Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TransMedics Group Inc (NASDAQ:TMDX) reported a strong Q4 2024 with total revenue of $121.6 million, representing approximately 50% growth year over year.
• The company's US revenue grew 11% sequentially to $117 million, showcasing strong domestic performance.
• TransMedics Group Inc (NASDAQ:TMDX) achieved an operating profit of $8.6 million in Q4, up from $3.9 million in Q3, indicating improved profitability.
• The company reported an overall gross margin improvement to 59% in Q4, up from 56% in Q3.
• TransMedics Group Inc (NASDAQ:TMDX) expanded its fleet of owned aircraft to 21, enhancing its logistics capabilities and operational efficiency.

Negative Points

• The company's overall gross margin for the full year 2024 was 59.4%, down from 63.8% in 2023, due to a higher contribution of service revenue which carries a lower margin.
• TransMedics Group Inc (NASDAQ:TMDX) faced allegations from a short report, which led to an investigation, although no evidence of fraud was found.
• The company anticipates potential operational challenges in 2025, including unexpected aircraft maintenance impacting service margins.
• There is variability in organ transplantation volumes, which could affect quarterly performance, as seen in Q3 2024.
• The precise timing of launching the next-gen lung and heart clinical programs depends on several variables, including FDA approval timelines, which could impact growth projections.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with TMDX.

Q: Can you provide insights into the quarter-to-quarter variability in your guidance for 2025? A: Walid Hassanin, CEO: We don't issue quarterly guidance due to the inherent variability in the transplant market. Historically, Q3 and Q4 have shown some volatility due to holidays, but this can occur in other quarters as well. Gerardo Hernandez, CFO, added that they believe variability tends to normalize in subsequent quarters.

Q: With strong growth in heart and liver transplants, should we expect liver to continue driving growth in 2025? A: Walid Hassanin, CEO: Yes, liver will likely continue to lead growth until contributions from heart and lung clinical programs begin in the second half of the year. We expect stronger signs of growth as these programs become more active.

Q: Are there any concerns about the potential attrition of high-volume customers? A: Walid Hassanin, CEO: The concern about losing high-volume customers is unfounded and stems from misinformation in a short report. The centers mentioned in the report remain active users of OCS, both in Q4 and currently.

Q: How do you view the competitive risk from the NRP approach in the DCD liver and heart segments? A: Walid Hassanin, CEO: NRP is not a threat to our liver DCD franchise. We see overall growth in DCD liver penetration for OCS, and NRP can complement OCS rather than replace it. Our market share in DCD liver has increased to 53%.

Q: What is TransMedics' role in the organ allocation process, and how might recent media coverage impact your business? A: Walid Hassanin, CEO: We are encouraged by increased public awareness of organ transplant challenges. The New York Times article highlights issues but lacks full context. We do not see it impacting our business meaningfully, and we aim to educate the public on these matters.

Q: How do you plan to manage the variability in aircraft maintenance impacting service margins? A: Walid Hassanin, CEO: We have full visibility on scheduled maintenance and spread it across the year. Unanticipated maintenance events (AOG) are managed by having a robust fleet and internal maintenance capabilities, allowing us to respond quickly to unexpected issues.

Q: Can you elaborate on the expected contribution of heart and lung clinical programs to 2025 growth? A: Walid Hassanin, CEO: The contribution from these programs is expected to be minimal in 2025, estimated at 2-5% of growth. The guidance accounts for variability in national volume and trial initiation timelines.

Q: How do you address concerns about your pricing strategy in the market? A: Walid Hassanin, CEO: We believe the value we deliver exceeds our pricing. Our growth and market penetration reflect this value. We continue to refine our marketing to better communicate the benefits of our offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.