TransMedics Group, Inc. [TMDX] Filings

10-Q 1 tmdx-20240630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38891

TransMedics Group, Inc.

(Exact name of registrant as specified in its charter)

    Massachusetts

    83-2181531

    (State or other jurisdiction of
incorporation or organization)

    (I.R.S. Employer
Identification Number)

    200 Minuteman Road
Andover, Massachusetts

    01810

    (Address of principal executive offices)

    (Zip code)

(978) 552-0900

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, No Par Value	TMDX	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 26, 2024, the registrant had 33,359,363 shares of common stock, no par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, including any acquisitions, joint ventures or strategic investments, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in the section titled “Risk Factors,” which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report and should not be relied upon as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or will occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Some of the key factors that could cause actual results to differ include:

•

our ability to maintain profitability on a sustained basis

•

our ability to attract, train and retain key personnel;

•

our existing and any future indebtedness, including our ability to comply with affirmative and negative covenants under our credit agreements to which we will remain subject until maturity;

•

the fluctuation of our financial results from quarter to quarter;

•

our need to raise additional funding and our ability to obtain it on favorable terms, or at all;

•

our ability to use net operating losses and research and development credit carryforwards;

•

our dependence on the success of the Organ Care System, or OCSTM;

•

our ability to expand access to the OCS through our National OCS Program, or NOPTM;

•

our ability to scale our manufacturing and sterilization capabilities to meet increasing demand for our products;

•

the rate and degree of market acceptance of the OCS;

•

our ability to educate patients, surgeons, transplant centers and private and public payors on the benefits offered by the OCS;

•

our ability to improve the OCS platform and develop the next generation of the OCS products;

•

our dependence on a limited number of customers for a significant portion of our revenue;

•

our ability to maintain regulatory approvals or clearances for our OCS products in the United States, the European Union and other select jurisdictions worldwide;

•

our ability to adequately respond to the Food and Drug Administration, or FDA, or other competent authorities, follow-up inquiries in a timely manner;

•

the performance of our third-party suppliers and manufacturers;

•

our use of third parties to transport donor organs and medical personnel for our NOP and our ability to maintain and grow our logistics capabilities to support our NOP and reduce dependence on third party transportation, including by means of the acquisition, maintenance or replacement of fixed-wing aircraft for our aviation transportation services or other acquisitions, joint ventures or strategic investments;

•

our ability to maintain Federal Aviation Administration, or FAA, or other regulatory licenses or approvals for our aircraft transportation services;

•

price increases of the components of our products and maintenance, parts and fuel for our aircraft;

•

the timing or results of post-approval studies and any clinical trials for the OCS;

•

our manufacturing, sales, marketing and clinical support capabilities and strategy;

•

attacks against our information technology infrastructure;

•

the economic, political and other risks associated with our foreign operations;

•

our ability to protect, defend, maintain and enforce our intellectual property rights relating to the OCS and avoid allegations that our products infringe, misappropriate or otherwise violate the intellectual property rights of third parties;

•

the pricing of the OCS, as well as the reimbursement coverage for the OCS in the United States and internationally;

•

regulatory developments in the United States, European Union and other jurisdictions;

•

the extent and success of competing products or procedures that are or may become available;

•

our ability to service our 1.50% convertible senior notes, due 2028;

•

the impact of any product recalls or improper use of our products; and

•

our estimates regarding revenue, expenses and needs for additional financing.

TransMedics Group, Inc.

Table of Contents


		Page
	PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Income (Loss)	3
	Consolidated Statements of Stockholders’ Equity	4
	Consolidated Statements of Cash Flows	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

	PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
Signatures		34

iii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

TRANSMEDICS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


	June 30,			December 31,
	2024			2023
Assets
Current assets:
Cash	$	362,751		$	394,812
Accounts receivable		81,158			63,576
Inventory		48,671			44,235
Prepaid expenses and other current assets		16,685			8,031
Total current assets		509,265			510,654
Property, plant and equipment, net		229,030			173,941
Operating lease right-of-use assets		5,896			6,546
Restricted cash		500			500
Goodwill		11,549			11,990
Acquired intangible assets, net		2,253			2,354
Other non-current assets		84			62
Total assets	$	758,577		$	706,047
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	13,027		$	12,717
Accrued expenses and other current liabilities		37,716			38,221
Deferred revenue		1,447			1,961
Operating lease liabilities		2,139			2,035
Total current liabilities		54,329			54,934
Convertible senior notes, net		448,534			447,140
Long-term debt, net		59,217			59,064
Operating lease liabilities, net of current portion		6,603			7,707
Total liabilities		568,683			568,845
Commitments and contingencies (Note 11)
Stockholders' equity:
Preferred stock, no par value; 25,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, no par value; 150,000,000 shares authorized; 33,314,281 shares and 32,670,803 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively		669,445			641,106
Accumulated other comprehensive loss		(237	)		(199	)
Accumulated deficit		(479,314	)		(503,705	)
Total stockholders' equity		189,894			137,202
Total liabilities and stockholders' equity	$	758,577		$	706,047

The accompanying notes are an integral part of these unaudited consolidated financial statements.

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Revenue:
Net product revenue	$	71,732		$	42,462		$	133,057		$	76,455
Service revenue		42,573			10,003			78,098			17,564
Total revenue		114,305			52,465			211,155			94,019
Cost of revenue:
Cost of net product revenue		14,470			8,558			28,554			15,864
Cost of service revenue		30,574			7,166			53,378			12,648
Total cost of revenue		45,044			15,724			81,932			28,512
Gross profit		69,261			36,741			129,223			65,507
Operating expenses:
Research, development and clinical trials		13,858			8,291			25,238			14,162
Selling, general and administrative		42,895			29,356			79,056			54,340
Total operating expenses		56,753			37,647			104,294			68,502
Income (loss) from operations		12,508			(906	)		24,929			(2,995	)
Other income (expense):
Interest expense		(3,623	)		(2,505	)		(7,221	)		(3,596	)
Interest income and other income (expense)		3,268			2,431			6,838			2,986
Total other expense, net		(355	)		(74	)		(383	)		(610	)
Income (loss) before income taxes		12,153			(980	)		24,546			(3,605	)
(Provision) benefit for income taxes		41			(21	)		(155	)		(32	)
Net income (loss)	$	12,194		$	(1,001	)	$	24,391		$	(3,637	)
Net income (loss) per share:
Basic	$	0.37		$	(0.03	)	$	0.74		$	(0.11	)
Diluted	$	0.35		$	(0.03	)	$	0.70		$	(0.11	)
Weighted average common shares outstanding:
Basic		33,119,514			32,545,352			32,939,852			32,403,597
Diluted		35,288,308			32,545,352			34,983,603			32,403,597

The accompanying notes are an integral part of these unaudited consolidated financial statements.

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Net income (loss)	$	12,194		$	(1,001	)	$	24,391		$	(3,637	)
Other comprehensive income (loss):
Foreign currency translation adjustment		(55	)		(2	)		(38	)		5
Total other comprehensive income (loss)		(55	)		(2	)		(38	)		5
Comprehensive income (loss)	$	12,139		$	(1,003	)	$	24,353		$	(3,632	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)


					Accumulated
					Other						Total
	Common Stock				Comprehen-			Accumulated			Stockholders'
	Shares		Amount		sive Loss			Deficit			Equity
Balances at December 31, 2023		32,670,803	$	641,106	$	(199	)	$	(503,705	)	$	137,202
Issuance of common stock upon the exercise of common stock options		113,023		2,547		—			—			2,547
Issuance of common stock in connection with employee stock purchase plan		9,506		638		—			—			638
Vesting of restricted stock units		58,044		—		—			—			—
Stock-based compensation expense		—		6,870		—			—			6,870
Foreign currency translation adjustment		—		—		17			—			17
Net income		—		—		—			12,197			12,197
Balances at March 31, 2024		32,851,376		651,161		(182	)		(491,508	)		159,471
Issuance of common stock upon the exercise of common stock options		433,398		10,641		—			—			10,641
Vesting of restricted stock units		17,772		—		—			—			—
Issuance of common stock in connection with exercise of warrants		11,735		—		—			—			—
Stock-based compensation expense		—		7,643		—			—			7,643
Foreign currency translation adjustment		—		—		(55	)		—			(55	)
Net income		—		—		—			12,194			12,194
Balances at June 30, 2024		33,314,281	$	669,445	$	(237	)	$	(479,314	)	$	189,894


						Accumulated
						Other						Total
	Common Stock					Comprehen-			Accumulated			Stockholders'
	Shares		Amount			sive Loss			Deficit			Equity
Balances at December 31, 2022		32,141,368	$	666,277		$	(225	)	$	(478,677	)	$	187,375
Issuance of common stock upon the exercise of common stock options		378,500		3,574			—			—			3,574
Issuance of common stock in connection with employee stock purchase plan		14,135		384			—			—			384
Stock-based compensation expense		—		3,921			—			—			3,921
Foreign currency translation adjustment		—		—			7			—			7
Net loss		—		—			—			(2,636	)		(2,636	)
Balances at March 31, 2023		32,534,003		674,156			(218	)		(481,313	)		192,625
Issuance of common stock upon the exercise of common stock options		39,158		705			—			—			705
Stock-based compensation expense		—		4,958			—			—			4,958
Purchase of capped calls related to convertible senior notes		—		(52,072	)		—			—			(52,072	)
Issuance of restricted common stock		9,772		—			—			—			—
Foreign currency translation adjustment		—		—			(2	)		—			(2	)
Net loss		—		—			—			(1,001	)		(1,001	)
Balances at June 30, 2023		32,582,933	$	627,747		$	(220	)	$	(482,314	)	$	145,213

The accompanying notes are an integral part of these unaudited consolidated financial statements.

TRANSMEDICS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	24,391		$	(3,637	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense		8,901			2,679
Stock-based compensation expense		14,513			8,879
Non-cash interest expense and end of term accretion expense		1,547			593
Non-cash lease expense		650			423
Unrealized foreign currency transaction (gains) losses		200			(150	)
Changes in operating assets and liabilities:
Accounts receivable		(17,650	)		(19,862	)
Inventory		(7,932	)		(10,977	)
Prepaid expenses and other current assets		(3,217	)		515
Other non-current assets		(24	)		(54	)
Accounts payable		1,778			3,673
Accrued expenses and other current liabilities		630			4,196
Deferred revenue		(504	)		—
Operating lease liabilities		(1,000	)		(742	)
Net cash provided by (used in) operating activities		22,283			(14,464	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(67,935	)		(2,307	)
Net cash used in investing activities		(67,935	)		(2,307	)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $14,620		—			445,380
Purchases of capped calls related to convertible senior notes		—			(52,072	)
Proceeds from issuance of common stock upon exercise of stock options		13,188			4,279
Proceeds from issuance of common stock in connection with employee stock purchase plan		638			384
Net cash provided by financing activities		13,826			397,971
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(235	)		78
Net increase (decrease) in cash, cash equivalents and restricted cash		(32,061	)		381,278
Cash, cash equivalents and restricted cash, beginning of period		395,312			201,682
Cash, cash equivalents and restricted cash, end of period	$	363,251		$	582,960
Supplemental disclosure of non-cash activities:
Transfers of inventory to property, plant and equipment	$	3,381		$	1,091
Purchases of property, plant and equipment included in accounts payable and accrued expenses	$	1,540		$	71
Operating lease liabilities arising from obtaining right-of-use assets	$	—		$	2,222
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	362,751		$	582,210
Restricted cash		500			750
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	363,251		$	582,960

The accompanying notes are an integral part of these unaudited consolidated financial statements.

TRANSMEDICS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business and Basis of Presentation

TransMedics Group, Inc. (“TransMedics Group” and, together with its consolidated subsidiaries, the “Company”) was incorporated in the Commonwealth of Massachusetts in October 2018. TransMedics, Inc. (“TransMedics”), an operating company and wholly owned subsidiary of TransMedics Group, was incorporated in the State of Delaware in August 1998. The Company is a commercial-stage medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. The Company developed the Organ Care System (“OCS”) to replace a decades-old standard of care. The OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. The Company’s OCS technology replicates many aspects of the organ’s natural living and functioning environment outside of the human body. The Company also developed its National OCS Program (“NOP”), an innovative turnkey solution to provide outsourced organ retrieval, OCS organ management and logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS. The Company's logistics services include aviation transportation, ground transportation and other coordination activity.

On August 16, 2023, the Company acquired Summit Aviation, Inc. and Northside Property Group, LLC (together “Summit”). Summit was a charter flight operator based in Bozeman, Montana. The acquisition enabled TransMedics to add aviation transportation services to its NOP and become a comprehensive national provider of donor organ retrieval and delivery in the United States.

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company believes that its existing cash of $362.8 million as of June 30, 2024 will be sufficient to fund its operations, capital expenditures, and debt service payments for at least the next 12 months following the filing of this Quarterly Report on Form 10-Q. However, the Company in the future may need to seek additional funding through equity financings, debt financings or strategic alliances. The Company may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of the Company’s shareholders. If the Company is unable to obtain funding when needed, the Company will be required to delay, reduce or eliminate some or all of its research and development programs, product expansion or commercialization efforts, or the Company may be unable to continue operations.

The Company is subject to risks and uncertainties common to companies in the medical device industry and of similar size, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations. Products currently under development will require additional research and development efforts, including additional clinical testing and regulatory approval, prior to commercialization. In addition, the Company is subject to risks and uncertainties related to its aviation transportation services, including, but not limited to, compliance with FAA regulations, pilot availability and operational disruptions. These efforts require additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities. The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, the Company may not obtain necessary government regulatory approval on its expected timeline or at all, and approved products may not prove commercially viable. The Company operates in an environment of rapid change in technology and competition.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited interim financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2024 and results of operations for the three and six months ended June 30, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023 have been made. The Company’s results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited consolidated financial statements include, but are not limited to, revenue recognition, the valuation of inventory, the valuation of assets acquired and liabilities assumed in business combinations, including acquired intangible assets and the resulting goodwill, and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. As of the date of issuance of these unaudited consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ from those estimates or assumptions.

Risk of Concentrations of Credit and Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As of June 30, 2024 and December 31, 2023, the Company had no allowance for credit losses.

Certain of the components and subassemblies included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers, as are sterilization services. Although the Company seeks to reduce dependence on those limited sources of suppliers, manufacturers and service providers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The carrying value of the Company’s long-term debt approximates its fair value (a level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate. The Company's 1.50% convertible senior notes due 2028 (the "Notes") are carried at the face value less unamortized debt discount and issuance costs on the accompanying consolidated balance sheets, and the fair value of the Notes is presented at each reporting period for disclosure purposes only (see Note 8).

Spare Parts Inventory

Spare parts are used in aviation operations and are generally not for sale. Spare parts inventory is comprised of repairable and expendable spare aircraft parts, which are valued at the lower of cost or net realizable value, using the specific identification method. Storage costs and miscellaneous materials and supplies costs related to inventory or to support flight equipment are expensed as incurred. As of June 30, 2024, spare parts inventory of $0.7 million is included within prepaid expenses and other current assets on the accompanying consolidated balance sheets. The Company had no spare parts inventory as of December 31, 2023. The Company determines, based on the evidence that exists, whether or not it is appropriate to maintain a reserve for excess and obsolete spare parts inventory. The reserve is based on historical experience related to the disposal of inventory due to damage, physical deterioration, obsolescence, or other causes. As of June 30, 2024 and December 31, 2023, the Company had no allowance for spare parts excess and obsolescence.

Segment Information

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company has developed and is commercializing a proprietary system to preserve and deliver human organs for transplant in a near-physiologic condition to address the limitations of cold storage organ preservation. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the Company’s chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance. The Company has determined that its chief operating decision maker is its Chief Executive Officer. The Company’s chief operating decision maker reviews the Company’s financial information on a consolidated basis for purposes of allocating resources and assessing financial performance.

Foreign Currency Translation

The functional currency of each of the Company’s foreign subsidiaries is the currency of the local country. Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using the period-end exchange rates, and income and expense items are translated into U.S. dollars using average exchange rates in effect during each period. The effects of these foreign currency translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity.

The Company also incurs transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded. Realized and unrealized foreign currency transaction gains (losses) are included in the consolidated statements of operations as a component of other income (expense). Realized and unrealized losses totaled $0.2 million and $0.4 million for the three and six months ended June 30, 2024, respectively. Realized and unrealized gains totaled less than $0.1 million for the three months ended June 30, 2023 and $0.1 million for the six months ended June 30, 2023.

Recently issued accounting pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in their tax rate reconciliations, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of the adoption of this guidance.

3. Acquisition of Summit

On August 16, 2023, the Company acquired Summit pursuant to the terms of an equity purchase agreement. Summit was a charter flight operator based in Bozeman, Montana. The acquisition enabled TransMedics to add aviation transportation services to its NOP and become a comprehensive national provider of donor organ retrieval and delivery in the United States.

The acquisition was accounted for as a purchase of a business under ASC Topic 805, Business Combinations. Under the acquisition method of accounting, the assets and liabilities were recorded as of the acquisition date, at their respective fair values. The preliminary purchase consideration of $14.9 million reflected an upfront cash payment of $18.0 million, net of cash acquired and working capital adjustments. During the three months ended June 30, 2024, the Company recorded a final working capital adjustment of $0.4 million to the purchase price and goodwill, which amount was released to the Company in July 2024. The Company’s consolidated financial statements as of June 30, 2024 reflect the final allocation of the purchase price to the assets and liabilities assumed based on fair value as of the date of the acquisition.

The Company's estimate of preliminary purchase consideration was subject to change upon finalizing working capital adjustments. The Company’s preliminary estimate of the fair value of specifically identifiable assets acquired and liabilities assumed as of the date of acquisition was subject to change upon finalizing its valuation analysis. During the three months ended December 31, 2023, the Company recorded an adjustment to goodwill of $0.3 million, representing an adjustment to its estimate of the fair value of accounts payable and deferred tax liabilities as of the acquisition date. As of June 30, 2024, the preliminary estimates have been finalized, with no further changes to be recorded to the purchase price or allocation of the purchase price to the assets and liabilities assumed.

The following table summarizes the allocation of the purchase price (in thousands):


Assets Acquired and Liabilities Assumed:
Accounts receivable	$	2,089
Other current assets		1,040
Property, plant and equipment		5,922
Right-of-use asset		288
Intangible assets		2,430
Goodwill		11,549
Total assets acquired		23,318
Accounts payable and other current liabilities		(6,917	)
Deferred tax liabilities		(1,660	)
Operating lease liabilities		(288	)
Total allocation of purchase price consideration, net of cash acquired	$	14,453

Property, plant and equipment consisted primarily of flight school aircraft and construction-in-progress related to a commercial aircraft hangar that Summit was in the process of constructing at the date of acquisition. Flight school aircraft were valued using market comparisons adjusted for aircraft-specific condition. The fair value of construction-in-progress approximated its cost.

Intangible assets consisted primarily of a customer relationship asset of $2.3 million related to flight school revenue and was valued using the multi-period excess earnings method, a form of the income approach. Significant assumptions and estimates utilized in this model include the revenue growth rate, contract renewal probability and the discount rate. Intangible assets are being amortized on a straight-line basis to selling, general and administrative over their estimated useful lives of 12 years as of the acquisition date.

Goodwill was recognized for the excess purchase price over the fair value of the net assets acquired. Goodwill is primarily attributable to the workforce of the acquired business (which is not eligible for separate recognition as an identifiable intangible asset) and anticipated synergies between Summit’s existing business processes and the NOP. Goodwill from the acquisition is included within the Company’s one reporting unit and is included in the Company’s enterprise-level annual review for impairment. Goodwill resulting from the acquisition is not deductible for tax purposes.

Deferred tax liabilities relate to the differences between the fair value recognized in purchase accounting and the tax basis of property, plant and equipment and intangible assets. The net deferred tax liability is a source of income to support the recognition of a portion of existing deferred tax assets. Therefore, the Company recorded a tax benefit of $1.7 million during the three months ended September 30, 2023 for the release of a portion of its valuation allowance related to the net deferred tax liabilities recorded in purchase accounting.

4. Inventory

Inventory consisted of the following (in thousands):


	June 30, 2024		December 31, 2023
Raw materials	$	27,506	$	25,823
Work-in-process		4,053		3,806
Finished goods		17,112		14,606
	$	48,671	$	44,235

5. Property, Plant and Equipment, Net

Property, plant and equipment, net consisted of the following (in thousands):


	June 30, 2024			December 31, 2023
Transplant aircraft	$	195,418		$	141,855
Flight school aircraft		3,484			3,484
OCS Consoles		17,232			14,491
Manufacturing equipment		7,940			6,898
Computer equipment and software		3,538			3,021
Laboratory equipment		2,539			1,875
Office, trade show and training equipment		4,323			4,006
Leasehold improvements		22,712			13,354
Construction-in-progress		1,876			6,250
		259,062			195,234
Less: Accumulated depreciation and amortization		(30,032	)		(21,293	)
	$	229,030		$	173,941

During the three and six months ended June 30, 2024, total depreciation and amortization expense was $4.5 million and $8.8 million, respectively. During the three and six months ended June 30, 2023, total depreciation and amortization expense was $1.4 million and $2.7 million, respectively. Construction-in-progress as of December 31, 2023 primarily related to construction of a commercial aircraft hangar at Bozeman Yellowstone International Airport in Bozeman, Montana. The aircraft hangar was placed in service in June 2024 and is included in leasehold improvements as of June 30, 2024. The Company is depreciating the aircraft hangar over 28.5 years. Substantially all of the Company's property, plant and equipment are held in the United States. The Company capitalized costs associated with the development of internal use software of $0.5 million in the three and six months ended June 30, 2024, which costs are included in construction-in-progress.

6. Goodwill and Intangible Assets

The carrying amount of goodwill was $11.5 million and $12.0 million as of June 30, 2024 and December 31, 2023, respectively, and related to the Company’s acquisition of Summit. The change in goodwill during the three and six months ended June 30, 2024 is a result of final working capital adjustments to the purchase price of Summit. Goodwill is not amortized, but instead is reviewed for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. To date, the Company has had no impairments to goodwill.

Acquired intangible assets consisted of the following (in thousands):


			June 30, 2024
	Weighted Average Useful Life		Gross Amount		Accumulated Amortization		Carrying Value
	(in years)
Customer relationship		12	$	2,320	$	169	$	2,151
Other		12		110		8		102
			$	2,430	$	177	$	2,253


			December 31, 2023
	Weighted Average Useful Life		Gross Amount		Accumulated Amortization		Carrying Value
	(in years)
Customer relationship		12	$	2,320	$	73	$	2,247
Other		12		110		3		107
			$	2,430	$	76	$	2,354

Amortization expense is recorded within selling, general and administrative expense. Amortization expense was $0.1 million for each of the three and six months ended June 30, 2024. Future amortization expense of the intangible assets as of June 30, 2024 is expected to be as follows (in thousands):


Year Ending December 31,
2024 (six months)	$	102
2025		203
2026		203
2027		203
2028		203
Thereafter		1,339
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TransMedics Group, Inc. [TMDX] Filings
10-Q	[2024-08-01]
10-Q	[2024-05-02]
10-K	[2024-02-27]
10-Q	[2023-11-08]
10-Q	[2023-08-04]
10-Q	[2023-05-04]
10-K	[2023-02-27]
10-Q	[2022-11-04]
10-Q	[2022-08-03]
10-Q	[2022-05-05]
10-K	[2022-03-01]
10-Q	[2021-11-09]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-11]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-06]
10-K	[2020-03-17]
10-Q	[2019-11-08]
10-Q	[2019-08-08]
10-Q	[2019-06-12]
S-1	[2019-04-05]