1Q23 Earnings Report
Revenue $41.6MM: +162% YoY / +32.5% QoQ
Net Loss only $2.6MM – down from a net loss of 10.6 last year and a loss of 6.8 last quarter. They are almost profitable.
Gross Margin 69%: down from 76% last year and up from 66% last quarter.
• The CEO is a major sandbagger.
• The QoQ revenue improvement is the best they have had in the last year. 29%, 18%, 29%, 32%. Fabulous. Much better than I expected.
• Gross margin is down from last year because they make a lower margin on the National OCS Program (NOP). Last year, the NOP was just getting started so the margin was still pretty high at that time.
• They said gross margin is up from last quarter because in the last quarter they were capacity constrained and had a lot of extra expense from shipping OCS units around the US to wherever they were needed.
• Liver and heart numbers continue to improve, and lung continues to lag. They said they are continuing to focus efforts on improving lung utilization and they are starting to see some positive signs in Q2 - but they said it would take 12 to 18 months to really get traction.
• They were able to increase capacity of the disposable kits through better utilization of their second shift in Q1. This is what allowed them to have higher revenue than they previously estimated. They thought that their capacity constraints would limit their growth, but they were able to generate enough production output to keep up with demand.
• The additional capacity expansion they are working on is on track to be operational by late Q2. It has already received FDA certification. They have secured more space in their facility to facilitate the capacity expansion and the extra room they will need for inventory.
• The capacity expansion will 4X their overall capacity for the OCS consumable kits. The workflow optimization referenced below will be additive to that 4x.
• They have hired an outside consulting firm to assist with revamping their workflow for efficiency. They believe this will even further enhance their capacity expansion.
• They have recently put in place a dedicated raw material team to proactively track and plan for all of the growth they anticipate in the coming years.
• They plan to add an additional 2-3 launch points later this year for the NOP. This will make the NOP overall more efficient and will enable them to reach certain geographical areas more quickly than they can today.
• This is probably one of the most interesting things - they said that they recruited a senior logistical manager from Amazon to assist with managing the delivery network going forward. (I guess they were meaning it literally when they said they wanted to become the Amazon of organ delivery.)
• They are planning to create a digital central command and dispatch center for the operations related to the NOP. They are going to digitize everything. This will enable tracking of the organ delivery through an app that both patients and clinicians will be able to access. I think they said they were going to call it “OCS Connect”.
• They talked quite a bit about their intention to eventually fully control their air and ground transport system for organ collection and delivery. They expect to launch this in 2H23. That is faster than I expected. The CEO went into a lot more of an explanation around some of the history of the transportation network for the legacy system. He talked at length about how it has massive cost inefficiencies that TMDX will be able to disrupt. He also said that the transportation piece is really critical for TMDX to take over because they are already running into constraints related to airplane availability based on their current number of transplants.
• Regarding the buildout of the transportation network, they are looking at either acquiring an existing operator or creating a joint venture. They are exploring different financing modalities and working with advisors with the goal of minimizing any potential dilution.
• The CFO stated that the revenue per flight is around $20 - $30k depending on distance and other factors. This flight revenue would be in addition to what they are already getting for the NOP service and the OCS unit itself.
• The CEO talked a little bit about the ways they are working on improving OCS lung usage. He was pretty generic but said he would be providing more details later in the year on things that they are specifically doing.
• He was challenged on the guide for the rest of this year and stated again (as usual) that they are being conservative and prudent and allowing for possible surprises.
Really great progress on all fronts. I find nothing to be disappointed with in this report. Holding all shares and happy to be invested in this company. They have a long runway of opportunity ahead of them.
Future TAM Expansion Possibilities:
- Taking over more of the existing (legacy) US organ recovery
- Expanding the US total number of transplants by enabling more organs to be used (because of the OCS technology)
- Growth in OCS Lung - which is barely bringing in any revenue at this point
- International OCS - which is barely bringing in any revenue at this point
- National OCS Program expansion in the US
- Possible NOP in other countries
- Distribution network in the US
- Possible distribution network and other countries
- possibly taking over management of the process that is currently managed in the US by governmental Organ Procurement Organizations (OPOs)
- Expansion into other types of organs.
- Improvements on the OCS technology to enable more treatments of organs while they are being stored prior to transplant.