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Wednesday, Oct. 29, 2025 at 4:30 p.m. ET Call participants President and Chief Executive Officer — Waleed Hassanein Chief Financial Officer — Gerardo Hernandez Need a quote from a Motley Fool analyst? Email [email protected] Total revenue -- $143.8 million for Q3 2025, representing 32.2% year-over-year growth, with contributions from all three organ segments. Segment revenue growth -- Liver revenue up nearly 41% year over year, heart revenue up approximately 14% year over year, and lung revenue up approximately 5% year over year. Gross margin -- 59%, up 2.9% year over year, attributed to higher fleet utilization and cost efficiencies in logistics. Operating profit -- Operating profit was approximately $23.3 million, representing over 16% of total revenue, up from $3.9 million or 4% of revenue in Q3 2024. Cash balance -- $466.2 million in cash at quarter end, reflecting an increase of $65.6 million due to strong cash flow and efficient collections. Transplant logistics revenue -- $27.2 million transplant logistics service revenue, growing 35% year over year, supported by an owned fleet of 21 aircraft (with a 22nd added in October). U.S. air transport coverage -- Provided air transport on approximately 78% of NOP missions in Q3 2025, up from 61% in 2024. Product revenue -- $88 million, increasing 33% year over year and reflecting continued strength in liver and heart programs. Service revenue -- $56 million service revenue, up 31% year over year, with logistics as the primary growth driver. Operating expenses -- $61 million, an 8% increase year over year, driven by R&D and SG&A investments. Operating margin -- Operating margin was 16%, expanding from 4% the prior year (Q3 2024); target of at least 750 basis points full-year operating margin expansion for 2025 compared to 2024. Net income -- $24 million net income, up 477% year over year, with diluted EPS at $0.66. International (OUS) revenue -- $3.6 million, up 41% year over year, and primarily driven by heart ($3.2 million); sequential decline of 13%. Full-year revenue guidance -- Increased range to $595 million–$605 million, representing about 36% growth at midpoint. New European expansion -- Announced first NOP program launch in Italy in 2026, with plans for up to four hubs and further geographic expansion under consideration. Clinical trials -- Enrollment for ENHANCE heart and de novo lung trials to start in Q4 2025, with initial capped participation in Q4 2025 and anticipated wider enrollment in early 2026 after FDA condition resolution. Fleet expansion -- Achieved the 2025 goal of 22 owned jets, with further acquisitions possible as international needs arise. OCS kidney program -- Preclinical and product development progressing, with device design unveiling planned for early 2026. Gen 3 OCS platform -- Development underway, with more details to be shared in 2026. Planned headquarters move -- Finalizing lease negotiations in Somerville, MA for a new integrated global facility, with announcement expected in early January 2026. Double shifting initiative -- Preparing to pilot double shifting a portion of the fleet by year-end to improve utilization and efficiency. TransMedics Group (TMDX +3.55%) reported year-over-year growth in both top-line and profit metrics, with revenue and margin expansion attributed to higher OCS adoption rates and increased logistics utilization. Management detailed solid progress in commercial, clinical, and operational initiatives, highlighting recent international expansion with a new NOP program in Italy and ongoing investments in both innovation and infrastructure. Upcoming clinical milestones include imminent patient enrollment for next-generation heart and lung trials and strategic advancements across core product and logistics platforms, positioning the company for further growth and market share gains in 2026 and beyond. Hassanein stated, "we are narrowing the range to raise the midpoint of our full-year 2025 revenue guidance. We are now guiding to a range of $595 million to $605 million for full-year 2025 revenue." Hernandez projected operating margins could "reach or approach 30% by 2028" with at least 750 basis points of operating margin expansion targeted for full year 2025. Leadership confirmed the company's first OUS NOP program is launching in Italy in 2026, supported by new logistics hubs and incremental staffing investment. The company expects to pilot double shifting of its aircraft fleet by year-end 2025, aiming to maximize asset utilization and operational leverage. ENHANCE heart and de novo lung clinical trials will generate initial revenue in Q4 2025 under conditional IDE approval, with broader trial enrollment expected in Q4 2025 and into 2026 once FDA conditions are removed. Development of Gen 3 OCS and OCS kidney devices is advancing, with public release of further details planned for 2026. Industry glossary OCS: Organ Care System; TransMedics' portable platform for organ perfusion and preservation. NOP: National Organ Procurement; TransMedics' integrated clinical and logistics support service for transplant centers. OPO: Organ Procurement Organization; regional entities coordinating organ donation and allocation within the U.S. system. DCD: Donation after Circulatory Death; organ donation protocol for donors declared dead based on circulatory criteria. DBD: Donation after Brain Death; organ donation protocol for donors declared dead based on neurological criteria. OUS: Outside United States; refers to operations and revenue generated beyond the domestic U.S. market. IDE: Investigational Device Exemption; FDA regulatory pathway permitting use of investigational devices in clinical trials. Full Conference Call Transcript Laine Morgan: 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 and opportunities. These statements involve risks and uncertainties that could cause actual results or events to materially differ from 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 are 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 three organ segments, driven by higher overall utilization and center penetration of OCS and 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% 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 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 Q3 was $27.2 million, representing approximately 35% year-over-year growth. Throughout 3Q, we owned and operated 21 aircraft before adding our twenty-second 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 emissions requiring air transport compared to approximately 61% in 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 enhanced heart and de novo 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 de novo 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 are very excited about initiating these two 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. 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 mid-term growth driver for TransMedics. As I have stated before, TransMedics' U.S. NOP success has been highly visible across the global transplant market. 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 dedicated transplant logistics support for reasons similar to those we have 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 four 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, 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 2026. We are also currently engaged with several other European countries and also engaged 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 2027 and beyond. With that, let me turn to the here and now. We are laser-focused on finishing our 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 of 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 in 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 detail 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 a typical seasonal slowdown in U.S. transplant activity, where Q2 tends to be one of the strongest periods followed by some moderation, performance remains strong. Continued benefit from our ongoing strategic investments drove solid performance across both product and service lines, along with continued margin expansion and improved profitability versus 2024. It's worth noting that in our earlier years, our rapid growth trajectory offset the natural seasonality in U.S. transplant activity. As we've reached related 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, $300,000 in lungs, and $100,000 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 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're also starting to see early benefit 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 investment we're making in infrastructure to drive future efficiencies and support our anticipated growth in 2026. Total operating expenses for the third quarter 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 $0.66 for 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 one 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 three 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 milestones 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 2026. These insights 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 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 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 the NOP platform and integrated logistics network, give us a clear advantage in expanding access to transplantation worldwide. 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 positioning 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 lifesaving solutions to global transplant markets. Of course, none of this would have happened without our dedicated world-class TransMedics team that is 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 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? Operator: Thank you. We will now begin the question and answer session. We have the first question from the line of Allen Gong from JPMorgan. Please go ahead. Allen Gong: Hi, team. Thanks for the question. 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 the fourth quarter, around $155 million plus sales. So how should we think about that as a run rate looking forward in 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 the seasonality every year, and we saw this 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 would be crucial to providing guidance for the full year 2026. Allen 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 covering the breadth of Europe, I imagine it won't be quite as straightforward if you can call that as your efforts in the U.S. But what kind of challenges do you anticipate ahead of you for that? 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? Thank you. 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 2026. We're heavily engaged with other geographies in Europe, and as I said, every geography has its own specific requirements. However, 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 their 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 has a lot of needs. Bill Plovanic: Thank you. We have the next question from the line of Bill Plovanic from Canaccord. Please go ahead. Bill Plovanic: Yes, great. Thanks for taking my question. I'm going to 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 de novo and enroll when you say enroll it, treat the first patients or book the first pay revenue in the first half of 2026, 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 the first handful of patients and book the revenue in 2025. What we are saying is we have conditional approval for a fairly sizable initiation of the trial, especially for the heart. So 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 2026 or early 2026. And then 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. Bill 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 a midpoint of the fourth quarter is only 6.5%. 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, the timing of those investments? And thanks for taking my questions. Gerardo Hernandez: Hi, 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 the space to improve. Upside. It assumes that we land in the low end of 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. Ryan Daniels: Thank you. We have the next question from the line of Ryan Daniels from William Blair. Please go ahead. Matthew O'Brien: Hey, this is Matthew O'Brien on for Ryan Daniels. And thank you for taking our question. 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. First, the first part of the question, we did 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 are 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 may come out from this initiative. And frankly, we see this as a potential opportunity, not as a potential risk. But we have to wait and see. Matthew O'Brien: Great. Thank you so much for those insights. Waleed Hassanein: Thank you. Chris Pasquale: Thank you. We have the next question from the line of Chris Pasquale from Nephron Research. Please go ahead. Chris Pasquale: Waleed, logistics penetration has been in the high 70s for three 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 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 78% 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 to 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. Chris Pasquale: Thanks. 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. Josh Jennings: Thank you. We have the next question from the line of Josh Jennings from T. T. Govan. Please go ahead. Josh Jennings: Hi, good afternoon. Thanks for taking the questions. 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 result better than TransMedics' internal expectations with a stronger start than expected in October or you have another plan, but maybe just help us think through what's driving the guidance increase in 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 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. Josh Jennings: Great. Thanks for that. And just a follow-up. I think it's clear that there really 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 I wanted to just confirm that any impact to donor registrations that you're seeing? And then maybe give us the status of the waitlist for liver, heart, and lung transplants. We just anecdotally talked to some heavy OCS users who've talked about their waitlist going down because volumes have increased dramatically. But I think those have refilled, maybe help us on those two topics. Thanks a lot for taking the questions. 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 three years when we're operating NOP, many centers wiped down the waitlist and rebuild 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 large or midsized centers that are efficient with their outreach. They could rebuild it within the 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 for rebuilding their waitlist because these are lifesaving transplant procedures, as you know. So that's our answer to the second half. The 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. But 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 number one 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. Josh Jennings: Understood. Thank you. Suraj Kalia: Thank you. We have the next question from the line of Suraj Kalia from Oppenheimer and Company. Please go ahead. Suraj Kalia: Hey, Waleed, can you hear me all right? Waleed Hassanein: I can. Hi, Suraj. Suraj Kalia: Perfect. Gentlemen, thank you for taking the questions. 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 will be difficult to come by. Can you argue the reverse is true for FY 2026? Or your confidence for FY 2026 is you would characterize that it's predicated on heart and lung contribution through the trials, OUS endeavor that you talked about. Just set the stage for us as how you guys are thinking as you shift gears in FY 2026? Waleed Hassanein: Suraj, thank you so much for that 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's thesis out there that penetration in liver will be difficult to come by. We see it completely differently. 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. 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 2026. And that's where we stand. From a U.S. perspective. Again, initiation of NOP OUS will be a potential catalyst albeit in 2026, but it is going to become a catalyst for us 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. Hope I addressed your question. Suraj Kalia: Fair enough. And Gerardo, if I could, look our math is your liver shares you'll gain 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, how should we think about is this a blip of the screen? Is there something structural? As we look forward? Just help us understand what qualitatively and quantitatively would be great. Gentlemen, thank you for taking my questions. 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 two 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, that there is a good portion of our clinical missions are done using car transport alone. This was the only two simple facts that we wanted to highlight to those who are just laser-focused on tracking tail numbers. And so that's just a clarification. Gerardo? Can you please address that? Gerardo Hernandez: Yes. Well, in reality, there is not much to add. We'll leave more and more Suraj, we didn't see any I would say, change in the, let's say, split between ground and air transportation through the quarter to compare to what we've seen earlier in the year. And we are assuming more of the same thing for Q4. I think that's what I would say, not much more to add. Thank you. Patrick Wood: Thank you. We have the next question from the line of Patrick Wood from Morgan Stanley. Please go ahead. Patrick Wood: Amazing. Thanks, guys. 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 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? Thanks, guys. Waleed Hassanein: Thank you, Patrick. Double shifting, Patrick, will give us at least in 2025, 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, correct me if I'm wrong, the idea is that 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. Basically, what will be happening, Patrick, there is that the same number of planes will fly a higher number of missions, maximizing the return on capital. That's basically the concept. Patrick Wood: Thank you so much. Thanks, guys. Matthew O'Brien: Thank you. We have the next question from the line of Matthew O'Brien from Piper Sandler. Please go ahead. Samantha Munoz: Hi, this is Samantha on for Matt. Thanks for taking our question. I guess, first, I know that 10,000 transplant targets 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 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 NextGen 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, want to reiterate what I've stated before. If we continue on the current trajectory of growth without any capitalization of growth in U.S. transplant volumes, in 2028, ten thousand transplants will represent approximately fifty percent to fifty-five percent 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 access to an additional twenty-three thousand to twenty-five thousand 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 program will accelerate the path to getting there and again, we remain convinced that 2028 at 10,000 transplants 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. Thank you. If I could sneak in one more, also on the next-gen heart and lung program. 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 doesn't really matter what the duration is. We expect it to be somewhere between twelve to eighteen 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 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. David Rescott: Thank you. We have the next question from the line of David Rescott from Baird. Please go ahead. David Rescott: Great. Thanks for taking the questions. Waleed, I wanted to follow-up on some of your comments around the timing of the trial and just looking for maybe some more color on what the difference between starting enrolling the trial in Q4 and having these full conditional limitations. I don't know if limitations are 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 that 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 2026. I'm just trying to understand what's going on there and maybe whether or not there's 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 zero contribution for the trial. We're actually we appear to be ahead of schedule. So let me clarify however, the difference between the two 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 two 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 two parts for heart and the one 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. Maybe on Europe, a two-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 will say that control organ donation allocation across different end markets, so I guess the or different countries. So I guess the first part for Italy is the assumption that organs that are trans the new service in Italy will likely stay in Italy? Or is it possible that those are going to get moved around transplant in Europe? And then as it relates to the margin comments, there, I know you called out gross margin staying in this 60% range in general, but maybe some near-term headwinds as you expand in Europe. 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 this 60% range? Maybe there's a difference between gross and operating, but any clarity there would be helpful. Thank you. Waleed Hassanein: Sure. Thanks, Dave. 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 dynamic 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: Hi, 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 on that long-term margin is around the 60%. I believe that's the level that we're going to be seeing as volumes scale across 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? Mike Matson: We have the next question from the line of Mike Matson from Needham and Company. Please go ahead. Mike Matson: Yes, thanks. So I had a question on the heart trial design and this may apply to lung too, wasn't able to find lung in the clinicaltrials.gov yet. But the endpoint is patient and graft survival at thirty days. And so my understanding is 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, 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 thirty days alone. It's patient and graft survival at thirty days with freedom of primary graft dysfunction within the first seventy-two hours after heart transplant. When you combine these two, you end up not in the high 90s, as just the 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 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 two combinations is what makes this powered enough to hopefully demonstrate superiority. So we're very Okay, got it. Getting the trial launched. 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. Mike 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 2026. I imagine you're going to have to run a trial there as well. So, before you can get it approved. So it's just 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? Thanks. 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. 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 a huge cost efficiencies given the increased improved outcomes and higher utilization of kidneys. That should be afforded by this. Daniel Markowitz: Thank you. We have the next question from the line of Daniel Markowitz from Evercore. Please go ahead. Daniel Markowitz: Hey, guys. Thank you for taking my questions. 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: It's an excellent question. Yes and no. The answer is for contribution, no. Yes, we're ahead of schedule. But realistically speaking, if we start enrolling in November, the impact is going to be minuscule. 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 early signal of how the trial is rolling out. 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? Thanks. 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 three 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 the 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. Tom Stiefel: Thank you. We have the next question from the line of Tom Stiefel from Stifel. Please go ahead. Tom Stiefel: Great. Hey, guys, thanks for taking my questions. Apologies if any of this has been asked, jumping in between calls. But maybe just one for me. Waleed, markets 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 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. Tom Stiefel: Yes, 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 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 new to the NOP or not constant users in the 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 directions. It's just we're becoming a bigger player in the market, and that's why it impacts us on a Q2Q 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, that variability happens after a very strong Q2. Tom Stiefel: It's really helpful. Thanks, Waleed. Young Lee: Thank you. We have the next question from the line of Young Lee from Jefferies. Please go ahead. Young Lee: All right, great. Thanks for squeezing me in here. 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, you know, 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 nine months. We're not saying it's going to be faster. 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. Young Lee: Thank you. Any follow-up questions, Young Lee? Young Lee: I'm all set. Thank you. 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 chatting 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.
