Earnings Call Transcript - TMDX Q3 2023

Operator, Operator

Good afternoon, and welcome to 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 Johnston from the Gilmartin Group for a few introductory comments.

Brian Johnston, Gilmartin Group

Thank you. Earlier today, TransMedics released financial results for the quarter ended September 30th, 2023. 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 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, 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 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 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 27th, 2023, our subsequent Form 10-Q filings, and the forward-looking statements included in today's press release which is available at 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. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 6th, 2023. And with that, I'll now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Waleed Hassanein, CEO

Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics third quarter 2023 earnings call. As always, joining me today is Steven Gordon, our Chief Financial Officer. The third quarter was an important foundation-building quarter for TransMedics. We closed two strategic acquisitions: one to position us for near-term growth with Summit Aviation and one to position us for long-term growth with Bridge to Life Technologies. Following the acquisition of Summit Aviation in August, our team worked diligently to meet our goal to initiate a limited launch of our transplant logistics service in late Q3. We met this goal, and we started seeing early positive impacts of logistics on revenue, on catalyzing NOP volume, and overall clinical adoption. This early momentum, combined with sustained demand for all three organ markets and solid OUS performance, enabled us to achieve significant growth in Q3. This was achieved despite operational and resource challenges we outlined in our second quarter call. Here are the summary results for Q3: Our total revenue was $66.4 million, representing 159% growth over the same period in 2022 and 27% sequential quarter-over-quarter growth from Q2 2023. $64 million of the total $66.4 million was from transplant-related activities, including approximately $2.1 million 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 plan, which I will cover later in the presentation today. Approximately $2.4 million of the total revenue was attributable to Legacy Summit Charter and Flight School operations. As we have stated before, we intend to exit the legacy charter business with diminishing contributions 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&L going forward. Stephen will detail associated P&L impacts in his section of today's call. Our team did a great job executing on all fronts. Q3 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 in helping us achieve these great results. Now let me cover the specifics of Q3. In line with our growth strategy, we grew revenue across all three organ markets in the U.S. compared to Q2. 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.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: 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. Beyond strong revenue growth, we also demonstrated continued operational efficiencies in Q3, 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 Q3, as we reached an all-time high of 97% NOP contribution of total U.S. cases. On a per organ basis, approximately 98% of liver, 93% of heart, and 97% of lung cases were from NOP in Q3. 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 Q2, we added 45 new clinical specialists and 10 surgeons in Q3. We will continue to invest in this area throughout the remainder of '23 and in early '24 to prepare for the expected growth in '24 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, which would represent more than a doubling of our case volume from 2022. Let me now turn to a more detailed discussion on our new logistics business. As we described on our Q2 call, TransMedics set out to develop a more efficient national transplant logistics model in the U.S. Our goal is to control the entire end-to-end process of donor-to-recipient logistics for all NOP transplant volume in the U.S. by the second half of 2024. By way of background, 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. 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 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 fuel 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 our NOP case volume. We are extremely pleased with the early results. Despite expected early growing pains and inefficiencies as we integrate the Summit operation, Q3 truly represents the first inning of this important new TransMedics business offering. 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 eight planes. We plan to expand our fleet to around 15 to 20 operational planes by the second half of 2024. Rest assured that we will continue to assess this need based on a data-driven approach. 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 '24. 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 our transplant logistics service on the growth of our NOP case volume and more efficient utilization of our clinical resources. Before I move on from logistics aviation, let me share our expectations on our gross margin progression going forward in Q3. The inefficiencies associated with integrating Summit and streamlining the entire operation to focus on transplant were a bit of a headwind on our service margin. We expect this to improve over the next few quarters. Let me be crystal clear: 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, Q3 margins do not, I repeat, do not represent our long-term margins at all. The expected inefficiencies of integration simply stated, Q3 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 to accelerate our OCS NextGen program and expand our product offering. Our goal is to leverage 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.S. by 2028. We hope to have more to share about these new technologies and their associated clinical programs later in 2024. We are continuing to drive our business forward, and for the seventh 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 five years. Given our strong Q3 results, balanced with potential scalability challenges, we are increasing our annual revenue guidance for the full year '23 to be between $222 million and $230 million up from our previously communicated guidance of $180 million to $190 million, 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?

Steven Gordon, CFO

Thank you, Waleed. I will now detail our Q3 results and provide supplemental financial information for the quarter. Given the two 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 third quarter of 2023, our total revenue was $66.4 million, which is an increase of 159% from the third quarter of 2022 and a 27% sequential increase from last quarter. Of note, the $66.4 million of revenue for the quarter included $1.6 million of revenue related to Summit Aviation's legacy charter business. The legacy charter business is in the process of transitioning, and we intend to exit by early 2024. We expect the charter revenue to be minimal in Q4 and zero as we enter 2024. The $66.4 million of revenue also includes about $800,000 of revenue related to the flight school that was part of our acquisition of Summit Aviation. Taking this into account, the transplant-related revenue was $64 million. Now, as Waleed mentioned, included in this $64 million was our first transplant-related logistics revenue of $2.1 million. 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, but this is now part of the service that we are providing. Therefore, we feel that $2.1 million in less than a full quarter is a very good start. In the U.S., transplant revenue for the quarter was $59.7 million. That's 156% growth from Q3 of 2022, and this includes the $2.1 million of logistics revenue. The organ breakdown on U.S. revenue was $41.2 million from liver, $15.1 million from heart, and $3.4 million from lung. Ex-U.S. revenue was $4.3 million, with $3.9 million from heart, $0.3 million from lung, and $0.1 million from liver. Now, regarding the breakout of product and service revenue this quarter, service revenue is growing given the introduction of logistics and aviation. Product revenue was $47.7 million in Q3 of 2023, and service revenue was $18.7 million. Just to reiterate, the service revenue includes the $2.4 million of non-transplant related revenue as part of the Summit acquisition, $1.6 million from the charter that's being transitioned out by early 2024, and $0.8 million from the flight school revenue. We expect this to recur, but it's not likely to grow; thus, the flight school will be less material as our transplant revenue grows. Now turning to gross margin, gross margin for the third quarter of 2023 was 61%, and as Waleed mentioned, this is lower than Q2 of 2023 due to transient inefficiencies related to the Summit acquisition and the 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. Thus, our service margin was impacted by both of these. 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. Mathematically, our product margin this quarter was 77%, and we expect this to improve into the 80% range over the next few quarters, while the service margin was 21% in Q3. We 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 70-30 for product and service, which would equate to about a mid to upper 60% range for gross margin for the overall business, very much in line with our expectations. We do expect and are very confident that gross margin will improve over the next several quarters, starting in Q4 and into 2024. Given the higher mix of service in our business, we believe a mid to upper 60s gross margin is a reasonable, steady state. 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. This was demonstrated in this quarter, Q3 that we just finished as well. Moving on to expenses, total operating expenses for the third quarter of 2023 were $69 million. However, operating expenses included two acquisition transaction-specific impacts. First, we have $27.2 million of acquired in-process research and development expenses related to our acquisition of Bridge to Life Technologies. Secondly, included in SG&A is approximately $2.2 million of other acquisition-related expenses. If we normalize for these two items, our underlying operating expense was $39.8 million. This is 68% above the third quarter of 2022 and 6% sequential growth from Q2 of '23. We have continued to make critical investments in the company to ensure scalability for growth and to support future growth while still growing expenses at a much lower rate than revenue. Our operating loss was $28.3 million in the quarter of 2023 compared to $5.5 million in the third quarter of '22. Considering the two transaction-specific expense items I mentioned earlier, our operating income would have been just above breakeven for the quarter, at about $900,000. Our net loss for the third quarter of 2023 was $25.4 million, compared to $7.4 million in the third quarter of '22. Total cash was $427.1 million as of September 30th, 2023. In the quarter, we spent $42.1 million on the two business acquisitions, as well as approximately $103 million on eight jets that were added to our transplant logistics fleet. We are depreciating these jets over 10 years with a 50% residual value. Finally, the weighted-average common shares outstanding for the quarter were $32.6 million. Overall, we are extremely pleased with our Q3 financial results. We have demonstrated that 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. This change in our business also demonstrated that even with a lower gross margin, the gross profit dollars are growing, which clearly puts us on a path to profitability. As a concluding statement, I will repeat our updated revenue guidance for 2023: for $222 million to $230 million, which represents 138% to 146% growth.

Waleed Hassanein, CEO

Thank you, Steven. Overall, the third quarter 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 '24 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&A. Operator.

Operator, Operator

The first question comes from Allen Gong with JP Morgan. Please go ahead.

Allen Gong, Analyst

Just kind of to touch on the guidance, right? Just kind of doing my math, it looks like you're guiding to basically flat growth in the fourth quarter, 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? Is it the trends you're seeing so far in October, or is it just the logistics of ramping up your aviation service model?

Waleed Hassanein, CEO

It's certainly the latter, Allen. Two things: One, we are not fully staffed yet. We made significant progress in Q3; our team was extremely creative to help us achieve the results we achieved. But we're not out of the woods yet, so that's number one. Number two is continuing to establish the aviation business. What we're seeing in October is actually extremely encouraging, but we need to be cautious in our guidance to ensure that we still acknowledge these operational challenges for the rest of this year.

Allen Gong, Analyst

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 have your ambition for 2028, but when we think about the near term, we've talked about really wanting to continue doubling sales and the number of transplants. So, when we think about 2024, with the fact that not only will you have continued momentum in the organ business but now also a ramping contribution from aviation, how should we think about your growth aspirations for 2024? Thank you.

Waleed Hassanein, CEO

Thank you, Alan. We are not shy about sharing our aspirations and our ability to execute upon them. 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 ‘24 at the end of the year call. But I want to be cautious that our numbers are growing significantly, so that data point is a bit dated. However, we are not issuing any guidance for ‘24 right now; we will do it in the first call in the year.

Bill Plovanic, Analyst

Thanks for taking my question. Good evening, and congratulations on a strong quarter. First, I 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 gross margin, operating margin per case? And I think you projected that maybe 75% to 80% of your current NOP could be with your own aviation, applicable to that. I'm just trying to get some metrics around this so we can kind of model this out. Thanks.

Stephen Gordon, CFO

Thanks, Bill. It's way too early to focus on the nitty-gritty details on 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 will focus on, as we believe it's the most indicative of healthy operation in both the service and product revenue. On the second one, of course, our intention is to cover almost 100% of our NOP cases with our aviation, but we need to be realistic. We must ensure that we beef up the fleet first and get all of our support staff, such as pilots and dispatch operations, set up. That's why we expect to do the lion's share of the NOP cases by the second half of next year, but our goal is to do as many of those cases ourselves, given the significant benefits we foresee from that.

Bill Plovanic, Analyst

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 pushed through the hospitals to reimburse for an average case on aviation specifically? How should we think about that?

Stephen Gordon, CFO

Sure. Bill, I want to be cautious. This is a fact of organ transplant: all aviation and logistics transport are fully reimbursed through the same mechanism of organ acquisition. 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 anyone on this call to think that the aviation business is not reimbursed through normal mechanisms of organ transplant. There is no limit, and if the center feels that it's too expensive, they would seek another quote or get from another vendor. But it's fully reimbursed; it's not a question of reimbursement, it's about ensuring that we have the fleet, the efficiencies, and the support team to cover the missions. As far as the average, again, it's too early. It depends on whether you are 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 really depends on what type of missions you're flying. Again, our goal is to gain efficiencies first, gain volume. The Q3 results is just really the first inning, not even early innings, but the first inning. So, we're looking forward to achieving more, building more confidence, and sharing more details as we build the fleet and operational efficiency we foresee.

Bill Plovanic, Analyst

And then last question, I promise. Just on the fleet: you ended the quarter with $427 million in cash. I think there's been an 8-K. You have acquired eight planes, and if my memory serves me correct, you're looking to acquire eight more. So, with $427 million, if it is $12 million a plane, that will leave you with over $300 million in cash. And I think, not to take words out of Steven's mouth, but your core business stripping everything out was actually profitable by almost a million bucks. Am I missing something here? Does that math add up?

Stephen Gordon, CFO

You are not missing anything, Bill. This is Steven. You have got it exactly right.

Suraj Kalia, Analyst

Hi, Waleed, Stephen. Can you hear me all right?

Waleed Hassanein, CEO

Yes. Hi, Suraj.

Suraj Kalia, Analyst

Gentlemen, congratulations on a great quarter. So, Waleed, I know you are shying away for obvious reasons from giving some of these metrics, but I have to ask: you gave us some idea in your prepared remarks. You mentioned that your team was creative in meeting demand; help us to 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?

Waleed Hassanein, CEO

Sure. Thank you, Suraj. My prepared remarks really were addressing the fact that we were able to achieve these great results despite still building our clinical support team. Our team went out of their way to cover as many cases as we could and minimize the impact of limited clinical staffing on our performance; that's one aspect of it. The second aspect is our logistics team. We were operating with a very small fleet and a very small staffing level, and we went out of our way to cover those cases efficiently as much as we could. The results speak for themselves, so that's really what the prepared remarks were intended to show. As far as the rate of dry runs, dry runs, as I have stated several times, are a feature of DCD donation. It will be with us as long as we have DCD donors. There will always be a case where a potential DCD donor doesn't progress to DCD. As long as we are using DCD donors, this will continue to be the norm for us. In terms of the trend we saw in the quarter, I would say the rate of DCD donor progression or lack of progression was a little bit below Q2, but that's all I can comment on. There will always be a lack of progression when using DCD donors. As far as the share of total transplants, we continue to do the lion's share of DCD heart donation in the United States. We expect to release the annualized number 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%. DCD is the low-hanging fruit right now because it's the clear option to growing U.S. transplant volumes. That's why we expect to see the overall heart, lung, and liver transplant improve this year compared to last year because of the high use of DCD donors, especially in heart and liver that is supported by OCS. That doesn't mean that DVD is not being used; the reverse is true. I would say that so far, it's between 45% to 50% of our volumes are DVD. We expect to see that growing in ‘24 and beyond as we highlight its benefits. There will be some data readouts and publications coming up in early ‘24 that will clearly point out the importance of using DVD organs to expand the donor pool even further. So, we are confident that as we move forward, both the DVD and DCD portions of our business will continue to grow and achieve high success rates.

Ryan Daniels, Analyst

I know there has been some controversy regarding the demand for NRP in the market with DCD over the last few quarters, but we've recently learned from our channel checks that many systems, particularly non-profits, are completely banning NRP due to ethical concerns. I'm interested to know if you have observed this trend in the market where these bans have started to take place across the United States.

Waleed Hassanein, CEO

Hi, Ryan. As I stated last call, you're absolutely right that we are not concerned at all about the progression of NRP. We are seeing the opposite; many centers that previously used NRP are shifting towards OCS. Again, we are doing more than 70% of the DCD hearts in the United States, so I'm not concerned that NRP is going to be limited in nature. Our results are pointing in that direction, and we have abstract data at the upcoming ISHLT that will address this point directly and clearly show the importance of OCS and its capabilities, including cost comparison between OCS and NRP. There was a misunderstanding that OCS might be more expensive than NRP, but it turns out the opposite is true. The bottom line is that TransMedics is doing the lion's share of DCD hearts in this country. We expect that to continue to be the case and ultimately, at some point, probably to do the vast majority of it. We are proud of where we are and trust our technology and methods because they eliminate all these ethical and legal concerns that exist around NRP.

Ryan Daniels, Analyst

Got it. That's super helpful color. And then I guess the additional question, and I'll hop back in the queue, is regarding the progress adding clinical staff. I think you said you brought on 45 new clinical staff and 10 surgeons. Can you speak a little bit to how that progressed through the quarter? Did you see the benefit for the full quarter? Or was that spread throughout the quarter? And how should we think about the investments there in the fourth quarter to get to the scale you need to continue to grow into 2024? Thank you. And congrats again.

Waleed Hassanein, CEO

Thank you, Ryan. To be fair, the hiring came mainly in the second half of the quarter, so they contributed some, but not significantly. We expect those to contribute more in Q4. We will continue to invest in building out the clinical support staffing in Q4 to prepare for '24 and beyond. This is an ongoing effort because as we see more and more growth, we need more clinical support. Tamara and his team are doing a great job in training and deploying these new hires to the field. We expect to see the impact of these 45 new hires in Q4, and as we ramp up in Q4, especially going into early '24.

Josh Jennings, Analyst

Thanks, Waleed, and Stephen. Congrats on the early strong results. Wanted to ask on two things. We believe you said in your prepared remarks that you don't believe center numbers are an accurate predictor of growth anymore. I hope I'm not asking you to repeat yourself on some of the other questions that you've already answered, but can you just give us a little more detail on why center numbers are not an accurate predictor of growth?

Waleed Hassanein, CEO

Sure. Thank you, Josh. What I meant by saying that is as long as we're growing our revenue per organ segment quarter-over-quarter, that is the strongest indicator of our growth. With NOP, as you know, we get a handful of centers each quarter that have never used the OCS before and they jump into the NOP. Most of those continue and grow, but some may slip a month and come back again; some continue every month. All I'm trying to say is it's becoming noisy to be looking at center-to-center and quarter-to-quarter growth. The other important point is for liver and heart we're already at a critical mass of centers. We're already north of 40 centers per heart and liver, so growing beyond that mostly involves increasing adoption and penetration within the center. That's important. The lung market will take some time until we have a new clinical program in place. But this quarter, lung revenue was the largest to date, and it's reflective of that growth. We want to avoid confusing the market with too much data that may not accurately track growth. The growth should be tracked by the quarter-to-quarter progression of per organ revenue, which is the most accurate indicator.

Josh Jennings, Analyst

Great. Can we read through that commentary to the metrics, so that we would be reporting value for regular users versus centers? Plus, as well as the metric of centers that have enlisted TransMedics with the NOP service this quarter? But did that with capacity expanding, that delta and those metrics are just not important. And as you said, not an active predictive growth?

Waleed Hassanein, CEO

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

Josh Jennings, Analyst

Excellent. My follow-up is, you mentioned during a headquarters visit this quarter that payers are saving money with NOP cases, and there is a desire from payers for centers to adopt NOP and use TransMedics' service. I'm hoping you could build on that, and just how much interaction does your company have with payers and anything you can add about how payers are saving money with each NOP case?

Waleed Hassanein, CEO

Sure. Thank you, Josh. To clarify from our visit, the comments we made are absolutely true. What we are referring to is with NOP: the growth of NOP has demonstrated the significant economic benefits of using OCS NOP across a patient's organ transplant journey. This begins with allowing more organs to become available, which lowers the patient's wait time on the list. This is one of the largest cost drivers for insurance companies—keeping patients on the waiting list in an ICU environment sometimes while being maximally supported. Secondly, we have seen post-transplant surgical procedure costs drop significantly. For example, post-transplant bleeding, re-transplantation, and necessary additional procedures like ECP are decreasing significantly. This addresses the point made by payers that we are seeing the benefits. We are in ongoing communication with the major payers in the United States, and increasingly, we are seeing centers having their own discussions with their payers with significant success. We held multiple forums here in Boston in mid-October, where many programs highlighted their success in improving transplant volumes using OCS and positive discussions with payers due to significant success. We remain confident this trend will continue as we keep our focus laser-sharp on outcomes and the quality of care we provide. If we execute that correctly, the rest will be a straightforward operational challenge.

Bill Plovanic, Analyst

Actually, I tried to get back out in the queue.

Operator, Operator

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

Waleed Hassanein, CEO

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

Operator, Operator

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