TransMedics Group, Inc. (NASDAQ:TMDX) Q3 2025 Earnings Call Transcript

TransMedics Group, Inc. (NASDAQ:TMDX) Q3 2025 Earnings Call Transcript October 29, 2025

TransMedics Group, Inc. beats earnings expectations. Reported EPS is $0.66, expectations were $0.37.

Operator: Good afternoon, and welcome to the TransMedics Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. [Operator Instructions] I would now like to turn the call over to Ms. Laine Morgan from Gilmartin Group for a few introductory remarks. Thank you.

Dorothy Morgan: Thank you. Earlier today, TransMedics released financial results for the quarter ended September 30, 2025. 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 of the call, 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. These forward-looking statements address various matters, including, among other things, future events, results and performance, financial guidance and projected expectations, potential market and business conditions, our examination of operating trends, the potential commercial opportunity for our products and services, the potential timing, outcome and impact of new clinical programs, and our potential initiatives, opportunities and plans in the U.S. and globally, including timing and expectations.

These statements involve risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by the 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 of our Form 10-Q filed with the Securities and Exchange Commission on July 30, 2025 and our subsequent SEC filings, which are available at www.sec.gov and on our website at www.transmedics.com. You can also find the company’s slide presentation with information on third quarter 2025 results on the Investor Relations section of the TransMedics website. TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements.

This conference call contains time-sensitive information and is accurate only as of the live broadcast today, October 29, 2025. And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Waleed Hassanein: Thank you so much, Laine. Good afternoon, everyone, and welcome to TransMedics’ Third Quarter 2025 Earnings Call. Joining me today is Gerardo Hernandez, our Chief Financial Officer. Organ transplantation remains a key area of focus for policymakers in both the U.S. and around the world. In the U.S., the ongoing national modernization initiative is focused on growing transplant volumes, while streamlining organ donation, coordination and oversight processes. Internationally, efforts are similarly focused on maximizing utilization of donor organs for transplants, while also finding more efficient ways to manage organ procurements and improving post-transplant clinical outcomes. Globally, TransMedics is uniquely positioned as the ideal solution to address these initiatives through our differentiated OCS technology, NOP clinical and logistical services and our proprietary transplant digital ecosystem.

As we will outline today, we are seeing strong signals supporting this conviction. We are now laser-focused on capitalizing on our momentum worldwide to provide our unique solutions to promote organ transplantation and save more lives. We are extremely proud of our strong results achieved in Q3 despite the anticipated and typical transient seasonal slowdown seen in the U.S. national transplant volumes as reported by UNOS OPTN data in Q3. Specifically, we’re very encouraged by the year-over-year growth trend, which we strongly believe is a more relevant and meaningful performance metric, especially in a seasonal quarter like Q3. Let me share the summary of our results for 3Q 2025. Total revenue for 3Q 2025 was approximately $144 million, or exactly $143.8 million, representing approximately 32.2% growth year-over-year.

We experienced year-over-year growth across all 3 organ segments, driven by higher overall utilization and center penetration of OCS NOP in the U.S. Specifically, we saw year-over-year growth of nearly 41% in liver, approximately 14% in heart and approximately 5% in lung revenues in Q3. Our overall gross margins for 3Q was approximately 59%, representing 2.9% growth year-over-year. We delivered operating profit of approximately $23.3 million in 3Q, representing more than 16% total revenue — of total revenue, up from $3.9 million or approximately 4% of total revenue in 3Q 2024. And finally, we have driven strong cash generation. We have significantly improved our billing processes and have maintained a healthy AR collections, which resulted in the addition of approximately $65.6 million of cash to our balance sheet as we ended 3Q with over $466.2 million in cash.

Shifting now to TransMedics’ transplant logistics infrastructure and performance. Transplant logistics service revenue for 3Q was $27.2 million, representing approximately 35% year-over-year growth. Throughout 3Q, we owned and operated 21 aircraft before adding our 22nd aircraft in October, which we were targeting to end 2025 with 22 owned aircraft. In 3Q, we maintained coverage of approximately 78% of our NOP missions requiring air transport compared to approximately 61% in Q3 of 2024. Meanwhile, we have continued to add to our pilot crew, enabling us to experiment with double shifting a portion of our fleet by year-end. We are pleased by our strong operational 3Q performance achieved despite the expected transient seasonality. We are confident that this seasonal impact is behind us as we have seen volume rebound in September and into early Q4.

Moving now to update on our Next-Gen OCS ENHANCE Heart and DENOVO Lung clinical programs. We are thrilled to report that several U.S. heart and lung transplant centers are approaching the initiation of patient enrollment for the ENHANCE Heart and DENOVO Lung trials. We remain confident that the enrollment will start in Q4 2025. Meanwhile, our team is actively working to complete our responses to the remaining FDA questions and expect that all IDE conditions for both trials will be satisfied by early next year. We’re very excited about initiating these 2 programs to demonstrate the potential positive clinical impact of our Gen 2 modification on heart and lung transplantation in the U.S. Importantly, we hope that these programs will catalyze significant OCS Heart and OCS Lung adoption in the U.S. in 2026 and beyond.

Now, please allow me to discuss our effort to expand our TransMedics NOP model outside of the U.S., which represents a key midterm growth driver for TransMedics. As I stated before, TransMedics’ U.S. NOP success has been highly visible across the global transplant markets. This resulted in many international geographies engaging with TransMedics to explore the potential for replicating all or a portion of our NOP model and our integrated logistics platform to help them grow their transplant programs. Importantly, through these market engagements, we became very aware of their significant needs for a dedicated transplant logistics support for reasons similar to those we’ve seen and experienced in the U.S. To that end, in September, we were excited to announce our plans to launch our first OUS NOP program in Italy.

We are now actively establishing up to 4 hubs to serve as launch points for that program, strategically covering both Northern and Southern Italy. We are also actively staffing up our Italian clinical support teams. Now, it is important to note that we are planning to start building an EU air and ground transplant logistics network similar to the one we have established in the U.S., however, appropriately sized to meet the European needs. Given our current knowledge of the Italian and European transplant logistics need, we see a significant opportunity for TransMedics to capitalize on by replicating our transplant logistics service in Europe. Please allow me to repeat, we — given our current knowledge, we see a significant business opportunity and revenue-generating opportunity by replicating our transplant logistics service in Europe to meet the growing needs for a dedicated transplant network — logistics network in European countries.

We expect the Italian NOP program to launch in the first half of 2026. We’re also currently engaged with several other European countries and also engage with regions outside of Europe to expand our program beyond Italy in the coming years. Stay tuned. This initiative will serve as an additional growth catalyst beginning as early as late 2026 and more meaningfully in ’27 and beyond. With that, let me turn to the here and now. We are laser-focused on finishing out 2025 strong to round out another great year for our business and potentially grow the U.S. national transplant volumes for the third consecutive year in a row. We are continuing to drive adoption of our OCS NOP across all organs. We are expanding our OPO partnership to increase organ utilization for transplantation around the United States.

Next week, we are hosting our annual transplant leadership forums in Boston with approximately 200 transplant leaders from all transplant market segments expected to participate. We are continuing to strengthen our clinical support staffing to meet the growing demand. And finally, we remain on track to begin double shifting a portion of our aircraft fleet by year-end to enhance operational efficiency. We are confident that all these activities will position us well to end the year strong and be in a good position for the expected ramp in adoption in 2026. Before I conclude, please allow me to provide a status update on our long-term growth initiatives and our planned new global headquarters and manufacturing facility. First, we are very pleased with the preclinical and product development progress of our OCS Kidney program, which is underway and was announced publicly at the World Transplant Congress Scientific Conference in August.

We expect to reveal the design of our OCS Kidney device in early 2026 at the American Society of Transplant Surgeons Winter Symposium. Second, the development of our Gen 3 OCS platform is well underway with significant progress already made on many of the advanced technology platforms that will be encompassed in that next Gen 3 OCS platform. We expect to share more detail on Gen 3 OCS platform in the second half of 2026. Third, as Gerardo will outline later, we are actively investing in critical business infrastructure systems to better position TransMedics to scale and grow with strong controls and efficiencies. Finally, we have narrowed down our selection for the new global headquarters of TransMedics to the city of Somerville, a northern suburb of Boston.

We are in the final stages of lease negotiations for a state-of-the-art new building to combine all of our functions in one campus, and we expect to announce the location in early January 2026. As you can see, we are not slowing down, and we are growing our technology platform and geographical outreach. As I have stated before, our near-term capital allocation strategy is a growth-oriented strategy. That said, while we expect operating margins to fluctuate somewhat as we deploy capital across these initiatives, we have a high degree of confidence in our long-term ability to deliver substantial top and bottom line growth. Now, let me conclude my remarks by commenting on our expectations for the remainder of 2025, which Gerardo will detail further.

Based on our performance to date and our expectation to end the year strong, we are narrowing the range to raise the midpoint of our full year 2025 revenue guidance. We are now guiding to a range between $595 million to $605 million for full year 2025 revenue. This represents approximately 36% growth over the full year 2024 at the midpoint. With that, let me turn the call to Gerardo to cover the detailed financial results for the quarter.

Gerardo Hernandez: Thank you, Waleed. Good afternoon, everybody. I am pleased to be here to discuss TransMedics’ third quarter results. Please note that a supplemental slide presentation with additional details on our third quarter 2025 results is available in the Investors section of our website. As Waleed highlighted, we sustained momentum through the third quarter with disciplined execution across the entire TransMedics team. Despite the typical seasonal slowdown in the U.S. transplant activity, where Q2 tends to be one of the strongest periods followed by some moderation, our performance remained strong. Continued benefits from our ongoing strategic investments drove solid performance across both product and service lines, along with continued margin expansion and improved profitability versus Q3 of 2024.

It’s worth noting that in our earlier years, our rapid growth trajectory offset the natural seasonality in the U.S. transplant activity. As we’ve reached greater scale, our results have started to follow those underlying market dynamics more closely, even as the business continues to expand at a healthy pace. Total revenue for the third quarter was approximately $144 million. U.S. transplant revenue was approximately $139 million, up 32% year-over-year and down 9% sequentially. By organ, liver contributed $108 million, heart with $27 million and lungs with $4 million. OUS revenue was $3.6 million, up 41% year-over-year and down 13% sequentially. OUS revenue by organ was $3.2 million in heart, $0.3 million in lungs and $0.1 million in liver.

Product revenue for the third quarter was $88 million, up 33% year-over-year and down 9% sequentially, reflecting continued momentum across both liver and heart programs and solid underlying activity levels compared to 2024. The sequential decline was in line with the typical seasonality moderation in transplant activity during the third quarter. Service revenue for the third quarter was $56 million, up 31% year-over-year and down 8% sequentially. The primary driver of growth was logistics revenue, which increased 35% year-over-year, reflecting continued expansion and strong utilization of our aviation fleet compared to 2024. Sequentially, logistics revenue declined 9%, consistent with the expected seasonal slowdown in transplant volumes during the third quarter.

Total gross margin for the quarter was approximately 59%, up nearly 290 basis points year-over-year and down roughly 260 basis points sequentially. The year-over-year improvement was driven by higher fleet utilization, cost efficiencies in logistics and limited unplanned aircraft downtime. We are also starting to see early benefits from spreading the scheduled maintenance more evenly throughout the year. Sequentially, the decline mainly reflects lower activity levels in the quarter and the impact of investments we are making in infrastructure to drive future efficiencies and support our anticipated growth in 2026. Total operating expenses for the third quarter of 2025 were $61 million, up 8% year-over-year, and the increase was primarily driven by a 7% increase in R&D expenses, reflecting continued investment in our innovation pipeline and the ramp-up of our product development capabilities.

SG&A expenses grew 8% year-over-year, reflecting ongoing expansion of our IT infrastructure and investments in strategic growth initiatives. Sequentially, total operating expenses were up 2%, primarily driven by an increase in SG&A in support of our ongoing expansion activities. Operating income for the quarter was $23 million, up 494% year-over-year and down 36% sequentially. Operating margin expanded to 16% compared to 4% in the prior year. Net income for the third quarter was $24 million, representing a 477% year-over-year increase and a 30% sequential decrease. Earnings per share were $0.71 and diluted earnings per share were $0.66 for the third quarter of 2025. We ended the quarter with $466 million in cash, up $66 million from June 30, 2025.

This increase was driven by strong operating cash generation, supported by continued improvement in our billing processes and healthy collections, reflecting our focus on efficiency and disciplined working capital management. Overall, our third quarter performance reflects the same disciplined execution, efficiency gains and progress across our clinical and innovation programs that we’ve demonstrated throughout the year. Together with the scalability of our model, these results continue to validate our ability to deliver strong financial performance and sustained momentum through the rest of 2025 and beyond. Looking ahead, as Waleed mentioned before, we are narrowing our full year revenue guidance to a range of $595 million to $605 million.

With only 1 quarter left in the year, this reflects our increased visibility and continued confidence in the strength of the business. At the midpoint, this represents roughly 36% growth over 2024, driven by expanding transplant volumes and sustained momentum across our service platform. In terms of gross margin, as mentioned in previous calls, we expect overall margins to remain around 60% over the coming years. This outlook reflects the various factors influencing both product and service margins beyond just mix. As we expand internationally and continue investing ahead of growth, we may experience some near-term pressure on margins. However, we expect those impacts to normalize and margins to recover as volumes scale across markets. In terms of capital allocation, our focus is on driving long-term value.

We are concentrating our investments in 3 key areas: first, fueling growth through continued R&D investments and targeted expansion into selected international markets; second, building a stronger foundation by implementing systems that simplify and optimize processes across the business, improving efficiency and scalability as we grow; and third, enhancing our infrastructure to support long-term scalability, including our planned move to a new global headquarters to accommodate growth, ongoing upgrades to expand our manufacturing and product development capabilities, and our continued evaluation of strategic opportunities that could further strengthen our platform for the future. Collectively, these initiatives play an important role in preparing TransMedics for its next stage of expansion as we move towards the 10,000 transplant milestone and beyond and reinforce our global leadership in transplantation.

Aligned with our focus on efficiency, we have also made progress on our double shifting pilot program to improve fleet utilization. Pilot hiring and training are advancing well, and we continue to expect early results in the first half of 2026. This insight will help us determine the appropriate fleet size and utilization model to maximize efficiency and capital returns. Recently, in October, we achieved our goals of owning 22 jets by the end of 2025. Looking ahead, we remain open to acquiring additional jets when the right conditions are in place, whether to enhance U.S. capacity or to support our international expansion efforts. Finally, with stronger top line performance, continued efficiency gains and disciplined spending, we expect to deliver at least 750 basis points of operating margin expansion for the full year of 2025 compared to 2024.

While there could be additional upside, that will depend on our final sales performance and the timing of our investment plan for Q4 of 2025. We continue to expect operating margins to reach or approach 30% by 2028. While we may see some fluctuations as we expand internationally and invest ahead of growth, we remain confident in the long-term direction and scalability of our model. Our OCS technology, together with NOP platform and integrated logistics network, give us a clear advantage in expanding access to transplantation worldwide. With the scalability of our model and strong execution across the organization, TransMedics is well positioned to sustain growth, expand margins and deliver long-term value, while giving more patients a second chance at life.

And with that, I’ll turn the call over to Waleed for closing remarks.

Waleed Hassanein: Thank you so much, Gerardo. Overall, we’re very pleased with our third quarter performance and the significant progress our team continues to make across multiple growth initiatives. Importantly, we are now laser-focused, as I stated earlier, on ending 2025 on a strong note and better position TransMedics for another strong growth year in 2026. It’s becoming increasingly clear that TransMedics is uniquely positioned with unparalleled attributes that include OCS technology, NOP clinical services, the transplant logistics network and our proprietary NOP Connect digital platform. All of these collectively enable us to deliver unrivaled life-saving solutions to global transplant markets. Of course, none of this would have happened without our dedicated world-class TransMedics team that are working around the clock to make organ transplantation more accessible to patients who are waiting for a new lease on life in the form of a new organ.

We are inspired and committed to continue our drive to expand the access to organ transplantation and improve post-transplant clinical outcomes of organ transplant therapy around the world. With that, I will now turn the call to the operator for Q&A. Operator?

Q&A Session

Operator: [Operator Instructions] We have the first question from the line of Allen Gong from JPMorgan.

K. Gong: I guess, my first is just on the trajectory into 4Q and then after that into 2026. So based on your guide, you’re expecting to get to roughly just under 30% in fourth quarter, around [ $155 million-plus ] sales. So how should we think about that as a run rate looking forward into 2026? And should we think about 2025 as being an appropriate year when it comes to seasonality, given we’ve seen you kind of normalizing more towards market growth as you’ve grown larger?

Waleed Hassanein: Thank you, Allen. Let me start with the second part of the question first, if you allow me. As I’ve stated publicly before, I think seasonality in organ transplant is something that we all have to be comfortable with and anticipate year after year, especially as we continue to grow and be a dominant player in the U.S. transplant market. As Gerardo mentioned, we see this seasonality every year, and we saw the seasonality every year nearly for the past almost a decade. And so, we should expect that going forward. Now, let me turn to the first part of your question. We plan to issue our guidance for 2026 at our next earnings call. I think 2025, our focus right now is to end 2025 strong and achieve our stated guidance.

And then, that gives us time to evaluate our initiatives, the clinical programs that are underway, then we will issue guidance for 2026, which we fully expect to be a growth year for TransMedics over 2025, but allow us the time to state our 2026 expectations with the benefit of finishing the year and adding these data points that will be crucial to providing guidance for the full year 2026.

K. Gong: And then, a quick follow-up just on international. I know the Italy announcement was definitely a pleasant surprise. And I guess, when we think about your efforts to expand beyond that to cover the breadth of Europe, I imagine it won’t be quite as straightforward as you can call it that as your efforts in the U.S. But what kind of challenges do you anticipate ahead of you for that? And how long do you think it will take before you can get your NOP and your logistics services in Europe to the same level as they are in the U.S.?

Waleed Hassanein: Thanks, Allen. Again, Europe is not a homogeneous geography. We have to be respectful and design our NOP to be tailored to each country’s specific clinical and regulatory requirements. Italy is going to be a very important first step. We’re very encouraged by where we are in Italy right now, and we hope to be able to deliver Italy early — or in the first half of 2026. We’re heavily engaged with other geographies in Europe. And as I said, every geography has its own specific requirements. However, the — what’s universal in Europe is the need for a dedicated transplant logistics network. It’s not going to be at the scale of the U.S. for sure. It’s going to be smaller. But that has a huge opportunity to even facilitate clinical adoption for the OCS in many of the European geographies that we’re engaged with, as well as other regions outside of Europe.

So we need to focus on our first kind of beachhead in Italy, deliver on our promises and deliver world-class service, achieve success there. And we believe wholeheartedly, especially in Europe, success delivers success. And if it works in Italy and it works well, this is going to propagate across Europe. And if it works in Italy, it will work anywhere in Europe, just given how the Italian environment is very complicated and very — has a lot of needs.

Operator: We have the next question from the line of Bill Plovanic from Canaccord.

William Plovanic: I’m going to just start off — first, I just wanted to get clarity. So you believe that you’ll have the final IDE sign-off from FDA on the ENHANCE and DENOVO and enroll — when you say enroll, treat the first patients or book the first revenue in the first half of ’26, is that what you’re saying at this point?

Waleed Hassanein: No. Bill, thank you for the question. We are going to enroll the first patients and probably first handful of patients and book the revenue in Q4 of 2025. What we are saying is we have conditional approval for a fairly sizable initiation of the trial, so especially for the heart. So we can — that’s going to happen in Q4. What I’m saying is that limitation or cap is going to be removed or these conditions will be removed once we address all the remaining questions for FDA, and that will come in Q1 of 2026 or early 2026. And then — and now, the trial will be uncapped and unconditional. It’s going to be open. But we’re going to enroll and book our first revenue in Q4.

William Plovanic: Okay. Perfect. And then, just trying to understand, on the operating margin guide, you’re saying 750 bps, which is 16% for the year, which is $96 million, which — that’s like $10 million on the midpoint of the fourth quarter is only 6.5%. So I’m just trying to understand, as you talk about the build-out of Europe logistics, like can you put a dollar amount on this for us? Is this $10 million, $100 million? Like how should we think about the CapEx required and the timing of those investments?

Gerardo Hernandez: Bill, this is Gerardo. In terms of CapEx and investment for the European NOP, we will be providing a little bit more color next year in our next call. However, for my anticipated forecast on operating margin in 2025, it assumes that it has certainly space to improve upside. It assumes that we land in the low end of our guidance range and that we actually deliver on our investment plan in the U.S. in Q4. So I believe we have space to surpass what I shared, but we’ll see where we land.

Operator: We have the next question from the line of Ryan Daniels from William Blair.

Matthew Mardula: This is Matthew Mardula on for Ryan Daniels. So I want to touch up with HHS decertifying an OPO in the middle of the year. Have you seen any disruptions from the OPO decertification? And I understand that HHS wants to increase the number of transplants and not have organs go to waste. But could the continued decertification of OPOs impact the number of organ transplants? Or do you just view this as a kind of small minimal risk?

Waleed Hassanein: Thank you for the question. At the first part of the question, we do not see any disruption to organ transplantation in the U.S. based on the actions taken by HHS. That’s number one. Number two, we believe wholeheartedly that if the stated goals and vision of HHS and HRSA and CMS to be achieved, actually, we believe it actually could provide a tailwind to organ transplant efficiency in the United States by having more performance metrics that everybody could get behind and be held accountable to. So we have to wait and see, and we have to allow the time for these initiatives to materialize, but we are confident in our ability to operate in the current OPO model or any other modernization model that will come — that may come out from this initiative. And frankly, we see this as a potential opportunity, not a potential risk, but we have to wait and see.

Operator: We have the next question from the line of Chris Pasquale from Nephron Research.

Christopher Pasquale: Waleed, logistics penetration has been in the high-70s for 3 straight quarters now. Curious how you think about where that goes over time. Is 80% a bit of a ceiling because the other 20% are drivable? Or do you think that, that number could still go higher as you guys continue to roll out the service?

Waleed Hassanein: Thank you, Chris. I want to clarify, Chris, that 79% — or yes, 78% or 79% or 80%, it’s our planes for only the mission requiring air transport. So we expect that number to go up definitely in the low-to-mid 80s. I think in 2025, we see a ceiling in the low-80s or 80%, roughly speaking, just because of some of the existing contracts that are supporting other logistics providers in the United States. The other element to that is the long-distance transport. Remember, our planes are short distance or relatively speaking, they’re light jets. So any Alaska or Puerto Rico or — I’m sorry, any Hawaii missions, we have to do it on third-party aircraft because that’s a longer jet. But Alaska and Puerto Rico, we can do on our jet.

So to summarize, we expect that number to go up in the mid-80s at least in the foreseeable future as we continue to gain market share and we continue to prove to the community that TransMedics logistics is providing not just the safest, the most efficient, but also cost-effective logistics partnership in organ transplant.

Christopher Pasquale: And then, sort of related to that, you guys rolled out the new NOP Connect kind of digital ecosystem earlier this year. I’m curious whether we have enough experience with that now to see what impact that’s having, either on your collection or sort of cash conversion cycle being simplified or on adoption of the broader services that you put into place?

Waleed Hassanein: Chris, that’s an excellent question. We are — not only we feel very excited about the rollout of this new ecosystem, we are already taking some very good feedback from the community, and we are rolling our 2.0 or 0.2 version of it in Q4. We are seeing some great efficiencies. I wouldn’t go as far as saying we’re seeing the full efficiency or the full impact yet. We expect that to come throughout 2026.

Operator: We have the next question from the line of Josh Jennings from TD Cowen.

Joshua Jennings: I wanted to circle back just on the 2025 guidance, revenue guidance update and just the increase of $5 million at the midpoint. Waleed, maybe help us think through, and Gerardo, some of the assumptions baked in there. I mean, was 3Q results better than TransMedics’ internal expectations with stronger start than expected? In October, you have another plane. But maybe just help us think through what’s driving the guidance increase, a little bit more detail.

Waleed Hassanein: Thank you, Josh. As you know, we don’t give that much detail. All I can say is, we are confident. One, we are pleased by the results of Q3. Two, we are confident in the trends we saw at the end of Q3, into early Q4. But we have to be prudent. We’re still early in Q4. We still have 2 more months to go, and we have to be respectful of that. Gerardo, do you want to add anything else?

Gerardo Hernandez: Well, no, I think we have a number of tailwinds, as Waleed was mentioning, [ Chris ]. What we’re seeing in terms of OCS adoption, organ utilization, it’s really fueling the momentum of the OCS. So we’re confident to get to the number. Of course, as you know, our philosophy has been to not only achieve, but as much as we can, go above and beyond. But we’re confident with where we are right now.

Joshua Jennings: Great. And just a follow-up. I think it’s clear that there really hasn’t been an overhang in terms of some of the headlines that came out on DCD donors and some of the New York Times expose, but wanted to just confirm that. Any impact to donor registrations that you’re seeing? And then, maybe give us the status of the wait list for liver, heart and lung transplants. We just anecdotally talked to — some heavy OCS users have talked about their waitlist going down because volumes have increased dramatically, but I think those have refilled, but maybe help us on those 2 topics.

Waleed Hassanein: Thanks, Josh. Let me address the second piece first. We can’t comment really on the waitlist because the waitlist is a very dynamic situation, as you know, Josh, and all that data is published. The facts are, for the last 3 years when we were operating NOP, many centers wiped down the waitlist and rebuilt it half a dozen to a dozen times. The growth in the national transplant volume speaks for itself. So the fact that centers are wiping down the waitlist, yes, that’s a transient effect. It takes a quarter, maybe sometimes in very — in large or midsized centers that are efficient with their outreach, they could rebuild it within a quarter, and some centers take a quarter to rebuild. So for that, we don’t — we are actually — we’re focusing on one thing.

We’re focusing on opening up the supply of available suitable organs for transplants, and we — and the centers are responsible of rebuilding their waitlist because these are life-saving transplant procedures, as you know. So that’s our answer to the second half. For first half, listen, it’s a very unfortunate expose that came out. But as we’ve stated numerous times, we cannot allow either intentional or unintentional bad behavior from certain players in the transplant community to be taken out of context and negatively impact the national transplant volume, which is helping a lot of patients who are waiting anxiously on the waiting list for an organ transplant. So — and I hope that some of these investigative reporters understand that, that, yes, it’s important to highlight some bad acts, but we have to remember that these are very, very few, very, very limited.

And ultimately, the #1 focus for us and anybody else who is involved in organ transplantation is to focus on the patients. And it is not in the best interest of the patients to portray transplantation as the Wild Wild West because it isn’t. The U.S. organ transplant system remains to be, in my humble opinion, one of the best, if not the best, transplant system on planet Earth. So we have to be cognizant of that.

Operator: We have the next question from the line of Suraj Kalia from Oppenheimer & Co.

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

Waleed Hassanein: I can.

Suraj Kalia: So Waleed, one for you and one for Gerardo. So Waleed, I’ll start out with you. Look, short-term gyrations aside, you guys have delivered on your numbers. Waleed, there is this pervasive belief that incremental liver share gains are — will be difficult to come by. Can you argue the reverse is true for FY ’26? Or your confidence for FY ’26 is you would characterize that it’s predicated on heart and lung contribution through the trials, the OUS endeavor that you talked about? Just set the stage for us as how you guys are thinking as you shift gears in FY ’26?

Waleed Hassanein: Suraj, thank you so much for the thoughtful question. Let me dissect that important question into different pieces. First, it is, in my view, a false assumption propagated by some of the bear thesis out there that the penetration in liver will be difficult to come by. We see it completely different. We think we are early in our liver penetration, and we have a long greenfield opportunity in liver transplant to grow our adoption rate over the next several years, not just 2026. Where is it coming from? It’s going to be coming from DBD penetration. It’s going to be coming from more DCD penetration. It’s going to be coming from more challenging — from expansion potentially of the DCD wait period. So we are very, very much believers that — the notion that growth in liver is going to be difficult to come by, we believe that’s a false assumption, propagated by the wrong narrative.

So that’s number one. Number two, we fully believe and expect that the next-gen heart and lung clinical programs will generate significant momentum in the adoption of both DBD and DCD heart and lung. And listen, we are all going to experience that as it materializes throughout 2026. But that is our expectations going into ’26. And that’s where we stand from a U.S. perspective. Again, the initiation of NOP OUS will be a potential catalyst, albeit in the second half of 2026, but it is going to become a catalyst for us in next year. A lot of publications are in the launching pad or in review that will generate that evidence that will be required or will facilitate the adoption picture that I just described, Suraj. I hope I addressed your question.

Suraj Kalia: Fair enough. And Gerardo, if I could, look, our math is your liver shares, you gained by almost 100 bps in the quarter, but your service revenues were obviously down, right? And one of the things that you and Waleed have been telegraphing for some time now is third-party ground transport and third-party flights picked up in the quarter. Gerardo, what — how should we think about — is this a blip of the screen? Is this something structural as we look forward? Just help us understand both qualitatively and quantitatively. It would be great.

Waleed Hassanein: Suraj, if you allow me, I’ll address one point, and then I’ll turn it on to Gerardo to address the rest of it. We never telegraphed or articulated or suggested that third-party service or transportation is growing in Q3. That was a misunderstanding, or it is a misunderstanding if somebody thinks that way. All what we wanted to clarify is 2 important points, and I’ll repeat them again if you allow me. One, tracking tail numbers alone is not 100% reflective of our revenue within the quarter for a variety of different reasons. Two, there is — a good portion of our clinical missions are done using car transport alone. This was the only 2 simple facts that we wanted to highlight to the community who are just laser-focused on tracking tail numbers. And so, that’s just a clarification. Gerardo, can you please address the rest?

Gerardo Hernandez: Yes. Well, in reality, there is not much to add, Waleed, more. Suraj, we didn’t see any, I would say, significant change in the, let’s say, split between ground and air transportation through the quarter compared to what we’ve seen earlier in the year. And we are assuming more or less the same thing for Q4. I think that’s what I would say, not much more to add.

Operator: We have the next question from the line of Patrick Wood from Morgan Stanley.

Patrick Wood: Amazing. I’ll keep it to one, just given the time. Waleed, you mentioned double shifting twice at the start in the comments. And just curious how you’re seeing that as an opportunity, what that means both financially for you guys, but then also for your customers and the ability to potentially service them faster? Is that a valid thought process? Just how do you see that affecting the business overall?

Waleed Hassanein: Thank you, Patrick. Double shifting, Patrick, will give us at least — in ’25, we’re just experimenting or piloting this program. The concept is to maximize the efficiency of our existing fleet and truly sweat the assets that we have before we think of adding any additional investment in our fleet. So from an impact standpoint, and this is just my perspective, and Gerardo, please correct me if I’m wrong, the idea is, at scale — at a certain scale, we will start seeing efficiencies in the bottom line and the margin contribution of the service with that model. But Gerardo, please correct me if I’m wrong.

Gerardo Hernandez: No, that’s right. And basically, what will be happening, Patrick, there is that the same number of planes will fly higher number of missions, maximizing the return on capital. That’s basically the concept.

Operator: We have the next question from the line of Matthew O’Brien from Piper Sandler.

Samantha Munoz: This is Samantha on for Matt. I guess, first, I know the 10,000 transplant target has been out there for a while, but we’re now seeing you start to communicate potentially even surpassing that target. I guess, what gives you the confidence that you can get there? And then, how much of that is dependent upon these next-gen heart and lung programs?

Waleed Hassanein: Thank you for the question. We have a very high degree of confidence that we will get there. And we — when we set that target, we set that target without the expectation of acceleration of heart and lung. So our hope is to get to 10,000 transplants even without the contribution of the next-gen heart and lung programs. The contribution of heart and lung transplant, the new programs, will be to accelerate the path or increase the contribution of the heart and lung in the mix. So that’s — we have a very high degree of confidence. And please, I want to reiterate what I’ve stated before. If we continue on the current trajectory of growth without any catalyzation of growth in U.S. transplant volumes, in 2028, 10,000 transplants will represent approximately 50% to 55% of the national heart, lung and liver volumes, which means we have not saturated the market.

The opposite is true. We have another probably approximately half of the market to continue to grow heart, lung and liver through. On top of that, what we said is, the kidney program being introduced in 2027 will give us an access to an additional 23,000 to 25,000 procedures in 2027 and beyond, and that could even catalyze our growth beyond the 10,000 target into 20,000 by 2030. So that’s what we stated. So we have a very high degree of confidence reaching the 10,000 transplants. Our results are pointing in that direction. Our growth rates are pointing in that direction. And we are hoping that the next-gen heart and lung clinical programs will accelerate the path to getting there. And again, we remain convinced that 2028, at 10,000 transplant with the current market growth, we would be at approximately half of the U.S. heart and lung and liver transplant market, leaving room for growth even beyond that.

Samantha Munoz: That’s perfect. If I could sneak in one more also on the next-gen heart and lung programs. It’s great to hear that those are going to start enrolling this quarter. How are you thinking about the duration of these trials and how long they’re going to take to enroll?

Waleed Hassanein: The duration of these trials, for us, it really — it doesn’t really matter what the duration is. We expect it to be somewhere between 12 to 18 months. But what is important for us is to see the trajectory or the impact — to see the impact of these trials in the form of trajectory of penetration of heart and lung volumes every quarter. Given that these are — these trials are revenue generating, the numbers will count in our quarterly report. That is what we are excited to see because we will know the impact even before the trial is completed.

Operator: We have the next question from the line of David Rescott from Baird.

David Rescott: Waleed, I wanted to follow up on some of your comments around the timing of the trial. I’m just looking for maybe some more color on what the — the difference between starting enrolling the trial in Q4 and having these full conditional limitations, I don’t know if limitations, but the full conditions on the trial that gets the IDE fully cleared in Q1. Is it something similar for both heart and lung? Would it be fair to assume maybe the Part A of the heart trial is good to go and start enrolling in Q4 and maybe it’s Part B that comes in, in 2026? Just trying to understand what’s going on there and maybe whether or not there is any change in the contribution you have baked in from clinical trials in Q4.

Waleed Hassanein: David, thank you for the question. I just want to remind you that we really didn’t account for much contribution in Q4 from the trial, pretty much 0 contribution for the trial. We’re actually — we appear to be ahead of schedule. So let me clarify, however, the difference between the 2 trials as we know them today. The heart conditional approval is for both Part A and Part B. We have a sizable conditional approval, so we can start enrolling in both Part A and Part B in Q4. The lung is slightly different. It’s more a limited — the lung is one part, so it’s not 2 parts. And it’s a fairly limited condition for approval because the questions that are asked for the lung is pretty straightforward, and we think we will overcome it fairly quickly.

And the FDA conditions were limiting, given that the questions are fairly straightforward. So what I’m saying on this call is, we should — we are expecting to enroll our first patients or cohort of patients in heart and lung in Q4 and hoping that by early Q1, we will remove all conditions from both IDEs and now will be — the trials will be wide open across all indications, across the 2 parts for heart and the 1 part for lung. And then, we will not be capped. That’s really the message I was telegraphing in the prepared remarks.

David Rescott: Okay. That’s very helpful. And maybe on Europe, a 2-part question. I know you provided some comments on it already. But I know the market in Europe is pretty fragmented and there’s different agencies, maybe we’ll say, that control organ donation and allocation across different end markets, so I guess — or different countries. I guess, the first part, for Italy, is the assumption that organs that are transplanted through the new service in Italy will likely stay in Italy? Or is it possible that those are going to get moved around transplants in Europe? And then, as it relates to the margin comments there, I know you called out gross margins staying in this 60% range in general, but maybe some near-term headwinds as you expand in Europe.

I’m just trying to get a context for the timing of this maybe step-down in margins and step back up in margins and still staying consistent in the 60% range. Maybe there’s a difference between gross and operating, but any clarity there would be helpful.

Waleed Hassanein: Sure. Thanks, David. So I’ll address the first part, and Gerardo will address the part around the margins. So we are not planning, at least early on, to impact the movement of organs at all within each geography in Europe that we will be operating on. Everybody needs to be aware that — and let me be very specific about Italy. Italy today, there is movement of organs across Italy. There’s movement of organs from Switzerland to Italy. There’s movement of organs from Italy to Switzerland. The same for some select other European countries. Our role is not to change any of the current dynamics that are routinely happening today. Our role is to facilitate the utilization of these organs to actual transplant successfully.

Our role, even if it’s a local transplant within Italy, based on our knowledge today, David, that they are having significant challenges of even securing logistics to move organs even within Italy. So for us, that’s a huge opportunity and a huge business opportunity to solve that problem as we’ve solved it here in the U.S. at a much bigger geographical scale. And now, I’ll turn it to Gerardo to address the margin question.

Gerardo Hernandez: David, in our Q4 call, we’re going to be providing a little bit more details on what to expect in the margin. But what I can confirm to you is, I remain confident that our long-term margin is around 60%. I believe that, that’s the level that we’re going to be seeing as volumes scale across in the U.S. already, but mostly outside of the U.S. But more importantly, we are laser-focused on the operating margin. That is — because of the way we operate, operating margin is more relevant than the gross margin. Yes, so Q4 is when we’re going to provide a little bit more details.

Operator: We have the next question from the line of Mike Matson from Needham & Company.

Michael Matson: So I had a question on the heart trial design, and this may apply to lung, too, but I wasn’t able to find lung in the clinicaltrials.gov yet. But the endpoint is patient and graft survival at 30 days. And so, my understanding is that that’s typically, even without using TransMedics in the — well into the 90s. So — and I think you’re running this study with the intention of showing superiority. So are you going to have — I mean, is this trial powered enough to actually show superiority from a high-90s number or mid-90s number versus what you’re actually going to get with your — using OCS for those organs?

Waleed Hassanein: Thank you, Mike, for the question. I want to clarify one important point. The primary effectiveness endpoint is not actually patient and graft survival at 30 days alone. It’s patient and graft survival at 30 days with freedom of primary graft dysfunction within the first 72 hours after heart transplant. When you combine these 2, you end up not in the high-90s as just a patient survival, but probably in the low-to-mid 80s. And that gives us the signal, the wider signal to enable us to power the study appropriately to aim for superiority. So a great point you raised, however. I think the clarification is that we are not — that primary endpoint is not just patient and graft survival. It’s patient and graft survival with freedom of primary graft dysfunction.

That — these 2 combination is what makes this powered enough for — to hopefully demonstrate superiority. So we’re very excited getting the trial launched. And both lung and heart are of the same design or the same selection of primary effectiveness endpoint to exactly achieve the goal and avoid the statistical anomaly of the very high patient survival numbers in the United States.

Michael Matson: Okay. That makes a lot of sense. And then just for kidney, I think you said you’re going to unveil the design in early ’26. But I imagine you’re going to have to run a trial there as well, so — before you can get it approved. So just can you talk about the timing of that? And then, is that also a trial where you would — when you started, you would actually get paid for those organs as well, like we are with the heart and lung trials?

Waleed Hassanein: Yes. Mike, excellent question. Yes, we are unveiling the design of the technology and the product. There will be a significant trial in the United States and maybe even international trial. But this is all going to be revenue-generating trial. And we’re excited about that trial because this trial is also going to be powered for superiority, and it will have a huge ramification not only on the clinical outcome for patients, but also financial ramification, given that CMS is the sole payer for end-stage renal failure expenses in the United States. So this is a trial that I hope and I believe CMS will be watching very keenly, and they will support it because it will have huge cost efficiencies, given the increased — improved outcomes and higher utilization of kidneys that should be afforded by this.

Operator: We have the next question from the line of Daniel Markowitz from Evercore.

Daniel Markowitz: The first one, you mentioned that the prior guide wasn’t assuming anything for 4Q from next-gen heart and lung trials. It’s nice to hear that’s running a bit ahead of schedule. Just confirming, does the new guide assume some contribution since that’s running ahead of schedule now that you’re closer and have visibility to it?

Waleed Hassanein: That’s an excellent question. Yes and no. The answer is, from a contribution, no. Yes, we’re ahead of schedule. But realistically speaking, if we start enrolling in November, the impact is going to be miniscule. That’s why we always guided without any meaningful contribution. All what we want to achieve is having the first handful of patients enrolled gives us an early signal of how the trial is rolling out and really teeing up to early 2026.

Daniel Markowitz: Got it. Okay. And then, the second one, I wanted to ask on recent industry news. We had OrganOx takeout announcement. I just wanted to give you an opportunity to kind of react to this announcement. What do you think this means for the market and more specifically for TransMedics over the coming years?

Waleed Hassanein: Thank you, Daniel. This is an excellent question. As I stated publicly before on my call with investors, we’re very, very pleased, and congratulations to OrganOx and the OrganOx team about this acquisition. We’re very pleased because it shows 3 things. One, it shows that TransMedics have created a multibillion-dollar industry in organ transplantation that didn’t exist before. We’re very pleased because it shows how undervalued TransMedics stock is, given the huge difference and improvement in OCS Liver and market share that OCS Liver have over any other platform in the market in the U.S. And number three, it validates that this is an area of the market that is now becoming an exciting opportunity for med tech industry.

So again, congratulations to OrganOx, but we feel very confident in our position. We feel very confident that we are way undervalued, given our leadership position, given our outcomes, given our numbers, given our market share, and we are determined to go and continue to execute and grow our market share in liver, heart, lung and soon kidney.

Operator: We have the next question from the line of Tom Stephan from Stifel.

Thomas Stephan: Apologies if any of this has been asked; jumping between calls. But maybe just one for me. Waleed, market slowed in the third quarter for the second straight year, and we saw somewhat of an accompanying deceleration in OCS. So maybe can you talk about why OCS seemingly faces, I’d just say, a bit of incremental pressure during times when the U.S. transplant market seems to slow down? And then, how should we be thinking about that dynamic maybe if market softness persists?

Waleed Hassanein: I’m sorry, I missed the second part of the question.

Thomas Stephan: Yes. I was just wondering how we should think about that dynamic, I guess, if market softness persists.

Waleed Hassanein: That’s an interesting question. So we believe that the market softness and the seasonality, as I stated before, this is something that is endemic in organ transplants, and we’ve seen this for several years. I think what’s changing is, TransMedics is taking a bigger market share in the market. And that market share is not — is spread between top users and the current users, and we’re expanding organically to newer centers. And when we look at Q3 this year, what we saw is our market share within our repeat users and top 20 accounts and consistent users was maintained, was well maintained within the institution. Any variability happens with the centers that are still coming new to the NOP or not constant users in NOP, we’re tracking that dynamic.

And again, we are not too concerned about it because we are maintaining our growth year-over-year. That’s why I said it’s much more relevant for us to look at our growth year-over-year. It’s very relevant to us to track our penetration within DBD and DCD. And all of these metrics are pointing in the right direction. It’s just we’re becoming a bigger player in the market, and that’s why it impacts us on the Q-to-Q variability. That’s all I can comment on at this point. And again, we should expect this variability every year and especially in Q3, especially if we see a significant uptick in Q2. Usually, this variability happened after a very strong Q2.

Operator: We have the next question from the line of Young Li from Jefferies.

Young Li: I’ll just keep it to one. So I appreciate all the clarifications and color on the trial enrollment. I guess, I’m kind of curious what factors allow you to enroll these trials faster than the prior trials that you have run?

Waleed Hassanein: I think we’re not saying it’s going to enroll faster. I think our fastest enrolling trial was the DCD Heart trial when we enrolled 90 patients in 9 months. We’re not saying it’s going to be faster. And all what we’re saying is, given the impact, given the anticipated impact, given the momentum we’re seeing in centers, how rapidly they’re going through the initiation process, demonstrating their excitement about these trials that usually — that excitement, that momentum is usually coupled with rapid enrollment. That’s all what we’re saying. We need to go and execute it. We need to go and deliver on that. That’s all what we’re saying. It’s all a reflection of how successful the program is. And we’re looking forward to launching this program. And again, we’ll be looking at the execution as it happens.

Operator: Any follow-up question, Young Li?

Young Li: I’m okay.

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

Waleed Hassanein: Thank you all very much, and look forward to chat again early next year. Thank you very much. Have a great evening.

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