Transmedics Group Inc (TMDX) 2023 Q2 法說會逐字稿

Good afternoon, and welcome to TransMedics Second Quarter 2023 Earnings Conference Call. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I'd now like to turn the call over to Brian Johnston from the Gilmartin Group for a few introductory comments.

Thank you. Earlier today, TransMedics released financial results for the quarter ended June 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 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 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 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.transmetics.com. 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, August 3, 2023. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics 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 buttressed our balance sheet with a successful convertible debt offering. And earlier this week, we entered into agreements for 2 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 3 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 1Q '23. U.S. sales represented $49 million in revenue, growing 170% year-over-year with OUS sales up 48% to $33.5 million. We also demonstrated continued improvement down the P&L as we benefit from increasing operating leverage. Stephen will cover the details 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 3 organs for the first quarter in many quarters. We saw growth in liver, heart and lungs. Liver and heart increased sequentially for the sixth consecutive quarter. Meanwhile, on volume was the highest we've achieved in the past 8 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 outlined 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 the OCS and NOP, 12 of which were active users. There were 13 lung programs that use the 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 along 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 U.S. 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 are 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 1Q 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 U.S. 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 NOP 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'm 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 time line 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

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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 8 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 aircraft to expand the TransMedics fleet, to reach our target goal of initially having 10 to 15 operational airplanes by the first half of 2024. Subject to the closing, we intend to main Summit 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 Bosman, 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. Especially 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 U.S. 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 5 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 OTS platform; and finally, expand the overall TransMedics product offering.

To execute on the above strategy, we recently acquired assets and IP related to 2 perfusion technologies from Bridge to Life. The first was Warm Perfusion EVOSS technology, for lung and heart transplant, and the second was Cold Perfusion LifeCradle for heart transplant. We plan to use unique elements of these technologies to supplement our OCS platform to accelerate the OCS next-gen 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 6 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 '22, and we are on track to deliver similar results again in '23.

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 5 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 4 to 6 months as the critical time needed to be ready for our next growth stage or wave in 2024 and beyond.

Given our strong 2Q and H1 '23 results, balanced with potential scalability challenges, we are increasing our annual revenue guidance for the full year 2023 to be between $180 million and $190 million. Up from our previously communicated guidance of $160 million to $170 million, and representing a 93% to 103% growth over full year 2022 total revenue. With that, let me turn the call to Stephen Gordon to cover the detailed financial results for the quarter.

Thank you, Waleed . I will now provide some additional details on the second quarter results and other financial information for the quarter. For the second quarter of 2023, our total revenue was $52.5 million. This is an increase of 156% from the second quarter of 2022, and a 26% sequential increase from last quarter. In the U.S., revenue was $49 million, an increase of 170% from Q2 2022 and 31% sequentially from last quarter.

The organ breakdown on U.S. revenue is the following: $32.7 million of OCS Liver, $13.5 million of OCS heart, and $2.8 million of OCS Lung. Let me repeat that. $32.7 million liver, $13.5 million heart, and $2.8 million lung. Ex U.S. revenue was $3.5 million, a 48% increase from the second quarter of 2022, and the breakdown there was $3.1 million of heart, and $0.4 million of lung. Now regarding the breakout of product and service revenue for the quarter. As a reminder, the service revenue is the added amounts we charge for the surgical procurement and organ management, as part of the NOP. In Q2, product revenue was $42.5 million, and service revenue was $10 million. So service revenue was 19% of the total.

The gross margin for the second quarter of 2023 was 70%. This is flat from a year ago, Q2 2022, and up from 69% in the first quarter of 2023. The margin on product revenue was 80% in Q2 2023, that's up from 77% in Q2 of 2022, and it's up from 79% in the first quarter of '23. The margin on service was 28% in Q2 2023. That's up from 20% in Q2 2022, and up from 27% last quarter. The modest sequential improvement in margin is a result of the higher revenue in the quarter.

Total operating expenses for the quarter were $37.6 million, that's 56% above Q2 2022 operating expense. We have continued to make critical investments in the company to ensure scalability to support growth. In R&D, we are developing next-generation technologies and digital tools to improve OCS capabilities and the NOP process. And in SG&A, we're adding resources to both our NOP, as well as the company's overall infrastructure.

Operating loss growth for the quarter was $0.9 million in the second quarter of '23. That's compared to $9.7 million loss in the second quarter of '22, and improved from a $2.1 million loss last quarter. And our net loss for the second quarter of 2023 was $1 million even, and that compares to $11.5 million in the second quarter of 2022. Total cash on the balance sheet is $582.2 million as of June 30, '23, which includes the proceeds of the convertible note that we issued in May, which provided a net cash of $393 million to TransMedics after the cost of the capped call related to the debt.

Our weighted average common shares outstanding for the quarter was 32.5 million. As Waleed's mentioned, earlier this week, we have signed (inaudible) agreements to support our long-term strategy. First, we signed an agreement and closed to purchase the assets and IP of the EVOSS and LifeCradle technologies from Bridge to life. And second, we signed an agreement to acquire 100% of the equity of Summit Aviation, which we expect to close in Q3. And finally, as a second step in our aviation strategy, we have purchased 2 aircraft in early Q3.

Overall, our financial results in Q2 2023 reflected the growth in adoption and utilization of our OCS technologies, and our NOP service solution. In Q3, we have made several investments to enhance both our products and services and allow us to continue to grow our business in the long run. And as a concluding statement, I'll just repeat our updated revenue guidance of $180 million to $190 million for the year, which represents 93% to 103% growth over 2022. Now I'll turn the call back over to Waleed for closing comments.

Thank you, Stephen. We are motivated and humbled by our commercial traction and execution throughout the first half of '23. That said, and as I said before, we strongly believe that we are in the early innings of a long runway of sustained growth for TransMedics. We must now allow for the time needed to scale our NOP infrastructure, integrate our new national logistics network that will enable us to fully capitalize on our unique NOP market opportunity.

Our TransMedics, NOP and the broader TransMedics team, are working diligently and tirelessly to deliver the best clinical support and technology for our clinical transplant programs globally. I want to take this moment to recognize their efforts and contribution. Importantly, I want to take this moment to welcome the Summit team -- the entire Summit team, operations, pilots and leadership to the TransMedics family. We are looking forward to their contribution to transforming the field of organ transplant logistics, under the TransMedics Aviation umbrella. From where I stand, I see a very bright future for TransMedics. We just need the time to continue to execute, so we can reach our TransMedics goal and Summit revenue growth. With that, I will now turn the call to the operator for Q&A. Operator?

(Operator Instructions) And today's first question comes from Bill Plovanic with Canaccord.

I'm going to skip over guidance here and go right to one, just looking at the U.S. heart number, you were up $13 million and then $13.5 million. So the sequential increase is maybe a little less than what investors were looking for. And that -- I'm sure there's some guidance translation. But I was wondering if you could help us understand what are the challenges you're facing in terms of the scale which you referenced in your prepared comments in the NOP? And then also have we worked through the manufacturing supply challenges, where are you unable to meet demand and have you missed any cases in the quarter because of -- you didn't have supply?

Thank you, Bill. Let me start with the second part of the question. We missed cases in the quarter, mainly lung, not because of supply chain issues, but because of logistical issues. We could not find planes to get us to where we need to be to achieve our missions. We've done the same -- we lost few missions as well for heart and liver, as well in Q3 because of lack of logistical support and capacity in the system.

So let me -- as far as the other capacity constraint, it's really -- we are not satisfied by the growth we're achieving now. We see even bigger growth ahead of us, Bill. And with the NOP cases now are transitioning from your traditional 8- to 12-hour case to 20 to 30 hour case given that many of the transplant programs across the U.S. are now more comfortable allowing the organ to be managed overnight and doing the transplant procedure in the morning to do -- to have better quality and better support, we need to beef up our team to be able to withstand that demand and that growth. And we need to beef up our surgical capacity, but most importantly, we need to get the TransMedics Aviation and TransMedics logistics. The broad logistics network up and running, to be able to -- not to lose any case going forward.

As far as specifics to the heart, I don't see this as a -- I see this as a little bit of a blip. We're not concerned about it one bit. It's part of the normal ebbs and flows that happens in transplant, but we're not concerned about it. And we're obviously tracking all that, and we hope to see this recover in Q3 and Q4.

Okay. And if I could circle back to guidance. The revenue guidance contemplates $86 million to $96 million in the back half of the year, and you've already done $94 million. So you're essentially saying the business is going down. Can you help us understand what's driving that down in the back half of the year, or just any more granularity on the thought process behind guidance?

Thank you, Bill. Three things. One, second half of the year is -- have some summer vacations, some holidays at the end of the year that always -- we are concerned about and what their potential impact on the overall transplant volumes. Two, we need time to integrate and stand up the logistical network in the second half of the year. That's going to require attention. And we may have additional cases in the second half of the year that goes uncovered because we don't have access to third-party aircraft, until we have our own network up and operational. And 3, just conservatism. We need to be conservative, given that the huge growth that we're experiencing, that we're already on the path to doubling our revenue from last year. I don't think investors should be concerned about where we are. We have a bigger growth wave ahead of us. And right now, it is prudent for our TransMedics team to focus on what's coming in '24 and beyond, given what we've done already in '23.

So I don't want this to be misinterpreted in any way other than we are growing with a net breaking speed, and we need to take that time to acclimatize and integrate, on our way to the top of the summit, and we're not anywhere close yet.

And the next question comes from Allen Gong with JPMorgan.

Again, congrats on the good quarter. I just had one question on lung. It was encouraging to see that inflect upwards a little bit given the challenges you've seen. But I'm also curious around the acquisition that you announced with EVOSS. How should we think about what that platform can bring to OCS, and what futures from that, you're planning to maybe incorporate it into OCS to help revitalize that market?

Thank you, Allen. We're excited as well about the lung performance this quarter. By no means we're declaring victory. We are continuing to monitor the situation and continue to invest mind share in reviving that. And there are other initiatives we'll be announcing in the second half of this year to help the lung, specifically around the EVOSS and OCS and being fully transparent. We believe the current OCS design is far superior than EVOSS from many fronts. However, EVOSS brings 2 unique attributes that we think might be of clinical importance. We need to do the studies to prove it or disprove it. One is the negative pressure ventilation. And 2, just a better smaller footprint. Again, we need to leave the first 2 results of a clinical program, but we did not want to lose an opportunity to integrate that into the OCS and have the clinicians have access to both positive and negative pressure ventilation.

So that's what we see as unique there, and we believe it might add some significant clinical benefit. We need to do the trials to prove it.

Got it. And then just a quick follow-up on profitability. I think it was definitely encouraging to see gross margins for both the product and service piece of your business improve, as well as pretty good expense control on the operating side. When we think about the further investments you might need to make on building out TransMedics, the airfreight piece of the business, how should we think about that for the back half of the year once the Summit Aviation (inaudible), as well as into 2024?

Allen, this is Stephen. Yes, definitely, we're seeing some modest improvement in margin with volume growth, but we're going to continue to invest by incorporating Summit, Summit, I think, is a modest increase in the overall spend rate, but we're going to bolster that with aircraft that we intend to purchase. And so we will see depreciation come on to our books for aircraft over the second half of the year.

The next question comes from Suraj Kalia with Oppenheimer.

Waleed, Stephen, can you hear me all right?

I can hear you just right?

Perfect. Congrats on a nice quarter. So Waleed, a bunch of questions, I'll just throw them your way and back in queue. So Waleed, I missed you -- forgive me many calls going on. I missed your comments about heart. It was sequentially flat. If there are any mitigating factors you could walk us through? That would be question number one. In terms of Bridge to Life integration with the next-gen form factor relief, can you give us a little more specifics in terms of how you're thinking about it, the timing of this acquisition of assets, and the incremental clinical improvements that you are thinking about that necessitated this asset acquisition? And finally, Stephen, for you, in terms of Summit Aviation, is this the end of the road or should we start thinking 12, 18, 24 months down the line, we would need to buy more planes to complement this fleet?

Thank you, Suraj. Suraj, the heart was up in Q2 over Q1. They may be not at the same pace that it was in Q1 over Q4, but it's up. It's not down and it's not flat. Factors to that is, again, we're not concerned about it one bit. This is the ebbs and flows of organ transplantation. There were a few cases that we lost, because we couldn't find planes to meet the mission. But it's not the only reason. It's just the ebbs and flows of organ transplant.

Coming out of ISHLT, there may have been some confusion confusing remarks made at ISHLT. We took care of that, and we feel very strongly that the heart will rebound in the second half of the year and going forward, and we're monitoring this very closely. Net-net, we are not concerned about that dynamic, one bit. The heart is growing. And we are tracking it, and we hope to report better that this issue is -- it's not existence in Q3. Remind me again, what's the second half of the second part before we go to the aviation -- there was a second part...

Yes, the -- Waleed I was curious about the...

Oh the EVOSS, the EVOSS. Yes. So Suraj, as you know, the next-gen program for TransMedics has already started. We -- it's been ongoing for the last year. So the reason for the timing for the EVOS acquisition is 3 things. We think that negative pressure ventilation might add a clinical benefit to combine it with our positive pressure ventilation. We are not going to release a product that has OCS name on it that has one ventilation mode. It will have both ventilation mode. To the form factor, the bottom line is, we need to make sure that we -- the final form factor would be the right form factor for the OCS 2 lung system that be lighter, smaller than the existing OCS platform.

So that's all we can comment on at the moment. And let me turn it on to Stephen to address the specific question about Summit.

Yes. The answer Suraj about Summit is this is not the end all. Summit is a relatively smaller operator, and we need to buttress the fleet by investing in additional planes. We've already started that process, which we bought 2 early in Q3, and we're going to continue to buy more as we go through the next 12 months. So it's definitely not the -- it's the beginning. It's definitely not the end.

And the next question comes from Ryan Daniels with William Blair.

Congrats on the strong performance. Waleed, one for you. I think you mentioned 8 aviation hubs, and I'm curious how that will correlate to the current NOP hub infrastructure, meaning will you consolidate that a bit and change it now that you actually own the assets and could be a little more flexible there given your internal ownership?

Ryan, it's good to have you on our call. Thank you for the question. We are exploring all of the above at the moment, Ryan. I hate to give an answer that might send people to think there's a definitive direction. The definitive direction is we did the math based on data and historical performance and national heat map of donors. And we believe that if we put air assets at 8 out of our 15 hubs across the United States, will result in nearly 100% coverage of the Continental U.S. For us, that's huge.

The workflow part is still underway, for workflow optimization. We might actually open new hubs. Let us do the work. I hate to front run this. I want the team in TransMedics to take the time to do it right. And definitely, once we have it, we will be sharing it on our upcoming calls.

Okay.

But for us, the priority is to provide 100% coverage --100% availability, 100% coverage across the Continental U.S. That is the #1 priority for the network to get operational.

Yes, makes sense. And then regarding your comments about clients getting more comfortable with NOP and going to 20 to 30 hour cases, improving the work-life balance and outcomes by allowing them to be in the morning versus any time at night. I'm curious if that's something that's also driving active and repeat users and maybe increasing the overall use of NOP such that there might be cases that before they didn't use it -- didn't use OCS, but now just because of that luxury in order to improve the work-life balance, they're actually moving more of their cases to the platform?

Ryan, absolutely correct. But it's not just -- it's well beyond world-class balance at the moment. It's safer. It's safer for the patient. It's safer for the staff. It is less cost intense to have your primary transplant staff operate in the morning and actually could enable them to do multiple cases back to back, versus paying double time in the middle of the night with the emergency or trauma teams that are on call, and it may or may not be the right talent assembled to do a safe transplant procedure.

The other benefit, in addition to that is in major academic institution, it provides a better teaching and training opportunity for the fellows that are involved in organ transplantation. So it's well beyond just work-life balance for the clinical staff. It's really -- it's a comprehensive benefit. And we've -- as you know, we've always stated that one of the benefits of NOPs to enable that to happen. And we're really glad to see this happening and taking off that soon. We expect this to be a late transition. We're seeing this transition happening sooner than what we expected. It's great, but we need to make sure that we are staffed up for it and making sure that our team is fresh, safe and ready to cover these cases for as long as they need to.

Perfect. That's very helpful. And then one last one, just in regards to the potential CapEx for planes. I don't know if you mentioned this, but should we be thinking of outright purchases or leases? And then if it's a purchase is a CapEx $10 million to $12 million range, is that what we should be thinking per plane?

Yes, Ryan. I think in the near term, it is CapEx. It is purchases and the range is pretty close to what you just described.

And Ryan, just to add to what Stephen said. The reason why we looked at both options. We believe strongly that this is the right initial assumption to have the best cost profile for the operation. Leasing and aircraft adds significant margin to the lessor that we want to make that an efficient process, so we can pass some of the cost savings and efficiencies to our transplant users.

The next question comes from Josh Jennings with TD Cowen.

Was hoping -- I will lead to just ask a follow-up on OCS loan franchise, and just the lung initiative that you guys have in place and trying to help double lung transplant volumes in the United States. I know you've just been some talk is all about the technology acquisition. But can you just help us -- just remind us of, I guess, the thrust there both in terms of collaboration with the lung transplant surgeon community and any other societies, and just the cadence of how you see OCS being adopted at a higher clip in 2024 and beyond?

Thank you, Josh. I think, Josh, we're in the early stages of these initiatives. I think the second half of this year, we will start ramping up. We wanted to wait until we announced the acquisition, because we believe this is going to be one of the catalysts that will get people's attention. As you may know, in the community, there is a lot of focus on what's coming next, and EVOS had some attention focus on it. We wanted to get that out of the -- get that acquisition completed. We'll use that as a potential catalyst, but there are other several catalysts that we're working on, with the existing OCS platform.

It's going to take some time to get the next-gen lung system integrated with negative pressure ventilation and the new form factor operational, and we will probably use that as a second wave of growth, not the first wave of growth. We have other ideas and concepts to -- how we can get the lung growing in '24, maybe the next-gen lung system will be late '24, early '25 time horizon, but we have others that we are planning to enact and implement in later this year and early next.

Great. I apologize this question was already asked in another earnings call as well. But just in terms of the road map to profitability, and you're adding the aviation business, tucking that in. But any high-level comments, and I think we frequently get asked about just the revenue run rate, where TransMedics hit EBITDA positivity. I don't know if there's any updated thoughts. I know that acquisition hasn't closed yet, but anything on road map to profitability, or just any margin impact from a high level from this Summit Aviation acquisition?

Hey Josh, it's Stephen. Well, first, I would say we were EBITDA positive this quarter. But no, it's a very good question. I would say we're not prepared to say that at this call about where we think it's going to be once we integrate aviation. It's probably going to change. It's going to change so much, some on the investment side, but it's also -- we're going to be adding additional revenue from Aviation, which we haven't had before. So give us some time to model that through and we'll prepare that for future calls.

This concludes the question-and-answer session. I would like to return the call over to Waleed Hassanein, for any closing comments.

Thank you. Thank you all for joining us on the Q2 call. We look forward to speaking with you again for Q3. Have a great afternoon, everyone.

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