TransMedics Q1 2026 Earnings Call - Revenue Growth Hits 21% as CHOPS and Gen 3.0 Drive Strategic Expansion

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you so much, Hannah. Good afternoon, everyone, and welcome to TransMedics’ first quarter 2026 earnings call. As always, joining me today is Gerardo Hernandez, our Chief Financial Officer. Our vision has always been bold and growth-oriented. Since inception, TransMedics has been relentless in our pursuit to transform organ transplant therapy by increasing utilization of donor organs and improving the clinical outcomes of transplant patients through technology and service innovation and by disrupting the status quo. To accomplish this, we’ve been deliberate, yet aggressive in our strategic investment in growth initiatives. We believe that 2026 is a critical and transformational year that stands to cement TransMedics’ near, mid, and long-term growth trajectories and global market position.

In the U.S., we’re actively engaged in growing our heart and lung franchises by advancing our ENHANCE Heart and DENOVO Lung programs to expand our clinical evidence to support broader adoption. In parallel, we are also completing the development of the OCS Kidney platform using our Gen 3.0 platform. Our OCS Kidney platform will enable us to access the largest segment of the global transplant market, which is kidney transplantation. This will happen for the first time in the history of TransMedics. We strongly believe that once regulatory approvals are in hand, OCS Kidney will derive significant growth for our abdominal franchise. We’re not stopping here.

We’re also actively engaged in upgrading our heart, lung, and liver devices to Gen 3.0 platform, which will enable us to gain significant future operating leverage and increase clinical adoption of the OCS platform in these critical organ transplant segments. Our growth initiatives also now go beyond warm perfusion. We recently unveiled the TransMedics Controlled Hypothermic Organ Preservation System or CHOPS. CHOPS is designed to expand our product offering to cover new segments of the transplant market best served with cold static storage. Finally, our growth initiatives now extend beyond the U.S. to important international markets. In Europe, we are undertaking a bold initiative to replicate the NOP clinical service and transplant logistics model to catalyze European OCS adoption and potentially expand our total addressable market. I will provide details on each of these exciting initiatives on today’s call.

As you can see from our ongoing growth initiatives, our focus remains on long-term value creation with continued investment across each pillar of our growth strategy. Specifically, I wanna highlight that this is a strategic and proactive decision. We fully expect that our financial performance over the next several quarters will reflect these necessary investments in people, infrastructure, and technology development as we capitalize on the opportunities in front of us. Based on everything we know today, we are highly encouraged and inspired by what’s ahead for TransMedics. We are committed to executing our plan to drive significant growth for TransMedics and for the global transplant markets broadly. As I’ve stated repeatedly, I truly believe that TransMedics remain in the early innings of our long-term growth opportunity. I’m excited to report that our first quarter performance that reflects a strong start for 2026.

Despite the broader volatility and the transient negative impact of the U.S. Transplant Modernization Act on OPO performance and the overall donor numbers in the U.S., we managed to deliver a solid quarter to start the year. Here are the key operational highlights for 1Q 2026. Total revenue for 1Q 2026 was $174 million, representing approximately 21% growth year-over-year and approximately 8% sequential growth from 4Q 2025. U.S. transplant product revenue grew by 22% year-over-year and approximately 7% sequentially to $102 million, while OUS transplant revenue grew approximately 39% year-over-year and approximately 17% sequentially to $6 million.

We delivered adjusted operating profit of approximately $18.1 million in Q1, representing approximately 10.4% of total revenue in 1Q, while continuing to make significant investment to fuel our growth. Importantly, we ended 1Q with $462 million of cash and cash equivalents while making substantial investments in the growth initiatives above. TransMedics transplant logistics services revenue for 1Q 2026 was approximately $32 million, up from $26.1 million in 1Q 2025, representing approximately 22% year-over-year growth and up from $28.6 million in 4Q 2025, representing approximately 12% sequential growth. In Q1, we maintained coverage of approximately 82% of our NOP mission requiring air transport. We expect to maintain 22 operational aircraft in the U.S. fleet throughout 2026.

As we discussed, we are now focused on maximizing the utilization of our U.S. fleet and improving efficiency and capacity by double-shifting a portion of the fleet to meet the growing clinical demand. We will detail key findings from this initiative at year-end. Overall, we are pleased by our strong performance that was fueled by growing OCS case volume, increased clinical adoption. Importantly, we’re also encouraged that we achieved these results without any contribution of ENHANCE and DENOVO clinical programs due to the enrollment timing of these important programs. Speaking of ENHANCE and DENOVO, let me shift to provide a detailed update on our strategic initiative to unlock these two important clinical programs to help us grow our cardiothoracic franchise in the U.S. At the recent ISHLT conference in April, we unveiled our TransMedics Controlled Hypothermic Organ Preservation System or CHOPS.

CHOPS is a true active cooling device designed to provide a variety of temperature condition ranging from 4 to 12 degrees Celsius to meet the user’s need. This represents a unique optimized, unique and optimized approach that we believe is superior to the styrofoam boxes that are used for cold static storage of organs today. These boxes use phase-changing material or cold packs that are extremely variable and are nearly impossible to control or adjust preservation temperatures with. CHOPS will be an FDA-registered and regulated organ preservation device made by TransMedics and will serve as the control arm of the ENHANCE and DENOVO programs once the IDE supplement is approved. This would be a huge strategic win for TransMedics as it stands to help avoid any reliance on competitive products as we conduct our important clinical programs for heart and lungs.

We plan to file the IDE supplement within the next few weeks, and we expect this to be approved and implemented in early Q3 2026. Importantly, in parallel to these clinical programs, we fully intend to file a 510 application to clear this device for commercial use in the U.S. Once cleared by FDA, CHOPS would expand TransMedics platform of organ preservation technologies and enable us to address shorter preservation times for organs that may be best suited for cold storage. As we highlighted on our last call, the panic and confusion caused by the competitive reaction to our clinical programs somewhat delayed our ENHANCE Part B and DENOVO enrollment. We not only addressed this challenge by introducing CHOPS, but we are now going after the niche market with superior, more validated cooling technology and our best-in-class NOP infrastructure.

Said differently, beyond facilitating our trial enrollment, we are expanding our product portfolio to ensure that TransMedics is well-positioned to provide transplant programs around the world with the widest range of products to meet their clinical needs across the full spectrum of organ transplantation. We plan to accomplish this goal based on best-in-class technologies, best-in-class clinical services, and with the most cost-efficient and reliable logistical network in the market. Let me move to share update on our strategic initiatives that we see as an important catalyst for our business. First is the National Transplant Modernization Act. In March 2026, TransMedics submitted our detailed comments on CMS proposed rulemaking language for the new U.S. transplant system to advance U.S. transplant modernization initiatives. Our public comments focused on several key topics.

On the system-wide benefits of allowing new entities with proper national infrastructure that are not current OPOs to participate in the new transplant ecosystem by becoming either a multi-regional or even national OPOs. This is to help maximize U.S. donor organ utilization for transplants. It would provide a mechanism for fair competition and maximize transparency while driving cost efficiency to the U.S. transplant ecosystem. On the benefit of using FDA-approved portable perfusion technologies to maximize donor organ utilization in the U.S. while limiting the use of unproven, fairly expensive, and potentially detrimental techniques that were organically introduced into the market over the last several years. On the benefits of enabling for-profit entities to participate so long as they are strictly adhering to all performance metrics proposed by CMS and complying with all the financial disclosure requirements.

Fourth, on the benefits of allowing new entities to bid to replace as many of the decommissioned OPO regions as they can support. Finally, we highlighted the potential benefits of requiring these new participating entities to provide technology and clinical support services to existing OPOs. Again, it was intended to maximize the benefits to the U.S. transplant ecosystem in general and not just to one entity. If CMS agrees with this direction, TransMedics fully intend to submit bids for donor service areas or DSAs associated with decommissioned OPOs later this year or early next. Again, our goal is to drive efficiency, transparency, maximize patient access, and organ utilization for transplant in the U.S. The second growth initiative is NOP Europe. As we’ve discussed, we are actively building infrastructure and staffing in Italy across four hubs to cover Northern and Southern Italy.

Meanwhile, we’re actively engaged and applying for Italian organ transplant air and ground logistics tenders for a few Italian regions as we speak. We are also actively engaged with Benelux region stakeholders to establish NOP in the Netherlands and Belgium to create NOP hubs that are staffed by a dedicated clinical TransMedics staff to manage OCS cases in these countries. Another important element to our European NOP strategy is to create the first-ever dedicated and integrated transplant logistics network to cover the broad European transplant logistics demand. On that front, we announced last week that we’ve entered into a definitive agreement with a major European charter flight operator, PAD Aviation or PAD Aviation, to partner on creating this European air logistics network. PAD is located in Paderborn, Germany, which is within one to two-hour distance from all the major transplant hubs across Europe.

Importantly, they are operating a fleet of same model aircraft that we use in our U.S. fleet, Embraer Phenom 300E. Simply stated, we’re planning to replicate the success of the U.S. NOP in Europe to potentially expand or nearly double our total addressable market, increase OCS clinical adoption, and provide efficient and dedicated transplant logistics service across Europe using our dedicated logistics network. The third growth initiative is OCS Kidney Program. As we discussed on the last call, this represent our next frontier, with kidney expected to be the first organ to launch on our OCS Gen 3.0 technology platform. Gen 3.0 technology platform will comprise a completely redesigned from form factor, hardware, software, and perfusion system that is smaller, lighter with lower part count, purposefully designed for automated assembly and high reliability.

Currently, the development program is running at full speed, and we hope to introduce the final design device and a potentially working device at the American Transplant Congress in Boston in late June. Looking ahead, we are still targeting early 2027 for our U.S. IDE submission for our kidney program. We are extremely excited about this program as it stands to unlock a substantial incremental market opportunity measured in tens of thousands of kidney transplant procedures globally. The fourth growth initiative is OCS Gen 3.0 upgrade for both liver, heart, and lung systems. This program is running in parallel to the kidney program to bring significant technology upgrade to our current liver, heart, and lung systems and help catalyze our clinical adoption in these transplant segments.

Again, we are intentionally developing our Gen 3.0 platform to gain supply chain and operating level, leverage with lower part counts and less reliance on critical third-party suppliers. As you can see, our growth strategy is multifaceted with catalysts lined up across the short, mid, and long terms. We’re excited and laser-focused on investing to ensure the successful execution of these initiatives throughout 2026 and beyond. Now, let me conclude by stating that based on all the dynamics we see today, both in the U.S. transplant ecosystem and at the macro level, we are reiterating our revenue guidance for the full year 2026 between $727 million-$757 million, representing a 20%-25% growth over full year 2025.

We may revisit the guidance later in the year as we gain more visibility on the pace of ENHANCE and DENOVO enrollment and other dynamics in the U.S. transplant ecosystem. With that, let me turn the call to Gerardo to cover the detailed financial results for the quarter.

Gerardo Hernandez, Chief Financial Officer, TransMedics: Thank you, Waleed. Good afternoon, everybody. I am pleased to share TransMedics’ first quarter 2026 results. Please note that a supplemental slide presentation with additional details is available in the investor section of our website. As Waleed highlighted, we started 2026 with solid execution and continued momentum across our platform. Importantly, consistent with the priorities we highlighted on our previous earnings call and throughout 2025, Q1 also marked the beginning of an accelerated phase of investment and execution for TransMedics. We are advancing multiple initiatives designed to support future growth, strengthen our operating capabilities, and position us to capture the opportunities ahead. This includes continuous progress across our different programs, international expansion efforts, jobs, and as announced last week, our agreement to invest in PAD Aviation to support the development of a dedicated organ transplant logistics network in Europe that Waleed mentioned before.

Together, these initiatives and these actions demonstrate our ability to move quickly and boldly in allocating capital to execute on strategic opportunities that we believe can further fuel long-term profitable growth. As Waleed said, let me repeat, these actions are designed to further fuel long-term profitable growth. Beginning Q1, we are introducing certain non-GAAP financial measures, including adjusted R&D expense, adjusted SG&A expense, adjusted operating expenses, adjusted income from operations, adjusted net income, adjusted diluted earnings per share, and adjusted operating margin. We use these non-GAAP financial measures to support financial and operational decision-making and to evaluate period-to-period performance. We believe these measures are useful to both management and investors because they provide meaningful supplemental information regarding our core operating performance, particularly as we begin to incur certain discrete expenses and because they offer greater transparency into the key metrics management uses in running the business.

Examples of these discrete expenses include costs related to strategic initiatives, corporate development activities, headquarter relocation, and implementation of our new ERP. A reconciliation between GAAP and non-GAAP results is included in the supplemental materials available in our website. Turning to our Q1 financial performance. Total revenue for the quarter was approximately $174 million, representing 21% growth year-over-year and 8% growth sequentially. Growth was led by strong liver performance, continued progress in heart, and increasing contribution from our integrated logistics platform. U.S. transplant revenue was approximately $167 million, up 20% year-over-year and 8% sequentially. By organ, liver contribute with approximately $139 million, heart with approximately $26 million, and lung with approximately $2 million. International revenue was approximately $5.6 million, up 39% year-over-year and 17% sequentially.

International revenue growth was primarily driven by heart, with smaller contribution from lung. We are encouraged by the progress we are seeing internationally as we continue to build our presence and advance our expansion plans. At the same time, the business remains at an early stage, and quarterly variability is expected due to reimbursement and market dynamics. Total product revenue for the quarter was approximately $108 million, up 22% year-over-year and 8% sequentially, reflecting continued strong liver performance and modest growth in heart. Service revenue for the first quarter was approximately $66 million, up 19% year-over-year and 9% sequentially. Growth was driven primarily by logistics revenue, supported by increased utilization of the TransMedics aviation fleet. Together, these results reflect continued demand for the OCS platform and the value of our integrated NOP model.

Total gross margin for the first quarter was approximately 58%, broadly consistent with recent quarters and down approximately 331 basis points year-over-year. The year-over-year decline was driven primarily by increased internal supply chain activity to replenish inventory across our hubs and position inventory in support of the DENOVO and ENHANCE programs, as well as continued investment in NOP network, which together with certain one-time items impacted the margin. We would expect this to normalize in the coming quarters. Sequentially, as mentioned before, gross margin remained broadly stable at approximately 58%. Underlying performance in the quarter was encouraging, with operational improvement largely offset by ongoing internal supply chain costs to support the DENOVO and ENHANCE programs, continued investment in NOP capabilities, and certain one-time items that we will expect to normalize in the coming quarters, as mentioned before.

Adjusted operating expenses for the first quarter were approximately $83 million, up approximately 42% year-over-year and 17% sequentially. Adjusted R&D increased approximately 45% versus the first quarter of 2025, primarily driven by the continued development of our OCS Kidney program and our next-generation OCS platform. The increase also reflects ongoing product development activities in Mirandola, Italy, and headcount growth as we continue to strengthen our development capability across U.S. and the Mirandola site. Sequentially, the increase in adjusted R&D was primarily driven by continued investment in OCS Kidney and our next-generation OCS platform, with a smaller contribution from increased product development activity in Mirandola.

Adjusted SG&A increased approximately 41%, primarily reflecting the continued investment to strengthen NOP network and IT capabilities, the initial impact of our new headquarter in Somerville, and consulting and market research in support of international expansion plans. Some of these factors also drove the sequential increase, particularly continued investment in NOP network and international expansion initiatives. Adjusted income from operations for the quarter was approximately $18 million, representing an adjusted operating margin of approximately 10%. The year-over-year decrease in operating margin primarily reflect the timing and scale of our planned investment in 2026 as well as the gross margin dynamics discussed earlier. Adjusted net income was approximately $11 million or $0.30 per diluted share. As Waleed mentioned before, we ended the quarter with approximately $462 million in cash.

Cash generation from operations remained solid during the quarter. Our balance sheet remains strong and continues to provide us with the flexibility to invest in the business, support our clinical and international expansion plans, and evaluate strategic opportunities that can strengthen our platform. Turning to our 2026 financial outlook. We are reiterating our full year 2026 revenue guidance of $727 million-$757 million, representing a 20%-25% growth over full year of 2025. We continue to expect growth to be driven primarily by increased transplant volume supported by OCS and NOP platforms, expansion of service revenue, and progress across our clinical and international initiatives. In terms of gross margin, we continue to expect our long-term gross margin profile to remain around the 60%.

As I shared before, as we continue to invest ahead of growth and expand geographically, we do expect some near-term pressure. We feel confident in our long-term profitability goals. As we continue to scale the business, we expect to capture additional operating leverage while also benefiting from initiatives that are planned to be margin accretive over time, including our kidney program and our next generation OCS. Taken together, these factors reinforce our confidence in the long-term profitability of the business. Again, as Waleed say, let me repeat, taken together, these factors reinforce our confidence in the long-term profitability potential of the business. In terms of capital allocation, our focus remain on driving long-term value. We are concentrating our investment in three key areas. First, fueling growth through continued R&D investment, strengthening our NOP network and targeting expansion into selected international markets.

Second, building a stronger foundation through enhanced systems, processes, talent and organizational capabilities to improve efficiency, scalability and execution. Third, enhance our infrastructure and strategic optionality, including our new global headquarters, manufacturing and product development upgrades, and selected strategic opportunities that can further strengthen our platform. Overall, our first quarter performance reflects continued execution, disciplined investment and progress across several strategic initiatives. Several strategic initiatives that aim to expand our TAM and materially strengthen TransMedics’s long-term position. We are moving with conviction and investing strategically in capabilities required to support future growth, improve scalability and drive long-term value creation. With that, I’ll turn the call over to Waleed for closing remarks.

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you, Gerardo. Overall, we’re proud of our success to date. We’re not stopping here. 2026 represents another critical period for TransMedics as we invest to deliver on several transformational growth catalysts. The strong financial position we’ve built over recent years have enabled us to pursue this multi-pronged approach, and we are more excited than ever for what lies ahead. In conclusion, we’re humbled and proud of the significant life-saving impact of our OCS technology, NOP services and dedicated team, and remain committed to our mission of expanding cases and improving clinical outcomes to patients in need for organ transplant worldwide. With that, I will now turn the call to the operator for Q&A. Operator?

Operator: Thank you. Your first question comes from the line of Bill Plovanic of Canaccord Genuity. Your line is open.

Bill Plovanic, Analyst, Canaccord Genuity: Great. Thanks. I’m gonna focus on CHOPS if I could. Just, you know, could you please help us understand the strategy behind CHOPS, the thought on cannibalizing your existing uses? Then, you know, are you still planning on hitting that 10,000 organ target? Does that include CHOPS or is that incremental? Then also just any thoughts on CHOPS for liver and kidney. Thanks for taking my question.

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you, Bill. I want to clarify one thing right off the gate. CHOPS is not cannibalizing anything. CHOPS is tackling a segment of the market, specifically DBD hearts, that are like 2 hours of preservation that we are not we’re not being used at today. CHOPS is not cannibalizing. It’s additive to our market share, and it’s specifically focused on these short transport runs that are currently going on static cold storage. That’s number 1. Number 2, the strategy behind it was to find a better way to develop the control arm with better technique than the standard styrofoam boxes that are currently being sold for static cold storage.

Also presented an opportunity for us to provide a broader product portfolio to meet those centers that are their volume is primarily shorter distance and they don’t invest in DCD or longer distance organ procurement. Our goal right now is on heart and lungs. In that order, we do not see, obviously it will be approved for organ preservation, cold static storage for organ preservation, but we have not made a decision yet, is it gonna be rolled out for liver and kidney as well. We think the kidney cold static preservation is really a disaster, and we are trying to transform all this to machine perfusion. CHOPS is specifically designed for the cardiothoracic platform.

Joshua Jennings, Analyst, TD Cowen: Thank you.

Operator: Your next question comes from the line of Joshua Jennings of TD Cowen. Your line is open.

Joshua Jennings, Analyst, TD Cowen: Hi, good afternoon. Thanks for taking the questions. Hoping to just build on discussion that ISHLT will lead and just with the ENHANCE Part A and Part B programs, you know, optimal scenario being kind of win, win, potentially driving day-only surgeries for high risk DCD hearts, showing superiority in DBD short transports, then also opening up this advanced cold storage CHOPS opportunity. Maybe just help me better understand the dynamics there, if you would, how ENHANCE Part A, Part B can help drive stronger heart penetration, OCS heart penetration. Thanks for taking the question.

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you, Josh. As we’ve stated before, ENHANCE was designed exactly to accomplish the goals you outlined. We wanted to give the market a safe, reproducible, and effective way to do morning hour heart transplants. We wanted to give the market a better way to preserve DCD hearts and better way to preserve long distance and long preservation time, extended criteria hearts, minimizing edema and resulting in better function and enhancing function on OCS. That was primarily the design of ENHANCE. In addition, we wanted to penetrate that segment of the market that I called earlier DBD hearts that are, let’s call it sub 4 hours of preservation, which currently the vast majority of those are being transported using styrofoam boxes with cold packs. That’s Part B of ENHANCE.

Yes, the vision, the strategy of ENHANCE still intact. Unfortunately, the competitive dynamic caused a little bit of a confusion and resulted in a little bit of a delay to launching these two parts, specifically Part B. We found a solution for it that completely make ENHANCE fully independent from any competitive dynamic. We are as excited as always and as we’ve ever been on ENHANCE, and we just can’t wait to get the IDE supplement approved and getting the program rolling.

Again, from where we sit here, we see this as a huge opportunity for us to catalyze adoption in heart across all market segments in heart and still have an optionality for centers that are not, for whatever reason, are not focused on any of the, you know, sort of expanding portion of the heart market of DCD or long distance procurement and just are happy with the cold storage to offer a product that is, we believe, will be, will provide them, meet their expectation and provide them potentially a better solution, but on our platform, which is CHOPS. As you said, Josh, we look at this as a win-win-win from TransMedics perspective. We just have to be patient. We have to execute on the strategy. We have to finish the program.

You know, from where we sit, Part A is going slightly ahead of schedule. We’re excited about what we’re seeing. The market is giving us early feedback on the on how the hearts are behaving coming off OCS, which is exactly as we predicted it would be. Again, we need to finish the program, and then we expect good things.

Operator: Your next question comes from Allen Gong of JPMorgan. Your line is open.

Allen Gong, Analyst, JPMorgan: Hi, team. Thanks for the question. I had a quick one on, you know, what you’re seeing in the market. I know interquarter you had talked to, you know, some disruption that you were seeing at OPOs, especially as they’re grappling with some of the potential changes proposed in the, you know, OPTN modernization. I’m curious to hear what you’re seeing so far in the second quarter. Are you seeing, you know, the same level of challenges? Are you seeing it get better? Are you seeing it worsen? How should we think about, you know, your growth in second quarter in light of that?

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you, Alan. The specific things that we’re seeing is what everybody’s seeing, which is that the overall donor, deceased donor numbers have been below expectation and below last year. We saw that throughout the first quarter and April continued. We hope that will reverse. We usually don’t pay too much attention to inter-quarter variability, but we are paying attention this year because of the dynamic with the Modernization Act. If you remember, we predicted that we will see some volatility in deceased donor numbers, which is the mechanism that OPOs kinda register their displeasure with that transformation. We’ve seen it reverse, and we have all the confidence that it will reverse. When it will reverse, we don’t know.

We’re not, we don’t expect this to be a chronic thing and we expect actually when it reverses, it will bounce back to baseline, but we expect some acceleration. That’s what we’ve seen over the history over the last 20 years. When this happens, that dynamic kind of plays out as I outlined.

Allen Gong, Analyst, JPMorgan: Got it. Thanks. Sorry if I missed this in the prepared remarks when bouncing around. You know, I understand that, you know, the new strategy that you are approaching for your clinical trials. Do you have an expectation for when you think you can get those IDE approvals and then how quickly you can get those trials started afterwards? Thank you.

Bill Plovanic, Analyst, Canaccord Genuity2: Yes. Yep. Thank you, Alan. As I stated in the prepared remarks that we plan to file the IDE supplement within the next couple of weeks, and we hope to be in the approval stage and implementation stage by early Q3.

Operator: Your next question comes from the line of Ryan Daniels of William Blair. Your line is open.

Matthew Mardula, Analyst, William Blair: Hello, this is Matthew Mardula on for Ryan. Thank you for taking the questions. I might have missed this, so I apologize. What is the guidance for operating margins this year? Is just the operating margin growth more weighted in the second half and investments more front-loaded given what we’ve seen in Q1? Any more color into margins and its trajectory for the second half would be greatly appreciated. Thank you.

Gerardo Hernandez, Chief Financial Officer, TransMedics: Yeah. What I mentioned in the last call is that we’re expecting up to around 250 basis points below an operating margin below last year, which now will be really adjusted operating margin below the number that we had in 2025. I would not like to go into more details in terms of phasing because we have an investment plan that it needs to materialize for it to result in what we’re seeing. I rather not go into those level of details now.

Operator: Your next question comes from the line of Chris Pasquale of Nephron Research. Your line is open.

Chris Pasquale, Analyst, Nephron Research: Thanks. Waleed, I also wanted to ask about the ENHANCE DENOVO trials. The CHOPS program seems like a great addition to the portfolio. Previously, you were comparing OCS to established hypothermic organ storage approaches in those studies. Now, by including CHOPS in the trials, you effectively have two investigational arms being compared against each other. I guess kind of a 2-part question is, one, does that complicate the interpretation of the results? Do you worry at all about not having a clean outcome here in terms of physicians being able to interpret what the data says? Then two, you’re theoretically introducing a harder control arm here if you really believe that you’re gonna do a better job controlling the temperature of those organs.

Does that make you at all concerned about the margin of improvement you’re gonna be able to show in the studies? Thank you.

Bill Plovanic, Analyst, Canaccord Genuity2: Chris, excellent question, and thank you for asking it. Let me address it in several sections. The first segment is, there’s no such thing as well-established cold storage other than ice. With what we’ve seen over the years is there’s these hypotheses and claims that are being thrown out there in the marketplace by a handful of newcomers to the space that haven’t been really substantiated. In fact, even the variation in temperature we’ve seen at the last ISHLT that did not show any significant difference than four degrees to eight degrees versus 10 degrees. None of these hypotheses have really materialized. For us, we’re not concerned at all that we are lowering the standard.

The opposite is true. We’re actually elevating the game and saying, "Listen, if you as a center wants your organ to be stored between 4 and 8, we have a device that we can validate that it’s between 4 and 8. If you want it at 10, we have a device that validates it at 10." That’s number one. Number two, we’ve discussed the second part, which is, you know, comparing two investigational arm. The CHOPS will not be investigational by the time we interpret the trial results. That’s the plan that we discussed with FDA, and I would leave it at that. Three, am I worried about raising the bar on a control arm? No.

I think the OCS will prove its value because again, these programs are designed to show several value points. Again, we know that even if we deliver superiority results, there will be a segment of the market that’s still focused on cold static storage just because of cost, just because of limited volume or what have you. In this case, TransMedics would gain market share in that segment that today we don’t have a product to sell to these needs. Net-net, we are extremely focused on getting these programs executed. We believe we found the best solution out.

In fact, I would, you know, at risk of quoting the FDA, the FDA called it a creative and elegant solution. We will go and execute the trials, and we’re confident that our strategy is gonna pan out on many fronts. We just can’t wait to get these programs fully activated and we get out of this confusion that was created by the panic that was thrown into the mix by our competitors.

Operator: Thank you. Your next question comes from line of Suraj Kalia of Oppenheimer. Your line is open.

Bill Plovanic, Analyst, Canaccord Genuity0: Hi, Waleed. Can you hear me all right?

Bill Plovanic, Analyst, Canaccord Genuity2: Can hear you perfect, Suraj.

Bill Plovanic, Analyst, Canaccord Genuity0: Waleed, I wanted to follow up on Chris’s question just with a slightly different flavor. One of the pushbacks we got after the CHOPS announcement was, hey, how do you know this, the CHOPS is optimally designed, i.e., it isn’t really designed as an inferior product? I’d love for you to push back on that notion. You know, this is a new product. How do you know this is optimally designed as is? You know, you can I think so Chris was looking at one side of the spectrum in terms of good outcomes of the control arm. What I’m saying is, or at least what the pushback we got was, hey, what if it is sub-optimally designed and you get bad outcomes in the control arm, hence you automatically look good.

I’d love for you to push back on that notion of thought.

Bill Plovanic, Analyst, Canaccord Genuity2: Great. Suraj, thank you for asking this important question. The opposite is true, Suraj. The thing is, again, this question implies that the market is actually working with highly scientific, highly validated technologies. The opposite is true. Major transplant programs are going to Home Depot and buying either YETI coolers or Ryobi coolers, and they’re operating with them day in and day out. Guess what? None of these coolers have been validated or designed or even FDA approved for that intended purposes. We are elevating the game. We are a company that pride itself of developing and delivering level 1 evidence to the highest clinical standards and to the FDA standards. That’s number one.

Number two, as I said in my prepared remarks, and I will reiterate it again here, CHOPS is designed to be a fully registered and regulated FDA medical technology, which means by definition, Suraj, as you know, that we have to go through exorbitant amount and exhaustive testing to validate that the design, it meets the intended purpose. None of the technologies I’m talking about have gone through that. For that’s hyperbole assumption. The opposite is true. We are actually, I am with Chris’s spectrum is the one that, you know, that’s more realistic, that we are elevating the game on the control arm.

Even then, we’re not concerned because we see significant value and also we provide solutions across the spectrum of values achieved that would be achieved and enhanced in the DENOVO.

Operator: Your next question comes from the line of Matthew O’Brien of Piper Sandler.

Bill Plovanic, Analyst, Canaccord Genuity4: Hi, this is Samantha on for Matt. Thank you so much for taking our question. Also wanted to talk about the clinical trials in CHOPS. I guess first, kind of a two-parter. Can you first just quantify and put into numbers for us how much of the market CHOPS is expected to address? I’m also trying to square the design of these trials. You know, you mentioned the superiority. These trials are essentially trying to say that OCS is a better technology versus now cold storage and CHOPS. Also the decision to launch CHOPS, you know, presumably this inferior technology. Thank you.

Bill Plovanic, Analyst, Canaccord Genuity2: Sure. Sam, that’s an excellent question. Let me address the latter piece first. Again, as I stated earlier, we all know everybody on this call and the listeners know, and they’ve spoken to clinicians and surgeons in the field of organ transplantation. You ask 10 transplant surgeons one question, you will get 12 different answers. We know for a fact that even when we prove superiority, there will be a handful of centers or a segment of the market that will still prefer cold storage technique in certain cases. Why not provide them that solution and go through the effort of providing a fully FDA-approved regulated device that gives them that flexibility? That’s number 1. Number 2, I’m sorry, Sam, can you repeat the first part of the question again?

I lost my train of thought.

Bill Plovanic, Analyst, Canaccord Genuity4: No, that’s okay. Thanks for that.

Bill Plovanic, Analyst, Canaccord Genuity2: Oh, the quantification.

Bill Plovanic, Analyst, Canaccord Genuity4: Just, quantifying.

Bill Plovanic, Analyst, Canaccord Genuity2: Yeah, quantification.

Bill Plovanic, Analyst, Canaccord Genuity4: Yes.

I’ll give you one example. Twenty twenty-five U.S. heart transplant total volume was 4,646 hearts. Okay. You need to know that 46% of that total market, which is 2,131, were DBD hearts preserved less than 4 hours. Our portion of that market is measured in single digits. That is a market that is today all going to cold storage techniques. The styrofoam cooler, the Ryobi cooler, the YETI coolers. Why not provide an answer to that? Yes, we should gain a greater portion of that by demonstrating superiority or demonstrating better outcomes. But there will be a segment of that market still out there that the surgeon or the clinicians would need access to cold storage technique.

Bill Plovanic, Analyst, Canaccord Genuity2: Let’s provide them the solution and provide them the clinical service of NOP and the logistics associated with it.

Operator: Thank you. Your next question comes from the line of Daniel Markowitz of Evercore. Your line is open.

Daniel Markowitz, Analyst, Evercore: Hey, thanks for taking my question. I wanted to talk about energy prices. It sounds like you’re able to pass this along to customers via surcharges. Can you just talk through the dynamic a little bit? What’s the exposure here? Are you able to pass it all along? How does this flow through the P&L and what’s, I guess, contemplated in the guidance on that front, both on the revenue and on the COGS side? Thanks.

Bill Plovanic, Analyst, Canaccord Genuity2: Daniel, thank you for asking this important question, which, as we understand, has been creating this black cloud overhang over TransMedics. People forgot who TransMedics is and which market segment we deal with. We’re not United Airlines or Delta. We are an organ transplant company. Everybody needs to remember that we are operating in a highly competitive environment where there are other charter operators and companies that service the same market that we are servicing from a logistics standpoint. Historically, for the last four or five decades, transplantation have survived and grown when oil prices was high, when oil prices was low. How? Because the market has a mechanism to recover the cost of these when the prices go up.

In fact, you know because of that competitive dynamic, I cannot share with you on an open mic the detail of how TransMedics is doing it. All I can share with you is I can assure you, and I assure all the listeners on this call, that TransMedics is doing the absolutely right thing by our customers, and we are having the ability to control our logistics and our fleet and the network effect that was created here gives us maximum operating leverage on dealing with fuel prices. I’ll give you one example.

We are monitoring fuel prices by hub, and we have the maximum flexibility of moving hubs and floating our fleet to make sure that we are not incurring unnecessarily higher fuel charges, so we don’t pass these unnecessarily high fuel charges to the transplant program. Again, the results speaks for themselves. If fuel charges are truly that unsurmountable challenge, we would not be able to print the results we printed here. To put everybody’s mind at ease, fuel charges is a small component of our operating flight hour cost. It is covered, and our network is the most cost efficient way to deal with this problem until it’s resolved.

Operator: Your next question comes from line of David Rescott of Baird. Your line is open.

David Rescott, Analyst, Baird: Great. Thanks for taking the questions. I wanted to follow up on some of the margin commentary, gross and operating. First on the, on the gross margin side. I think, you know, historically, Q1 is typically or has been over the past two or three years, the high watermark for gross margin. Curious, one, if that is the way that we should be thinking about, you know, the cadence for the year, if there’s any maybe transient impacts there. I appreciate some of the comments already on the operating margin side.

Just trying to get a sense maybe for, you know, some of the puts and takes that you saw in Q1 versus what you’re expecting to maybe normalize or work its way out as you get into the back half of the year, maybe CHOPS is a piece of that. Just to be curious on any more color on the gross and operating margin numbers in the quarter and then for the year. Thank you.

Gerardo Hernandez, Chief Financial Officer, TransMedics: Right. Thank you, David, for the question. In terms of gross margin, we, as I shared in the call, we’re looking and we’re expecting, convinced that the right margin for the business is the 60%, around 60%. We are investing ahead of that, because of that, we are seeing some pressure in the margin in the short term. I saw a, let’s say, significant positive impact, operational impact in the quarter, in Q1, that was mostly offset by some a good portion of that was transient expenses. My view is that for the rest of the year, we should see a recovery towards our long-term goal.

I’m not sure we’re gonna get all the way to the long-term goal this year, or even next year. That’s why it’s long term. I see and I believe that this is the quarter where it should be more the floor rather than the ceiling.

Operator: Your next question comes from Young Lee of Jefferies. Your line is open.

Bill Plovanic, Analyst, Canaccord Genuity3: All right, great. Thanks for taking the question. I think you mentioned the ENHANCE Part A trial is enrolling slightly ahead of schedule. I guess I’m wondering, you know, how does that sort of inform or change your expectations for Part B enrollment timing once that restarts in 3Q? Is 12-18 months still the right timeframe for ENHANCE Part B and DENOVO enrollment, or can you enroll faster than that?

Bill Plovanic, Analyst, Canaccord Genuity2: Young Lee, thank you for the question. I’ll answer the second part first. We still are holding the 12-18 months timeframe. That hasn’t changed. I caution to compare Part A to Part B. They’re two different components. It’s, remember, it’s the same centers that will be enrolling in Part A or Part B. Again, it’s all about value. If the center sees the value and sees the clinical outcomes in their hand, we expect the trial enrollment to pick up. For me, right now I’m focusing on getting the IDE supplement approved, getting the CHOPS into the control arm, and removing all the confusion by competitors so we can get Part B enrolled.

DENOVO is actively enrolling. We enrolled a handful of patients already, despite some of the confusion, thanks to the transplant program stepping up and moving forward. I think it will accelerate even further once CHOPS is introduced as the control arm or an option for the control arm.

Operator: Thank you. Your next question comes from Mike Matson of Needham & Company. Your line is open.

Mike Matson, Analyst, Needham & Company: Yeah, thanks. Just on the CHOPS devices that are gonna be used in the trials, will you be getting paid for those? Just generally, can you talk about what kind of pricing we should expect on that, you know, both in the trials and then, you know, when you’re selling it just kind of the customers in the open market? Thanks.

Bill Plovanic, Analyst, Canaccord Genuity2: Mike, I appreciate very much the question. Unfortunately, I cannot discuss the commercial structure of CHOPS yet. The priority is to get it through the IDE process. All I can say is this is gonna be a part of our NOP service offering. I leave it at that.

Operator: Thank you. Your next question comes from Thomas Stephan of Stifel. Your line is open.

Bill Plovanic, Analyst, Canaccord Genuity1: Great. Hey, guys. Thanks for taking the questions. Apologies if this has been asked. jumping between calls. Gerardo, maybe for you, for the 20%-25% guidance on revenue in the core business for 2026, you know, when I look at growth over the last, call it, year or so, you know, 40%+ growth in 1H, 30%+ in 2H, and then 1Q was a bit over 20%. Like, with that trend in mind, what gives you confidence that the growth rate rest of year will remain stable in the core business or even accelerate a bit moving forward in order to kinda hit that full year 20%-25%? Thanks.

Gerardo Hernandez, Chief Financial Officer, TransMedics: Hi, thank you for the question. Well, basically, when we look at the phasing and the history of the transplant volume in the U.S., we can see how the remaining of the year it continues to strengthen. We’re not expecting any change to the global volume, except for the one that Waleed mentioned before in terms of any potential disruption due to the Modernization Act. Now, we believe that we can that we will deliver within the 20%-25% growth with that. I think that’s really what makes us confident. We’re seeing the results, we’re seeing the adoption, and that together with the last year’s performance, it really shows how the market trend is going.

There is nothing really that would prevent us to get to that range, at least, as I see it today.

Bill Plovanic, Analyst, Canaccord Genuity2: Tom, let me add also, again, we don’t comment on penetration and market share, mid-year or throughout the year. As you know, we comment on it at year-end because of the choppiness of it. You know, we’re watching our market share in Q1. Despite the overall transplant numbers and donor numbers, being a little bit on the low end and below last year, we’re maintaining and growing our market share, which tells me that we’re taking some market share in Q1. That’s what gives us the confidence that just organically, without even talking about ENHANCE and de novo, that we should be able to meet that target range that we set for ourselves.

Operator: Thank you. There are no further questions at this time. I’ll now turn the call over to Waleed Hassanein, President and Chief Executive Officer, for closing remarks.

Bill Plovanic, Analyst, Canaccord Genuity2: Thank you all very much for spending your afternoon with us. We’re looking forward to one-on-one calls. I appreciate it. Have a great evening, everyone.

Operator: This concludes today’s conference call. You may now disconnect.