for a small cap company few have been in the headlines as much over the last three months than transmedics Group which is a company that has created a system that allows Hearts livers and lungs to stay alive for longer and be transported greater distances for organ donation well the stock has been all over the place and the company reported their earnings after the market closed today and the stock is up about 5% so does this mean the worst is over or is there more the other shoe to fall let's SP the next couple minutes trying to figure this out my name is Brian stoel as at the time of this recording I do own shares of transmedics want to give a shout out to fin chat. for sponsoring today's video we'll see more from them in just a minute so this was transmedics fourth quarter of 2024 let's get right into the results uh what we see is that Revenue was up 50% from the fourth quarter last year at 122 million that be analyst estimates and the midpoint of Management's assumed guidance because they only give full year guidance earnings per share came in at 19 cents that was a significant improvement from the same time last year and ahead of analyst estimates let's look at margins uh in general you love to see all that green gross margins expanded ever so slightly but operating margins which I would argue is the most important expanded meaningfully net margins were up as well cash flow the company was actually free cash flow positive to the tune of about $6 million for the quarter for the year they are still losing money on a free cash flow basis net income increased again that's on a gap basis the balance sheet is upside down which means there's more debt than there is Cash the main reason for that is the building out of a logistics Network which includes 19 planes which were purchased as of the end of the fourth quarter 21 planes today and they plan to bring that to 22 planes by the end of this year so let's look at what was going on in the company by going down the income statement as I said Revenue was up 50% the cost of that Revenue was up 49% those were close enough so that gross profit in general matched uh the gross profit growth matched Revenue growth however I think it is worth looking at this buy segment so first we've got product Revenue which is mainly the consumables that these machines need to keep a heart along and a liver alive and those consumables are the high margin driver here and it was very very positive news here with the gross margins for the product Revenue expanding meaningfully about 500 basis points and it's approaching 80% now service revenue is not only but primarily the transportation of those organs for hospitals in the National organ transplant system the platform there we saw gross margins go in the other direction from 34 and a. half% down to 29.
2% some of that is that more and more of the organs are being transported with transmedics um transportation Logistics system and that is a lower margin bus business something to keep your eyes on now 50% Revenue growth just 40% growth in operating Pro uh operating expenses which is good news it's why it's quoted green because it's growing slower than revenue and all that combines to see the operating income increase meaningfully more than tripling from 2. 6 million to 8. 6 million uh net income less meaningful but that was up 73% it is worth noting that the number of diluted shares outstanding on average was up 3% which isn't great but for a company in this stage of growth of her transmedics is not that bad either now there's a whole lot more going on underneath the hood here so it's worth digging into these facts and for that we're going to head to fin chat.
I highly suggest you click the top Link in the show notes below and it'll take you right to Fin chat. and you can see these stats there and if you decide for full functionality if you get a year-long membership you'll get 15% off so the first thing that I pulled up here is the breakdown of Revenue again the product Revenue the the the consumable instruments that are needed to keep the heart the lung liver alive is in the red and primarily Logistics flying these organs across the country is in the orange uh what's important to note here is that the growth rate actually started accelerating a little bit from the third quarter to the fourth quarter that's a great sign and coming in at 45% um so that was great news overall uh this is for the product Revenue love to see that that's probably the most important one the service revenue is still seeing Bonkers growth it is coming down it's going to come down because this growth was unsustainably high coming in at 59% growth I would argue what's really important is this red one showing uh showing an increase and so it's not only increasing its Revenue growth rate but its margins were expanding as well that is very good news on the whole it's also worth pointing out that there are three different organs that we're talking about here now this is revenue that the company gets broken down by the organ that's being transplanted in the green obviously you can see that liver is the most important then heart and then very very small portion here is lung let's first look at lung it's pretty much insignificant because it's so small it grew 6% during the quarter the company's coming out with a new uh updates for the lung which they hope will drive greater adoption in the year ahead but for now it's kind of of an afterthought let's look at heart and so what we see with heart transplants is that the growth rate of 40% is definitely positive but uh excuse me is slowing down from where it was over the last couple of quarters the most important by far is liver and what we see there is is that the growth rate of 62% is still fantastic it's phenomenal but it is worth noting that that growth rate is coming down can't get too upset about that given where it is it's also worth pointing out that this company is moving abroad as well albeit slowly the as you can see these numbers are much much smaller um growing 10% year-over-year this is an afterthought it is optionality at this point not anything that anyone should get too excited about there are a couple other updates that I think are worth getting to in just a second but I wanted to point out that the company's uh guidance for the year was 22% growth now uh if the company had matched expectations the market was expecting 22% growth as well but the base because the company reported better than expected results is a little bit higher andless we expecting 18% growth they have been a beaten rais company in the past so I'm sure that's what a lot of investors like myself are hoping for moving forward but I really want to talk about this slide right here because there was a lot of talk a lot of talk including much by myself about the fact that um while transmedics has fantastic ftic a fantastic technology it is expensive and there are other ways that these transplants can happen especially uh one that's become more commonly used called normic Regional profusion or MrNRP um which is gaining in popularity so market share to me is really what this all comes down to and so in the conference call management did provide some guidance there they said from 2023 to 2024 market share across all three organs went from 13. 8 to 20.
