Universal Display Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 6, 2023

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to the TransMedics Third 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. I would now like to turn the call over to Brian Johnson from the Gilmartin Group for a few introductory comments.

Speaker 1

Thank you. Earlier today, TransMedics released financial results for the quarter ended September 30, 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 the Question and answer portion of the call that include forward looking statements within the meaning of federal securities laws. Any statements contained in this call that relate to expectations or predictions Our future events, results or performance are forward looking statements.

Speaker 1

All forward looking statements, including without limitation, our examination of operating trends, the potential Commercial opportunity for our products and our future financial expectations, which include expectations for growth in our organization and guidance and or expectations for revenue, gross margins and operating expenses in 2023 and beyond are based upon our current assumptions and estimates. 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 Additional information regarding these risks and uncertainties appears under the heading Risk Factors on our Form NK filed with the Securities and Exchange Commission on February 27, 2023. Our subsequent Form 10 Q filings and the forward looking statements included in today's earnings press release, which is available on our website and at www.sec.gov. 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 1

This conference call contains time sensitive information and is accurate only as of the live broadcast today, November 6, 2023. And with that, I'll turn the call over to Walid Hassaneen, President and Chief Executive Officer.

Speaker 2

Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics' 3rd quarter 2023 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. The Q3 was an important foundation building quarter for TransMedics. We closed 2 strategic acquisitions, 1 to position us for near term growth with the Summit Aviation and one to position us for long term growth with Bridge to Life Technologies.

Speaker 2

Following the acquisition of Summit Aviation in August, Our team worked diligently to meet our goal to try to initiate a limited launch of our transplant logistics service in late 3Q. We met this goal and we started seeing early positive impact of logistics on revenue, on catalyzing NOP case volume and overall clinical adoption. This early momentum combined with Sustained growth demand for all three organ markets and solid OUS performance enabled us to achieve significant growth in 3Q. This was achieved despite operational and resource challenges we outlined in our Q2 call. Here are the summary results for 3Q.

Speaker 2

Our total revenue was $66,400,000 representing 159% growth over the same period in 2022 and 27% sequential quarter over quarter growth from 2Q 2023. $64,000,000 of the total $66,400,000 was from transplant related activities, including approximately $2,100,000 In NOP Aviation and Logistics related revenue, we are thrilled by the early performance of our transplant aviation and logistics service as it raises our confidence in our long term plans, which I will cover later in the presentation today. Approximately $2,400,000 of the total revenue was attributable to legacy Summit, Charter and Flight School operations. As we've stated before, we intend to exit the legacy Charter business with diminishing contribution in Q4 before a full exit in early 2024. Meanwhile, we will maintain our Flight School revenue, which will continue to be a part of our P and L going forward.

Speaker 2

Stephen will detail associated P and L impacts in his section of today's call. Our team did a great job executing on all fronts. 3Q performance speaks volumes to their hard work, Dedication and creativity, I want to take a moment and acknowledge our entire team at TransMedics for their efforts to help us achieve These great results. Now let me cover the specifics of Q3. In line with our growth strategy, we grew revenue across all 3 organ markets in the U.

Speaker 2

S. Compared to 2Q. OUS revenues also grew sequentially. Stephen will cover the detail in his section of today's call. Given the success of the NOP program and the flexibility it affords U.

Speaker 2

S. Transplant programs to use it, going forward, We will primarily focus on the organ specific revenue trends quarter over quarter instead of the number of centers. Let me repeat again. Going forward, we will primarily focus on organ specific revenue trends quarter over quarter instead of the number of centers. This is because we no longer believe or see center numbers as an accurate predictor of growth in the NOP era.

Speaker 2

Beyond strong revenue growth, we also demonstrated continued operational efficiencies in 3Q as we continue to benefit from increasing scale and making further progress towards positive cash flow and profitability. In terms of NOP, we met our stated goal of having NOP contribute the lion's share of our U. S. Revenue in 3Q. As we reached an all time high of 97 percent NOP contribution of the total U.

Speaker 2

S. Cases. On a per organ basis, approximately 98% of liver, 93% of heart and 97% of lung cases were from NOP in 3Q. Given this success, we fully expect that we will transition out of the shrinking direct acquisition model in 2024. To meet the growing demand for NOP and to overcome our clinical support staffing shortage we discussed in 2Q, we added 45 new clinical specialists and 10 surgeons in 3Q.

Speaker 2

We will continue to invest in this area throughout the remainder of 'twenty three and in early 'twenty four to prepare for the expected growth in 'twenty four and beyond. From a volume perspective, We are well on our way to reaching our stated goal of completing more than 2,000 U. S. NOP transplants in 2023. This would represent more than doubling of our case volume from 2022.

Speaker 2

Let me now turn to a more detailed Discussion on our new logistics business. As we described on our 2Q call, TransMedics set out to develop a more efficient national transplant logistics model in the U. S. Our goal is to control the entire by the second half of twenty twenty four. By way of background and as a reminder, approximately 75% to 80% Of NOP heart, lung and liver transplants require private charter air transportation to move transplant teams and organs from donor to recipients.

Speaker 2

The rapid expansion of NOP, the increase in distance afforded by the protective effect of the OCS technology and our experience operating the NOP model in the U. S. Over the past 18 months have clearly shown us That the current industry model is inefficient and unscalable in the era of NOP and the new national allocation laws. Our vision is that with a TransMedics developed and operated world class efficient transplant dedicated logistics service, We can meaningfully drive additional growth of our NOP case volume and fueling overall revenue growth. Late in Q3, we initiated a limited launch of our new transplant logistics business with aviation to solve these inefficiencies and support and expand Expected early growing pains and inefficiencies as we integrate the Summit operation, 3Q truly represents the first inning of this important new TransMedics business offering.

Speaker 2

So far, we are thrilled by the early encouraging results. We are in the process of building out the fleet and adding additional staff to operate the fleet efficiently. As of today, we have acquired 8 planes. We plan to expand our fleet to around 15 to 20 operational planes by the second half of twenty twenty four. Rest assured that we will continue to assess this need based on data driven approach.

Speaker 2

We have also initiated the build out of our logistics digital command and dispatch center in Andover, Massachusetts, and we expect it to be fully operational by Q1 of 2024. This is important as it will drive significant efficiency To the dispatch operation for NOP Clinical and Logistical Resources, I want to affirm that based on everything we know today, We are extremely confident and bullish on the potential positive impact of Transplant Logistics Service Before I move on from Logistics and Aviation, let me share our expectations on our gross margin progression going forward. In 3Q, the inefficiencies associated with integrating Summit and streamlining the entire operation to focus on transplant was a bit of a headwind on our service margin. We expect this to improve over the next few quarters. Let me be crystal clear.

Speaker 2

We fully expect both our product and service margins to improve over the next several quarters as we gain more operational leverage and efficiency. Simply stated, 3Q margins do not, I repeat do not represent our long term margins at all. The expected inefficiencies of integration Simply stated, 3Q margins do not represent our long term margins at all, given the expected inefficiencies of integration and transitioning of the Summit operations. Now let me turn to our mid and long term plans. As we stated in our last call, we have a multifaceted strategy to leverage some of the technologies we acquired from Bridge to Life These technologies and new clinical programs to drive our mid and long term growth in NOP case volume to reach our stated goal of performing 10,000 NOP cases in the U.

Speaker 2

S. By 2028. We hope to have more to share about these new technologies and its We are continuing to drive our business forward And for the 7th consecutive quarter, we have demonstrated that we can grow our revenue and adoption of our OCS NOP cases. We are on track to meet our stated goal of doubling our NOP transplants to more than 2,000 in 2023. We are not stopping here, however, as we are determined to reach our goal of 10,000 transplants over the next 5 years.

Speaker 2

Given our strong 3Q results balanced with potential scalability challenges, we are increasing our Annual revenue guidance for the full year 'twenty three to be between $222,000,000 $230,000,000 up from our previously communicated guidance of $180,000,000 to $190,000,000 and representing 138% to 146% growth over the full year 2022 total revenue. With that, let me turn the call to Steven to cover the detailed financial results of the quarter. Steven?

Speaker 3

Thank you, Waleed. I will now detail our Q3 results and provide supplemental financial information for the quarter. Given the 2 acquisitions and evolving business model, I will move through the dialogue carefully and try to touch on all relevant points. Starting with revenue, for the Q3 of 2023, our total revenue was $66,400,000 This is an increase of 159% from the Q3 of 2022 and a 27% sequential increase from last quarter. Of note, the $66,400,000 of revenue for the quarter included $1,600,000 of revenue related to Summit Aviation's legacy charter business.

Speaker 3

The legacy charter business is in the process of transitioning And we intend to exit by early 2024. We expect the charter revenue should be minimal in Q4 and 0 as we enter 2024. The $66,400,000 of revenue also includes about $800,000 of revenue related to The Flight School that was part of our acquisition of Summit Aviation. So taking into account the charter and Flight School revenue, Transplant related revenue was $64,000,000 Now as Waleed mentioned, included in this $64,000,000 was our first Transplant related logistics revenue of $2,100,000 This logistics revenue was derived from Missions that utilized our own logistics network. In the past, our hospitals our hospital customers would have paid this to other logistics brokers.

Speaker 3

But this is now part of the service that we are providing. So we feel The $2,100,000 in less than a full quarter is a very good start. In the U. S, U. S.

Speaker 3

Transplant revenue for Quarter was $59,700,000 that's 156% growth from Q3 of 2022. And this includes the $2,100,000 of logistics revenue. The Oregon breakdown on U. S. Revenue was $41,200,000 of liver, dollars 15,100,000 of heart and $3,400,000 of lung.

Speaker 3

So Let me just repeat that. Dollars 41,200,000 of liver, dollars 15,100,000 of heart and $3,400,000 of lung. Ex U. S. Revenue was $4,300,000 It was $3,900,000 of heart, dollars 300,000 of lung and $100,000 of liver.

Speaker 3

Now regarding the breakout of product and service revenue this quarter. Service revenue is growing given the introduction of logistics and aviation. So product revenue was $47,700,000 in Q3 of 2023 and service revenue was $18,700,000 And just reiterating, the service revenue includes the $2,400,000 of non transplant related revenue as part of the Summit acquisition, dollars 1,600,000 of the Charter that's being transitioned out by 2024 early 2024 and $800,000 of the Flight School revenue. This we expect to recur, but it's not likely to grow. So the Flight School will be less material as our transplant revenue grows.

Speaker 3

Now turning to gross margin. Gross margin for the Q3 of 2023 was 61%. And as Waleed mentioned, this is lower than the Q2 of 2023 due to transient inefficiencies related to the Summit acquisition and limited launch of our transplant logistics offering. Beyond the integration, Margin was also unfavorably impacted by legacy charter operations as we transition to focus exclusively on transplant missions. So our service margin was impacted by both of these.

Speaker 3

We had the old charter business trailing off and we have The new transplant business beginning, but neither one was at scale in the quarter. In general, the Higher mix of service does reduce the overall business gross margin. However, we fully expect the gross margin to improve in the coming quarters. In simple and mathematical terms, our product margin this quarter was 77%. And we expect this to improve into the 80% range over the next few quarters.

Speaker 3

And the service margin was 21% in Q3. We also expect this to improve over the next few quarters to the low to mid 30% range. The mix in the quarter was 72% product and 28% service. In the future, we expect the mix to be about seventythirty Product and service, which would equate to about a mid to upper 60% range for gross margin in the overall business, very much in line with our expectations. So we do expect and are very confident that the gross margin will improve over the next several quarters starting in Q4 and into 2024.

Speaker 3

Given the higher mix of service in our business, we believe a mid to upper 60s gross margin is a reasonable steady state. And of course, as our logistics allows us to open up more cases and more product sales, the overall gross Profit dollar contribution will be significantly higher than if we were not using our own logistics network. And this was true in this quarter Q3 that we just finished as well. Moving on to expenses, total operating expenses for the Q3 of 2023 were $69,000,000 However, operating expenses include 2 acquisition transition excuse me, 2 acquisition transaction specific impacts. First, we have $27,200,000 of acquired in process research and development expenses related to our acquisition of the Bridge to Life Technologies.

Speaker 3

And secondly, included in SG and A is approximately $2,200,000 of other acquisition related expenses. Now if we normalize for these two items, our underlying operating expense was $39,800,000 This is 68% above the Q3 of 2022 And 6% sequential growth from Q2 of 2023. We have continued to make critical investments in the company Our operating loss was $28,300,000 in the quarter of 2023 compared to $5,500,000 in the Q3 of 2022. Taking into consideration the 2 transaction specific expense items I mentioned earlier, our operating income would have been just above breakeven for the quarter, about 900,000 Our net loss for the Q3 of 2023 was $25,400,000 compared to $7,400,000 in the Q3 of 2022. Total cash was $427,100,000 as of September 30, 2023.

Speaker 3

In the quarter, we spent $42,100,000 on the 2 business acquisitions, as well as approximately $103,000,000 on 8 jets that were added to our transplant logistics fleet. We are depreciating these jets over 10 years with a 50% residual value. Finally, weighted average common shares outstanding for the quarter were $32,600,000 Overall, we are extremely pleased with our Q3 financial results. We have demonstrated Adding our own aviation and logistics offering in Q3 allowed us to continue growing revenue at a strong pace. While we saw some headwinds on gross margin in this transitional quarter, I have full confidence in our ability to grow the gross margin to the mid-60s as we have described After integrating our logistics offering and this change in our business also showed that even with a lower gross margin, The gross profit dollars are growing, which clearly puts us on a path to profitability.

Speaker 3

As a concluding statement, I will repeat our updated revenue guidance of 220 Our guidance for 2023 were $222,000,000 to $230,000,000 which represents 138% to 146% growth. Now I would like to turn the call back to Waleed for closing statements.

Speaker 2

Thank you, Stephen. Overall, the Q3 was a critical execution period for TransMedics as we integrated a new business, Summit Aviation, Expanded our NOP clinical support capacity and launched a first of its kind business to expand our NOP product and service offering. Despite the great results achieved, we firmly believe that we are setting up a great foundation to further accelerate our growth in 2024 and beyond. We are extremely confident in our strategy and our ability to execute it to achieve our stated goal of 10,000 NOP transplant missions by 2028. With that, I will now turn the call to the operator for Q and A.

Speaker 2

Operator?

Operator

We will now begin the question and answer At this time, we will pause momentarily to assemble our roster. The first question comes from Alan Gong with with JPMorgan. Please go ahead.

Speaker 2

Hi. Can you hear me okay? Yes. Hi, Alan.

Speaker 4

I just want to make sure my line dropped for a second. Congratulations on the really good quarter. Just kind of to touch on it a bit, just the guidance, right? Just kind of doing my math, it looks like you're guiding to basically flat growth in Q4 and you had highlighted that you were taking a little bit of a cautious stance on a few dynamics. So can you walk us through kind of what is leading to that caution?

Speaker 4

Is it the trend you're seeing so far in October? Or is it just the logistics of ramping up your aviation service model?

Speaker 2

It's certainly the latter, Alan. Two things. 1, We are not fully staffed yet. We made significant progress in Q3. Our team was extremely creative to make us achieve the results we achieved, but we're not out of the woods yet.

Speaker 2

So that's number 1. Number 2 is continuing to standing up the aviation business. Actually, what we've seen in October is actually extremely encouraging. We just need to make sure that we are cautious in our guidance to make sure that We still have these operational challenges for the rest of this year.

Speaker 4

Got it. And then I'm guessing it's probably a little early to be talking about 2024, but I think in the past you've talked about your ambition. You obviously have your ambition For 2028, but when we think about the near term, you talked about really wanting to continue doubling sales and number of transplants. So So when we think about 2024 with the fact that not only will you have continued momentum in the Oregon business, but now also a ramping contribution from Aviation, How should we think about your growth aspirations for 2024? Thank you.

Speaker 2

Thank you, Alan. Alan, we are not shy of sharing our aspiration and our ability to execute upon it. However, your reference point needs to be updated a little bit. We've tripled our revenue last year. We are on pace to double This year over last year, I think we will issue guidance for 2024 in the end of year call, but I want to be cautioned that our numbers are growing significantly.

Speaker 2

That data point is a bit dated. So but we're not issuing any guidance for 2024 right now. We will do it In that first call in the

Speaker 5

year.

Operator

Our next question comes from Bill Placzek with Canaccord. Please go ahead.

Speaker 6

Great. Thanks for Thank you for taking my questions. Good evening and congratulations on a strong quarter. First, we think The most questions we're getting these days are related to the metrics surrounding the Aviation business. I think you gave us a little color on the gross margin, but Of the whole services business, can you give us an idea of what you think kind of average revenue per case is, It's gross margin, operating margin per case.

Speaker 6

And then I think you projected or you said that maybe 75% to 80% of your current NOP Could be with your own aviation applicable to that. Just Trying to get some metrics around this so we can kind of model this out. Thanks.

Speaker 2

Thanks, Bill. It's way too early To focus on that nitty gritty details on the aviation, and we don't intend to share that anytime soon. Our most indicative metric to track is growth in revenue and improvement in the service margin. That's what we are going to be focusing on, and we believe it's the most indicative of healthy Operation, both on the service and the product revenue. On the second one, of course, our intention is to cover Almost 100% of our NOP cases with our aviation, but we have to be realistic.

Speaker 2

We would need we need to make sure that we beef up the fleet first, get all of our support staff, the pilots, The dispatch operation stood up. That's why we expect to be doing the lion's share of the NOP cases by the second half of next year, Not before then, but our goal is to do as many of those cases ourselves, given, of course, What we see as a huge benefit on all fronts when we do that.

Speaker 6

And I mean, we don't have visibility into the metrics, but just a ballpark on average, what's a typical case Revenue that gets that you've seen kind of push through the hospitals to reimburse for an average case On the revenue for aviation specifically, how should we think about that?

Speaker 2

Sure. So Bill, I want to be cautious. This is not a question. This is a fact of organ transplant. All aviation and logistics transport are fully reimbursed Through the same mechanism of organ acquisition.

Speaker 2

There's no limit Per se, in fact, we are doing this because we believe we could be more efficient and pass some of the efficiencies back to the transplant program. So I do not want anybody on this call to think that the aviation business is not reimbursed Through normal mechanisms of organ transplant. There is no limit. There is no specifics. If the center feels that it's too Expensive, they would ask for another quote or get from another vendor, but it's fully reimbursed.

Speaker 2

It's not a question of reimbursement, it's a question of Making sure that we have the fleet, the efficiencies, the support team to be able to cover the missions. As far as the average, again, it's too early. It depends if you're flying Shorter distances, the average is somewhere between $25,000 to $30,000 If you're flying longer distances, It could go as high as $100,000 So it's really it depends on what type of missions you're flying. And again, we Our goal is to gain efficiencies first, gain volume. The Q3 results is just Really the first inning, not even early innings, it's the first inning.

Speaker 2

So we're looking forward to achieving more, building more Confidence and sharing more detail as we build the fleet and build up the operational efficiency we are foreseeing here.

Speaker 6

And then last question, I promise. Just on the fleet, a couple of things. One, you ended the quarter with $427,000,000 in cash. I think there's been 8 You've acquired 8 planes. And if my memory serves me correct, you are looking to acquire 8 more, which 427, if $12,000,000 a plane that will leave you with over $300,000,000 in cash.

Speaker 6

And I think not to take words out of Stephen's mouth, but Your core business stripping everything out was actually profitable by almost $1,000,000 Am I missing something here? Does that math add up?

Speaker 3

You're not missing anything, Bill. This is Steven. You've got it exactly right.

Speaker 6

Awesome. Thanks for taking my questions.

Speaker 2

Thank you, Bill.

Operator

The next question comes from Serge Kalia with Oppenheimer. Please go ahead.

Speaker 5

Hi, Waleed, Stephen, can you hear me all right?

Speaker 2

Yes. Hi, Suraj.

Speaker 5

Gentlemen, congrats on a great quarter. So, Walid, I know you're shying away for obvious reasons from giving some of these metrics, but I have to ask, Wally, give us some idea in your prepared remarks, you mentioned that your team was creative in meeting demand. Help us understand, in terms of dry runs and missed runs, how should we think about that? How did you all handle that in this quarter particularly?

Speaker 2

Sure. Thank you, Suraj. My prepared Mark's really was addressing the fact that we were able to achieve these great results Despite the fact that we were still building our clinical support team, so really our team went out of their way To make sure that we cover as many of the cases as we can and minimize the impact of Limited clinical staffing on our performance. That's one aspect of it. The second aspect is of our logistics team.

Speaker 2

We were operating with very, very small fleet and very small staffing, And we went out of the way to make sure that we cover those cases efficiently as much as we can And the results speak for themselves. So that's really what the prepared remarks was intending to show. As far as the rate of dry runs, Dry runs as I stated several times, dry runs is the nature of the DCD donation. It's going to be with us as long as we have DCD donors, there's always going to be a case where the DCD Our potential DCD donor doesn't progress to DCD. And as long as we're using DCD Donors, this is going to be the norm for us as we go forward.

Speaker 2

As far as the trend we saw in the quarter, I would say it was the rate of DCD donors progressing or lack of progression of DCD donors was a little bit Below Q2, but that's all I can comment on. But there's always DCD lack of progression when you're using DCD donors.

Speaker 5

And Walid, for my second question, I know when we were at your during the site visits, if memory serves me right, You had indicated that 70% or north of 70% of all DCD hearts TransMedics was capturing those. I'd love to get some updated color from you, especially in hearts. How do DCD and DBD Trajectories look alike. If you could also characterize how you think TransMedics' share progression within these subcategories is moving. Gentlemen, thank you for taking my questions.

Speaker 5

Congrats again.

Speaker 2

Thank you, Suraj. I appreciate the call. I appreciate the question. So let me address the 2 part question you asked. The first is, yes, TransMedix continue to do the lion's share of DCD heart donation in the United States.

Speaker 2

We expect to release the annualized number after by year end when the full number of DCD hearts are released, but from where we see it here, we are continuing to be north of 70% for sure. As I stated many times publicly, DCD is the low hanging fruit right now because it's The black and white option to growing U. S. Transplant volumes. That's why we expect to see the overall heart, Lung and liver transplant to grow this year over last year because of the high use of DCD donors especially in heart and livers that is afforded by OCS.

Speaker 2

Now that doesn't mean that The DVD is not being used. The opposite is true. I would say so far, it's between 45% to 50% of our volumes are DVD. We expect to see that growing in 'twenty four and beyond As we are now highlighting the benefits, there will be some data readouts, there are some publications coming up In early 'twenty four that will clearly point out the importance of using DBD organs to expand the donor pool even further. So we are Confident that as we move forward, the DVD and DCD portion of our business will continue to grow and will continue to Achieve high success rates on both.

Operator

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

Speaker 7

Question for you there. I know there was a little bit of controversy on NRP over Last few quarters and just demand in the market with DCD for that, but we've actually heard recently in our channel checks that many systems, especially non profits are Just banning NRP outright due to ethical issues. So I'm curious if you've seen that in the market where that's actually started to face

Speaker 2

Hi, Ryan. As I stated last call and You're absolutely right. We are not concerned at all about the progression of NRP. We're seeing the opposite is true. We're seeing Many centers that uses NRP are now used to use NRP and now shifting to OCS.

Speaker 2

Again, we are doing more than 70% of the DCD hearts So I'm not concerned at all. NRP is going to be limited in nature. We have our results is pointing to that and we have A couple of abstracts at the upcoming ISHLP that will address this point directly and clearly show that The importance of OCS and capabilities of OCS including cost comparison between OCS and NRP Because for a while there was a misunderstanding and misnomer that OCS might be more expensive than NRP. The opposite is true. So, the bottom line is TransMedics is doing the lion's share of DCD hearts in this country.

Speaker 2

We expect that to continue to be the case and ultimately at some point we'll probably be doing the vast majority of it. We are proud of where we are. We trust our technology. We trust our methods because it eliminates all these Ethical and legal concerns that exist around NRP.

Speaker 7

Got you. That's That's super helpful color. And then I guess the additional question, and I'll hop back in the queue. Really good progress adding clinical staff. I think you said 45 new clinical staff and 10 surgeons.

Speaker 7

Can you speak a little bit to how that progressed through the quarters? Did you see the benefit For the full quarter, was that kind of spread throughout the quarter? And then how should we think about the investments there in the Q4 To get to the scale you need to continue to grow into 2024. Thank you and congrats again.

Speaker 2

Thank you, Ryan. I think to be fair, I think this Came mainly through the second half of the quarter. So they contributed some, but not significantly. We expect those to contribute more in Q4 and we will continue to make investment in building out the clinical support staffing in Q4 to prepare for 'twenty four and beyond. So this is going to be a fountain that doesn't stop giving because as we see more and more growth, we would need more and more Pleco supports staffing and Tamara and his team are doing a great job in getting them trained and deployed to the field.

Speaker 2

But we will see the impact of these 45 new hires in Q4 And as we ramp up in Q4, it's mainly to see the impact in early 'twenty four.

Speaker 7

Perfect. Thank you so much.

Operator

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

Speaker 8

Thanks, Willy and Steven. Congrats on the really strong results. I wanted to just ask on 2 things, Willy, you said in your prepared remarks. I think the first With just center numbers, you don't believe it's an accurate predictor of growth anymore. Hope I'm not asking you to repeat yourself on some of the other questions that you've answered already.

Speaker 8

But Can you just give us a little bit more detail on why sentiment is not an accurate predictor of growth and just build on that download?

Speaker 2

Sure. Thank you, Josh. Really what I meant by saying that Josh is, As long as we're growing our revenue per organ segment quarter over quarter, that is the for us that is the most A strongest indicator of our growth. With NOP as you know, I mean every quarter we get a handful of centers that never use the OCS in their life, in our life and they jump into the NOP. Most of those continue and grow, but Some of them may they slip a month and then come back again, some continues every month.

Speaker 2

It's all I'm trying to say is it's becoming noisy to be looking at the center to center quarter to quarter center growth. The other thing is and that's the most important is for liver and heart, we're already at a critical mass of centers. We're already north of 40 centers For heart and liver, so it's growing beyond that is mostly growing within the center, I. E. Increasing the adoption and penetration within the center, that's important.

Speaker 2

The lung until we have a new clinical program in lung It's going to be few centers doing the lung, but this quarter was the largest anyway and it's reflective of the lung revenue. That's what we're saying. We want to be not confusing the market with too much data that really may not track the growth. The growth is tracked By the quarter to quarter progression of per organ revenue. That is the most accurate indicator of growth.

Speaker 8

Great. And can we read through that on that commentary that I think you were reporting regular users versus Centers that as well as the metric of centers that have enlisted TransMedics and with the NOP service in the quarter. But that with capacity expanding that delta and those metrics are just not important and as you said not an active predictive growth?

Speaker 2

Exactly. That's exactly what we're saying, Josh.

Speaker 8

Great. Excellent. My follow-up is something that we talked about, I think, at a headquarter visit this quarter. Just in my notes, I had you saying that the payers are saving money with NOP cases and There's a desire from payers for centers to adopt NOP and use TransMedics as that service. I'm hoping you could just build on that and just how much interaction does your company have, Chantenex have with payers and Anything you can add just to that that payers are saving money with each NOP case?

Speaker 8

Thanks a lot.

Speaker 2

Sure. Thank you, Josh. Let me clarify Josh's question. The comments we made during the team from Cowen's visit here is absolutely true. What we're referring to is with NOP, the growth of NOP have demonstrated the significant economic benefit of using OCS NOP across the chain of a patient needing an organ transplant.

Speaker 2

Starting with accessing more organ lowers the patient wait time on the waiting list. That's one of the biggest Cost driver to insurance companies keeping patients waiting on the waiting list in an ICU environment, sometimes even Supported, maximum supported in an ICU environment. So that's number 1. Number 2, we're seeing the post transplant surgical procedures that Costs add additional cost to the case rate dropping significantly. For example, post transplant bleeding, post transplant take down to the OR, Retransplantation, post transplant procedures like ERCP is growing down significantly.

Speaker 2

And that's what's causing Payers to say, we're seeing the benefits of it's really driven by more organs. With more organs, you're really driving the cost efficiency or the health economics of an organ transplant Significantly to a transplant payer and that's what we're seeing and what we're hearing. We are in constant communication and dialogue with some of the major payers in the United States. However, we're Seeing more and more centers now are picking up that mantle and having their own discussion with their own business cases to their payers With significant success, we just held multiple forums here in Boston in mid October and Many programs highlighted to the rest of the community their success in growing their transplant volume from OCS and their Positive discussion with payers, commercial payers, given the significant success they've achieved in growing their volume. So we continue to believe that this is going to continue with us and the key for us is to make sure that we continue to laser focus on outcomes And the quality of care we're providing, if we do that right, the rest is going to be a pretty straightforward execution challenge.

Speaker 8

Take that, Daimler. Thanks, Lee.

Operator

The next question comes from Bill Puan Zaniak with Canaccord Ingenuity. Please go ahead.

Speaker 6

Great. Thanks. Actually, I

Operator

This concludes our question and answer session. I would like to turn the conference over to Waleed Hovnan for any closing remarks.

Speaker 2

Thank you so much for your time this evening and we're looking forward to following up and looking forward to our next call. Thank you. Have a great evening everyone.

Operator

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

Remove Ads
Powered by Quartr
Earnings Conference Call
Universal Display Q3 2023
00:00 / 00:00
Remove Ads