Title

Presentation

Operator: Good afternoon, and welcome to the TransMedics Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Brian Johnston from Gilmartin Group. Please go ahead.

Brian Johnston: Thank you. Earlier today, TransMedics released financial results for the quarter and full year ended December 31, 2022. A copy of the press release is available on the company’s website. Before we begin, I would like to remind you that management will make statements during this call, including during the question-and-answer portion 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-Q filed with the Securities and Exchange Commission on November 4, 2022, and our subsequent filings with the Securities and Exchange Commission, which are available at www.sec.gov and on our website at www.transmedics.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, February 22, 2023. And with that, I’ll now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Waleed Hassanein: Thank you, Brian. Good afternoon, everyone, and welcome to TransMedics fourth quarter and full year 2022 earnings call. As always, joining me today is Stephen Gordon, our Chief Financial Officer. Our fourth quarter performance demonstrated continued commercial momentum and accelerated clinical adoption through the NOP, despite constrained supply of our OCS perfusion module, as we are working to increase finished goods assembly capacity. This marks another quarter of significant sales growth for the business. Here are the summary results. 4Q total revenue was $31.4 million representing 225% year-over-year growth, and approximately 22% growth over the third quarter of 2022. As expected, NOP continued to be the primary driver for the revenue growth at trend we expect to continue for the foreseeable future.

Total revenue for the full year 2022 was $93.5 million, including new products and service revenue of $92.1 million and $1.4 million favorable contour revenue adjustment in 3Q. These results represent 209% and 204% year-over-year growth respectively. We effectively tripled our revenue in 2022 over 2021. Stephen will cover the financial details and organ split in his section of this call. Now, let me provide some more granular highlights on the quarter and the full year. Overall, 4Q represented a high watermark for case volume for OCS and NOP. As heart and liver cases increased sequentially for the fourth consecutive quarter, we were also pleased to see modest but encouraging growth of lung activities in Q4, a trend which we hope to maintain in 2023.

Approximately 89% of our total U.S. case volume came from NOP. On a per organ basis, approximately 97% of the liver, approximately 79% of the heart and approximately 85% of the lung cases were from NOP. 2022 has demonstrated to us that NOP is here to stay and is uniquely differentiating TransMedics in the marketplace. Our goal is to drive NOP to be the new standard of care for solid organ transplant in the U.S. over the next several years. As we predicted and despite being in the first year of commercial launch of OCS, liver and heart in the U.S., the overall transplant market saw modest overall transplant volume growth year-over-year. Liver transplant grew by approximately 3%. Heart transplant grew by approximately 9%, and even lung were up approximately 7% in 2022 over 2021.

We believe this is an encouraging early sign that the use of OCS and NOP are enabling growth in the overall transplant volumes in the U.S. through the use of DCD, extended criteria and distant donor in the U.S. Simply stated the OCS and NOP are fundamentally growing the transplant market. We will continue to track this annual trend and we expect to see these growth rates to increase over time with NOP growth in all three organs. We ended 4Q 2022 with critical mass of transplant program using OCS and NOP. There were 22 liver programs that used OCS and NOP in Q4, of which, there were 12 active users. For heart, there were 29 programs that used OCS and NOP, of which 12 were active users. In lung, there were 13 programs that used OCS and NOP, of which, five were repeat users.

It is important to note we have achieved the above results despite being in a supply constraint situation for several weeks during 4Q. As we continue to build up our production capacity to meet the growing demand for OCS, we were able to navigate this difficult situation, grow our case volume, and grow our revenue by leveraging the NOP hub network to supply OCS modules to any location across the U.S. to meet the demand using charter flight. This early inefficiency in the supply chain distribution was the primary driver of the 4Q service margin erosion, since TransMedics have to absorb these costs to meet the demand. We expect this to be a transient phenomenon and that this will revert once we scale our production capacity and develop more leverage on the logistical process.

Let me use this opportunity to update you in several actions that we’ve taken to enable us to overcome the production capacity constraints over the coming several months. We’ve already expanded our clean room space. The documentation for FDA certification is under review by FDA and we are expecting the certification or FDA decision over the coming months. We are expanding our existing sterilization capacity and are in the final stages of qualifying a larger sterilization partner to expand total capacity and further de-risk our supply chain. We have staffed a second assembly shift that is now fully operational. Importantly, we’ve brought on Nick Corcoran, who have served in multiple roles of increasing responsibilities at Stryker Corporation as our Senior Vice President of Supply Chain and Operations to lead these initiatives as we continue to scale.

In summary, we expect to resolve production capacity constraints by the second half of 2023. There’s no doubt in our mind that 2022 was a transformative year for TransMedics business as we demonstrated the significant value proposition and growth potential for OCS and NOP in the United States. We strongly believe, however, that this is just the beginning of a long runway of sustained significant growth for TransMedics business. Let me articulate our strategies to achieve our growth potential. First, starting in 2023 and as soon as we adequately enhance production capacity, we will focus in four areas to grow our U.S. transplant franchise further. Specifically, we will continue to add new transplant programs to the NOP initiative in the U.S. for liver, heart and lung.

We will drive deeper penetration with an existing and new transplant programs based on the demonstrated efficiency and clinical outcomes of OCS cases at these programs. Focus on growing the overall transplant volumes at these programs from DCD extended criteria and distance standard donors using the NOP infrastructure. Finally, reinvigorating the OCS lung program through the NOP in the U.S. to contribute additional growth. Second, we will continue to expand our NOP infrastructure. Specifically, we are expanding our surgical capabilities and clinical support staff across the board and maybe opening new launch points as needed to expand our geographical reach in the U.S. Third, we are developing a best-in-class dedicated air and ground logistics network for organ transplantation in the United States.

This is critical. Let me repeat, this is critical to managing our growth potential and controlling our transportation costs and improving our service margins. Importantly, we strongly believe that this initiative would create a significant catalyst for further growing the NOP franchise in the U.S. Importantly, it will create a larger, deeper and wider more around our NOP offering, while uniquely positioning us to more fully transform the standard of care in the United States. Finally, by continuing to invest in our next-gen OCS and next organ programs. This is critical to our long-term growth, importantly, to further distance ourself from any potential competitors on the horizon. Let me conclude this section by sharing some important facts to help quantify the magnitude of growth in front of TransMedics that we are planning to fully capitalize on.

In 2022, we transplanted approximately 1,000 cases on OCS. This represents only 7% of the existing total U.S. liver, heart and lung transplants in 2022. We strongly believe that we have the potential and are creating the NOP infrastructure to be able to perform the lion share of the existing U.S. transplant volumes for liver, heart and lung transplants. In addition, we are €“ we also expect to benefit from our ability to grow the overall transplant volumes as we have demonstrated early on in 2022 by enabling the use of organs from DCD, extended criteria and distant standard criteria donors that were seldomly utilized for transplantation in the U.S. due to the limitations of historical procurement and preservation methods. This is effectively will grow our total addressable market opportunity for TransMedics and organ transplantation.

In all, we are humbled and thrilled by our successes in 2022. And we’re looking forward to continuing to build on this solid foundation to catapult TransMedics to new heights in 2023 and beyond. We are confident in our strategy and we are laser focused on execution of our plans to drive the next gear of growth for TransMedics and NOP. As mentioned, 4Q results continue to outpace our forecasted demand plans and challenge our finished goods production capacity. As we stand today, we foresee this issue continuing with us until probably the end of Q2, which may be impacted by a temporary shortage of supply of finished OCS products in immediate term. During this ramp up process, we may find ourselves in another back order situation in Q1 or Q2 2023.

That said, based on our 4Q and full year results and balancing these results with the expected finished goods pressures in H1 2023, we are setting our annual revenue guidance for full year 2023 to be between $138 million and $145 million in revenue, representing a strong 50% to 57% growth over 2022 total revenue excluding contra revenue reversal. With that, let me turn the call over to Stephen to cover the detailed financial results for the quarter.

Stephen Gordon: Thank you, Waleed. I will now provide some additional detail on the Q4 results and other financial information for the quarter and the year. For the fourth quarter of 2022, our total revenue was 31.4 million. This is an increase of 225% from the fourth quarter of 2021, and the 22% sequential increase from last quarter. In the U.S., revenue was 29.1 million. U.S. revenue increased over 300% from the fourth quarter of 2021 and 25% sequentially from last quarter. The organ breakdown on U.S. revenue was 16.1 million of liver, 11 million of heart, and 1.9 million of lung. Ex-U.S. revenue was 2.3 million, a 5% decline from Q4 of 2021 in U.S. dollars. But in constant currency, non-U.S. revenue grew 7%. And the ex-U.S. revenue was 2.1 million of heart, 0.2 million of lung and 0.1 million of liver.

We also are reporting the breakout of product and service revenue this quarter. The service revenue includes the added amounts we charge for the surgical procurement and organ management as part of the NOP. In Q4, product revenue was 25.1 million, and service revenue was 6.3 million. So the service portion was about 20% of the total in Q4. Gross margin for the fourth quarter of 2022 was 66%. This was down from 72% in the fourth quarter of 2021 and reflects the higher NOP service component and the early inefficiencies that Waleed mentioned in his remarks. The margin on product revenue was 79% in Q4 2022, and the margin on service was 14% in Q4 2022. Total operating expenses for the quarter were 27.5 million. That’s 50% above Q4 of 2021 driven primarily by our continued investment.

It’s scaling our NOP infrastructure and resources to be able to meet growth in NOP demand. Our operating loss was 6.8 million in the fourth quarter of 2022 compared to 11.3 million in the fourth quarter of 2021, primarily result of the growing revenues in the business. And our net loss for the fourth quarter of 2022 was 6.7 million compared to 12.7 million in the fourth quarter of 2021. Total cash was 201.2 million as of December 31, 2022, which equates to a reduction of 3.3 million from the balance at the end of Q3 of 2022. And weighted average common shares outstanding for the quarter were 32 million. From a cash perspective, TransMedics remains in a very strong position to continue to execute our strategy and increase OCS and NOP utilization throughout the organ transplant field.

Now let me share some detail on the full fiscal year 2022 results. For the full year, total revenue was 93.5 million, a 209% increase over the prior year, and included the $1.4 million favorable reversal of contra revenue in Q3. U.S. organ breakdown for the full year was 46.1 million of liver, 29.9 million of heart and 8 million of lung and OUS was 8.5 million of heart, 0.9 million of lung and 0.1 million of liver. Product revenue for the year was 79.2 million, and service revenue was 14.2 million. Gross margin for the full year was 70% the same as in 2021 and product margin was 79%, and service margin was 21% for the full year of 2022. And total operating expenses were 96.7 million for the full year 2022, that’s up 60% from 60.6 million in 2021.

Operating loss was 31 million €“ 31.4 million for the full year 2022 compared to 39.4 million in 2021. And net loss was 36.2 million in 2022 compared to 44.2 million in 2021. Overall, 2022 was a significant year for TransMedics as we demonstrated the commercial strength of the OCS, NOP and TransMedics in general. As Waleed discussed, we are very enthusiastic about our opportunities to grow OCS and NOP adoption in 2023 and over the next several years. To repeat Waleed earlier comment, we are providing annual revenue guidance in the range of 138 million to 145 million, which represents 48% to 55% or 50% to 57%, excluding the favorable contra reversal in 2022. Now, I would like to turn the call back to Waleed for closing comments.

Waleed Hassanein: Thank you, Stephen. To summarize, 2022 was a transformative year for TransMedics, delivering exceptional 209% revenue growth. We strongly believe, however, that we are in the early stage of a long sustained growth period for our business and organ transplantation in general in the U.S. We are now laser focused on scaling our production capacity and NOP clinical and logistics infrastructure to achieve our goals. With OCS and NOP, TransMedics is uniquely positioned to lead the global transplant space into the future. We look forward to furthering our impact in 2023. With that, I will now turn the call to the operator for Q&A. Operator?

Operator: Our first question is from Allen Gong with JPMorgan. Please go ahead.

Unidentified Analyst: Hi, this is actually Rohan on for Alan. Thanks for taking the question and congrats on a nice quarter. I just wanted to start off with 2023 guidance and specifically was hoping you could talk more about what this range assumes by organ in addition to new center ads and penetration rates?

Waleed Hassanein: You mean 2023 guidance?

Unidentified Analyst: Yes.

Waleed Hassanein: Yes. We never provide guidance on center or organ. We provide total revenue guidance for the year, and we’re not planning to change that anytime soon.

Unidentified Analyst: Okay. And then I guess shifting over to the next question. Would you be able to comment more on the durability of demand that drove out performance during fourth quarter? And also just if you could give additional color on the supply situation as it stands today, and specifically I guess your ability to meet demand in 2023, given that we’re kind of most of the way through the first quarter already?

Waleed Hassanein: On the demand, we believe that the demand was really in the early innings in 2022, even in Q4. We expect that demand to continue to grow throughout 2023 and beyond. And this is why we’re focusing on scaling our supply capacity. This is why we are adding new leadership, expanding footprint of our production space, adding second shift because we need to create that infrastructure to allow us to continue to be ready to meet that growing demand. We do not expect the demand to be a one and done thing. We expect this to continue to grow. And until we’re out of the supply capacity, we have to be prudent and we have to be conservative in our guidance and our estimation because we know that what back order situation could create. So I hope I addressed your question.

Unidentified Analyst: Yes, that was helpful. And I guess just to clarify something, I believe you mentioned that you hope to resolve production capacity by the second half of this year, if I’m not mistaken just wanted to. Okay, great. Thank you.

Waleed Hassanein: That’s correct.

Stephen Gordon: That’s correct.

Waleed Hassanein: Thank you.

Operator: The next question is from Cecilia Furlong with Morgan Stanley. Please go ahead.

Cecilia Furlong: Hi, great. Good afternoon and thank you for taking the questions. Waleed, I wanted to follow up a bit on the supply dynamics and you talked about a bit of pressure in 4Q, I don’t know if there’s a way to quantify the impact from the top line standpoint, but as we think about the first few quarters of 2023 ahead of scaling supply, how should we think about upside relative to the 4Q run rate?

Waleed Hassanein: Cecilia, because we expect the demand to continue to grow and we expect the demand to continue to outstrip our ability to beat it. I would be from our perspective, we would highly advise to plan Q1 and Q2 either flat or modest growth because we expect to find ourselves, again, outstripping our increased capacity that we are experiencing with the second shift. This is why we’re taking this methodical and conservative approach to our guidance.

Cecilia Furlong: Okay, understood. And if I could follow up, Stephen on gross margin, as you think about just your initiative in 2023 to ramp the logistics side, how should we think about the margin expansion story? And I know you’ve talked about in the 75 or mid-70s at scale, how should we think about the progression in 2023 and coupled with that too just from an OpEx standpoint, from an SG&A side, as you think about continuing to build out the NOP model, can you talk through how you’re thinking about just the ramp on a relative basis in 2023?

Stephen Gordon: Yes, thanks, Cecilia. And you’re €“ it’s a good question about margin. So, margin was challenged in Q4 because of the limited supply and we had to do provide other costs that allowed us to be able to grow the revenue. That’s going to continue in 2023. I would expect similar margins overall maybe slight sequential improvement throughout the year. The goal €“ the mature goal, the mid-70s, I don’t see that in 2023 until we’re completely out of supply constraints and with more revenue on the top line. As far as spending, we do expect to grow spending in 2023. I would model just for modeling purposes, I would think of a range of about 25% to 30% overall OpEx single digit on R&D and the rest in SG&A.

Cecilia Furlong: Great, thank you for taking the questions and congrats on the quarter.

Waleed Hassanein: Thank you, Cecilia.

Operator: The next question is from Josh Jennings with Cowen. Please go ahead.

Josh Jennings: Hey, good afternoon. Thanks for taking the questions and I’ll echo €“ it’s good to see the strong finish of the year. I was hoping we’ll lead to just ask about, I guess the three buckets that you called out on the call DCD extended criteria, DBD, and then distant standard organs €“ donor organs. Just it seems like, I think you’ve mentioned earlier in the year in a €“ it’s some public commentary just about OCS volumes were kind of spread widely throughout each of those buckets. And maybe if you could just build on comments earlier in the year today and just help us think through because I think some are thinking that the OCS opportunity may be limited or heavily weighted towards the DCD opportunity, but looking at the national database, it seems like DCD organs are still very, very early in terms of the step up in 2022 versus 2021. Sorry for the long-winded question, but hope you got the gist of it.

Waleed Hassanein: Yes, absolutely, Josh, and thank you for the question. This is exactly why we €“ I went through the script to highlight that we’re growing the overall transplant market, not just by DCD organ. In fact, DCD organ, when you look at the blended rate across all three organs was less than 50%. But we’re actually seeing DBD organs either distant procurement is leading the way. Extended criteria DBD organ, OCS is being used across all transplants, including transplants within the same hospital and using NOP. So this is not intended to segment or limit. I was trying to actually highlight €“ excuse me, the opposite that the OCS is being used across the gamut of organ transplants.

Josh Jennings: Excellent. Thanks for that. And then just two other areas we just heard surgeons talk about recently. One was the rapid recovery approach that you may be or some centers are using our particularly OPOs when donors are either becoming more compromised and there’s not enough time to match and use serology testing to match the donor with the recipient and just explaining the organ, putting it on the OCS system and then running those serology tests. And then matching the organ and then also just the stacking of organ transplant procedures by NOP adopters would love to hear kind of how early we are in those two approaches that OPOs are using as well as liver organ transplant centers, a rapid recovery and stacking and where you see those two buckets kind of contributing to growth in 2023 and 2024. Thanks for taking the questions.

Waleed Hassanein: Thank you, Josh. We’re very early on both. Stacking is becoming more and more a routine process in the active users and heavy users, the super users of NOP and they’re preaching it to their colleagues and other transplant programs. The rapid deployment of NOP to salvage an organ, it’s in their way early innings. I think we are just scratching the surface. This is another mechanism of how can we increase the supply of organs from routine standard organs that traditionally would’ve been lost because there is no OCS or no NOP that would salvage these organs. We’ve done a handful of those procedures throughout 2022 and we expect that this is just a beginning. We expect this to grow. We’re seeing more OPOs coming to us, not just for that, but coming to us just to encouraging us to creating hubs near major OPOs to help them out allocate more organs.

And again, we’re evaluating all this with the laser focus on making sure we are progressing and expanding and growing methodically and with maintaining the highest clinical quality of managing these organs and delivering NOP service.

Josh Jennings: Thanks for those answers. Appreciate it.

Waleed Hassanein: Thanks, Josh.

Operator: The next question is from Bill Plovanic with Canaccord. Please go ahead.

Bill Plovanic: Great. Thanks. Good evening. My first question is just on the impact of supply on the fourth quarter, how much €“ how many cases do you think you lost, number one. Number two is we look at the kind of active users in the accounts you’re in. How much impact did this have on new account adoption or your limitation of new account adoption? And then I have some follow-ups on that.

Waleed Hassanein: Great. Thank you, Bill. I think let me start with the second part of the question. Of course, it impacted initiation of new program. You were highly selective and we €“ however, we maintained an open dialogue we expressed, why we couldn’t do it sometime. What €“ but when we could do it, we mobilized heaven and earth to make sure that NOP hubs that have supply would go and get these organs. So of course, it negatively impacted our ability to grow active users in Q4. But we’ve had €“ we have already forecasted that. And until we’re out of this supply constraint, we expect this to continue to happen. And our team is getting great at making sure we’re managing expectation appropriately and not causing any untoward reaction.

The first one, as you know, we never really quantified the magnitude other than the number of weeks. And in Q3, we had I think 1.5 or 2 weeks of shortage that we could not perform cases. In Q4, we had approximately 2 to 3 weeks of shortage. And it impacted both liver and heart. So we’re hopefully marching towards a time where this is not €“ is no longer an issue.

Bill Plovanic: Great. And then if I could dig into it, so from my understanding from the manufacturing standpoint, there’s kind of multiple points. There was one a human problem where you didn’t have enough people. You added the second shift. Kind of what revenue level can you support with the second shift until the incremental capacity comes on Board, which I think you said you expect now by the end of the second quarter or end of the first quarter for that incremental capacity. Thanks for taking my questions.

Waleed Hassanein: Thank you, Bill. I said, we expect the incremental capacity to start coming online in the second half of the year. I wasn’t specific end of the first or end of the second. So that’s number one. Number two, right now, we are not providing granular information on revenue potential, because we are just trying to maximize the throughput and manage the existing event. So I will caution not to share anything at this point, because this is all going to change within the next few months here. Once the new clean room comes online, once Nick finished, bringing in the additional fire power that he needs to run this with a smooth process once he finished the layout and everything else, this could have significant efficiencies to increase the numbers, whatever number we think we have today.

Bill Plovanic: Great. Thank you.

Operator: The next question is from Suraj Kalia with Oppenheimer. Please go ahead.

Suraj Kalia: Waleed, can you hear me all right?

Waleed Hassanein: I can hear you just fine, Suraj.

Suraj Kalia: Perfect. Pardon the background noise. So first and foremost, exceptional quarter. Congrats to you Stephen, Tamer and the whole team. So Waleed, let me start out on NOP. Do you have the flexibility to increase NOP pricing over time? And the second part of that question is, so you mentioned the active sites versus the total sites for each organ. Great. But a number of these sites, as we know, are contracted for transport with some other agency. I’d love to get your perspective of what happens, how long a process is it to facilitate them to NOP and how does the process work there?

Waleed Hassanein: So Suraj, let me add address the €“ I’m sorry, can you repeat the first part of the question? I got the second part. What was the first part?

Suraj Kalia: So just the flexibility of NOP pricing, right? We are today what 15, 20 grams?

Waleed Hassanein: Yes, yes.

Suraj Kalia: Why couldn’t we increase it to 30, 40, 50 over time? Because that’s what the statistics indicate with the current logistics providers end up charging.

Waleed Hassanein: Right. So Suraj, listen, we are early in the NOP and our strategy has always been that NOP is nothing but a catalyst to drive growth of the disposable sales and disposable utilization. So we cannot out overprice the NOP portion that actually end up having a negative impact, not a positive impact. And when we talk about NOP service charge, this is excluding the any plane charges. This is just personnel in the surgical front, surgical procurement fee and clinical management of the organ. We think we are in good shape in the future, we reevaluate. But right now, I’m not expecting significant changes on the pricing of the NOP service component. Related to the transportation, listen, transportation for organ transplant in this country is a broken field.

It is not harmonized, it is individualized. Many of those contracts you’re referring to are with entities that don’t even own a single jet, and they’re nothing but brokers in the middle of the night trying to brokers a flight from a high net worth individual or another operator. And it is very inefficient from a cost structure standpoint. I am not worried one bit about what existing contract we do. I am more laser focused on establishing our own network and creating the Amazon or FedEx model for organ transplantation for the NOP. I am confident if we do this right and we do it at the scale we want to do it at, that the existing contracts will melt and won’t be any issue for us to see transformation of the field in the way we hope to see.

Suraj Kalia: Got it. Last two questions. One for you, Waleed, one for Stephen. So for you, Waleed, in terms of lungs, love to get your thoughts, obviously, you all have gone gangbusters on heart and liver, right? Everyone is now focusing their attention on lungs. How soon could this take off any additional color there would be great. And Stephen, specifically for you, when we started out FY2022, guidance was approximately $50 million, if memory shows me right. Here we are, we ended the year with almost double because you guys did have €“ couldn’t provide product for the last two quarters or some weeks. And so help us understand FY2023 guide, what is the level of conservatism built into these numbers as you’ll see the year ahead? Gentlemen, congrats again, and thanks for taking my questions.

Waleed Hassanein: Great. Stephen, you want to address the second half first?

Stephen Gordon: I’m happy to answer the conservatism question first. I don’t think I can give specifics around it. The thing I would say to you though is, last year was really our first year of commercialization. So there was really a lot of unknown in how the market was going to evolve and especially the pace that the market was going to evolve. So now we have a lot more information, we have a lot more history. And so we won’t put that all together with our guidance. So I can’t really talk about the level of conservatism, but I can tell you we just have a lot more information today to predict that we did a year ago.

Waleed Hassanein: Suraj, I want to also add or build on what Stephen just said. Listen, we know we have lived through two quarters with level of conservatism €“ I’m sorry, level of back order situation. We know what the impact is on our customers, our NOP franchise and the revenue. We have to be conservative at least in the first half of this year to make until we are out of this supply constraint, we have to be extremely careful, prudent, and conservative. But it’s not at the same level as Stephen said, last year we didn’t know the ramp curve of NOP and especially on heart. Remember, we started hard at NOP less than 20%. We ended a year at high 70s, low 80s. So we have better visibility now. Now, let me go back to your first question about the lungs.

Listen, given the huge negative impact that lung has been suffering from for the last several years, we have to be cautious. We have to assume that our efforts is going to take the full year before we start seeing some tangible progress on or uptake in the lung numbers and the lung activities in the U.S. We have taking this very seriously. We’re focused on that. And we guide for patients and we guide for looking at the long-term horizon. This is not going to happen overnight. Remember the is not happening until end of April. That is usually a big catalyst for lung and heart activities every year. So we’re not going to have that impact until probably Q2. So we need to €“ we’re guiding for the full year impact not in the Q1 or Q2. So I hope I’m addressing your question and we’re looking forward to your visit on Friday.

Suraj Kalia: Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Waleed Hassanein for any closing remarks.

Waleed Hassanein: Thank you. We want to thank everybody for joining us on this call and we’re looking forward to speaking again on our 1Q 2023 call. Thank you. Have a great evening everyone.

Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.