TransMedics Group, Inc. (NASDAQ:TMDX) Q1 2023 Earnings Call Transcript

Cecilia Furlong: Great. Congrats on another strong quarter. I wanted to start, Waleed, some of your comments in the Q&A, just about the center targeting balance that you talked about in 1Q as you work through some of the supply. And as you think going forward, just as capacity increases, can you talk about how you’re thinking about the focus on bringing on new or the earlier stage NOP users versus really recircling on and driving deeper utilization across your current repeat users. And then also, as we think about , what are you contemplating the balance from a commercial standpoint on trying to reinvigorate lung versus driving those heart as well as liver sites going forward?

Waleed Hassanein: Thank you, Cecilia, for the question. I think my answer for both questions will be the same, Cecilia. We’ve always said from the day we went public, we’ve said TransMedics is not a single organ company. We’re not a single-trick pony. TransMedics full potential happens when we have all three organs firing in all cylinders. Also, as we gained FDA approval of heart and liver, we also stated publicly that, that kind of makes the business more resilient to any headwinds in one organ, i.e., the delays. So from our perspective, we are going to continue to push on all three fronts to achieve our overall growth for the business, regardless where it’s coming from. So that’s number one or the second half of your question.

The first half of your question, again, we stated this last quarter that our growth strategy is not a single focus point. We’re focusing on going deeper in our existing accounts or existing centers, but also growing the number of users in the United States. And that’s something we’re going to continue to pursue. That’s why at some point, hopefully in the future, at some point, the number of centers is really going to be to us. It’s really as long as we’re demonstrating growth — and the third element to the strategy is growing the overall U.S. transplant volume. So one can argue, if we just stay with one core group of centers, and we were able to penetrate their existing volume deeper and grow their overall volume by 30% or 40%, that could achieve significant success growth-wise for TransMedics, but that’s not what we’re doing.

We’re doing all of above. We’re targeting existing centers to grow their penetration and overall volume. We’re targeting new centers to hook them up on NOP and its benefits for them and for their patients and for their staff and going deeper and growing their overall volume. So that’s what we’ll be doing over the next few years. And that we believe that if we achieve that coherent strategy, that is the recipe for a huge growth and successful TransMedics. And in our humble view makes TransMedics more resilient to any of these headwinds that we could experience throughout this growth potential.

Cecilia Furlong: Great. Super helpful. And if I could follow up as well. Just on margins, and specifically, the service margin component of gross margin that we saw pick up. Stephen, if you could talk through how we should think about just that component of gross margin through the balance of the year? And then secondly, on OpEx as well as we think specifically SG&A some of the initiatives you talked about in terms of building out, adding incremental components to NOP. Just how we should think about the balance of this year from an OpEx and SG&A standpoint.