TransMedics Group, Inc. (TMDX)·Q4 2024 Earnings Summary

Executive Summary

• Strong Q4 finish with revenue up 50% YoY to $121.6M and up 11.8% QoQ; diluted EPS was $0.19 as gross margin recovered to 59.2% on service margin improvement and despite ~$2M inventory charges that reduced product GM by ~200 bps .
• 2025 revenue guidance introduced at $530–$552M (+20–25% YoY), with management signaling only modest gross margin and operating leverage expansion given a growing, lower-margin services mix and normal quarterly variability .
• Operational execution improved: owned aircraft covered 75% of NOP missions (61% in Q3), daily aircraft availability rose to 14 (10.7 in Q3), and logistics revenue rose to $21.7M, aiding service margin recovery to 29.2% (19.2% in Q3) .
• Strategic catalysts: independent review found “no evidence of misconduct” following a short report; lung IDE filed and heart IDE filing imminent; Next-Gen Heart/Lung programs to launch 2H25; liver remains the primary growth driver near term .

What Went Well and What Went Wrong

• What Went Well

  • Sequential re-acceleration: Revenue +11.8% QoQ to $121.6M; U.S. revenue +11% QoQ to $117M; OUS +51% QoQ to $4M, supporting improved total GM to 59.2% (from 55.9% in Q3) .
  • Logistics efficacy: Owned aircraft covered 75% of missions (61% in Q3) and daily availability rose to 14 (10.7 in Q3), driving service margin recovery to 29.2% from 19.2% .
  • Governance/legal overhang addressed: “This investigation did not find any evidence of fraud or other misconduct” (Kirkland & Ellis + forensic accounting) and formal FDA Citizen Petition response filed with Covington & Burling .

• What Went Wrong

  • Mix pressure: Service revenue mix remains a headwind to overall GM vs 2023; Q4 service GM of 29.2% still below 34.5% in Q4’23 and management expects only modest overall GM expansion in 2025 given mix .
  • Inventory charges: ~$2M inventory-related charges lowered product margin by ~200 bps in Q4 (one-off tied to year-end procedures) .
  • Variability persists: Management cautioned ongoing quarter-to-quarter variability tied to transplant volumes and potential unexpected aircraft maintenance affecting service margins .

Financial Results

Segment mix and unit economics:

• Product vs Service revenue

• Additional operating detail (Q4 2024 unless noted):
  • Logistics revenue: $21.7M (vs $20.1M in Q3) .
  • U.S. revenue: $117M; OUS revenue: $3.9M .
  • Operating expenses: $63.4M (vs $45.3M in Q4’23); includes $10.4M stock comp ($5.5M in Q4’23) .
  • Q4 gross profit included ~$2M inventory charges (~164 bps GM impact) .

KPIs (FY 2024, unless noted):

• U.S. OCS cases: 3,715 (vs 2,347 in 2023) .
• Overall OCS market share (U.S., all three organs): 20.9% (13.8% in 2023) .
• Owned aircraft at 12/31/24: 19; 21 owned as of Q4 call; targeting 22 and then pausing to optimize utilization .
• Owned aircraft share of missions: 75% in Q4 (61% in Q3) .
• Daily average aircraft availability: 14 in Q4 (10.7 in Q3) .
• Year-end cash: $336.7M (vs $330.1M at 9/30/24); first year of positive operating cash flow ($48.8M) .

Guidance Changes

Notes:

• Management expects 2–5% of 2025 growth contribution from heart/lung clinical trial activity, with liver continuing to lead near-term growth .

Earnings Call Themes & Trends

Management Commentary

• “4Q ’24 was a banner quarter for our business and allowed us to conclude ’24 on a very high note.” — CEO Waleed Hassanein .
• “This investigation did not find any evidence of fraud or other misconduct.” — CEO on independent review of allegations .
• “Q4 gross profit included approximately $2 million in inventory-related charges… negatively impacted the fourth quarter’s gross margin by approximately 164 basis points.” — CFO Gerardo Hernandez .
• “We anticipate a 20% to 25% total revenue growth over the full year of 2024… $530 million to $552 million.” — CFO on FY25 revenue guidance .

Q&A Highlights

• Cadence/variability: Company does not guide quarterly; variability most often in Q3/Q4 (holidays) but normalizes over time .
• Organ mix: Liver expected to lead 2025 growth until heart/lung clinical programs contribute in 2H25 .
• Customer attrition concerns: Management noted centers cited in short report remained active users in Q4 and Q1 .
• NRP competition: Not mutually exclusive; OCS used post-NRP; OCS DCD liver share rose to 53% in 2024; NRP seen as non-threat .
• Logistics capacity: Plan to pause fleet at ~22 aircraft with double-shifting to increase capacity; target 18–20 operational on average .
• R&D/OpEx: Continued strong R&D investment; modest operating leverage gains expected in 2025 .
• Pricing pushback: Emphasized value and NOP network cost efficiencies (e.g., 50% discount on DCD dry-runs for full-service centers) .
• Clinical-trial contribution to 2025 growth estimated at 2–5% of growth (not revenue) .

Estimates Context

• S&P Global consensus estimates (revenue, EPS) for Q4 2024 and the prior two quarters were unavailable at time of writing due to data access limits. As a result, we cannot assess beat/miss vs Street for Q4 2024. We will update this section promptly upon retrieval from S&P Global.

Key Takeaways for Investors

• Momentum restored: Sequential growth and recovered service margins validate that Q3 headwinds were transient; operational utilization gains should continue to support margin normalization even as mix tilts to services .
• 2025 setup: Guidance +20–25% appears underpinned by liver-led growth, continued NOP/logistics leverage, and modest margin expansion; heart/lung trials add 2–5% growth contribution in 2H25 .
• Pipeline catalysts: Lung IDE filed and heart IDE imminent; Next-Gen programs could unlock DBD adoption and revive lung by 2026, adding medium-term growth vectors .
• Legal/short-report overhang reduced: Independent review found no misconduct; company responded to FDA Citizen Petition—helps stabilize sentiment and customer behavior .
• Watch variables: Quarterly transplant volume variability and unexpected aircraft maintenance (AOG) can swing service margins; logistics execution is a key swing factor to margins/EBIT .
• Mix matters: Services carry lower margins; continued shift requires scale and utilization to drive gross margin expansion; management guides only modest GM/OpEx leverage in 2025 .
• Actionable: Near-term, trade around operational/utilization updates and trial milestones; medium-term, thesis hinges on Next-Gen adoption expanding TAM and sustaining high growth while scaling services profitably .

Appendix: Additional FY 2024 Disclosures

• FY 2024 revenue $441.5M (+83% YoY); GM 59.4% (vs 63.8% in 2023) on higher services mix; operating profit $37.5M; diluted EPS $1.01 .
• Organ revenue mix FY 2024: Liver $309.6M; Heart $109.9M; Lung $17.7M .
• U.S. transplant volumes grew for liver (+9%) and heart (+1%) in 2024; OCS NOP believed to be a key driver .
• Cash $336.7M at 12/31/24; first year with positive operating cash flow of $48.8M .

Sources: Q4 2024 8-K and Exhibit 99.1 ; Q4 2024 earnings call transcript ; Q3 2024 8-K and call ; Q2 2024 8-K . Additional press release confirming content .