TransMedics Group, Inc. Q4 2025 earnings call

Thank you. Earlier today, TransMedics released financial results for the quarter and full-year ended December 31st, 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 made during this call that relate to future events, results, or performance, including expectations or predictions, are forward-looking statements.

All forward-looking statements, including without limitation, our examination of operating trends, the potential commercial opportunity of our products and services, the potential timing, benefits or outcomes of new clinical programs, and our future financial expectations, which include expectations for growth in our organization and guidance and/or expectations for revenue, gross margins, and operating expenses in 2026 and beyond, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements.

Additional information regarding these risks and uncertainties appears under the heading Risk Factors of our 10-K filed with the Securities and Exchange Commission on February 24th, 2026, and our subsequent SEC filings and the forward-looking statements included in today's earnings press release, which are available at www.sec.gov and our website at www.transmedics.com. TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections, expectations, predictions, or forward-looking statements, whether because of new information, future events or developments, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, February 24, 2026. With that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Thank you so much, Laine. Good afternoon, everyone, and welcome to TransMedics' fourth quarter and full-year 2025 earnings call. Joining me today is Gerardo Hernandez, our Chief Financial Officer. I am thrilled to be here tonight reporting our fourth quarter performance, capping off an outstanding year for TransMedics as we delivered our best operational performance to date. These results were achieved despite external challenges earlier in the year that were designed to distract and disrupt our sustained and transformational growth. I'm extremely proud of the resilience of our team and our business. In addition, I'm grateful to our global clinical users for their continued partnership with TransMedics and their trust in our OCS NOP program throughout the year.

Based on our performance in 2025 and our continued investment in expanding the caliber and the breadth of our team, I am growing exceedingly confident in TransMedics' ability to overcome future challenges as we continue to innovate and disrupt antiquated and inefficient transplant processes in the U.S. and around the world. We are highly motivated and inspired by our mission to expand the utilization of available donor organs for transplantation, while aiming to deliver the absolute best possible clinical outcomes for transplant patients worldwide. We strongly believe that TransMedics is just getting started, and we have our sights focused on new peaks, which we will share with you on today's call. Let me proceed with discussing our business performance. On our last call, we stated our expectation that Q3 seasonality in U.S. transplant activities would be transient and that we should recover in Q4.

Today, we're excited to report that Q4 results that validate our views. Q4 2025 was a banner quarter for our business and allowed us to conclude 2025 on a very high note. Here are the key operational highlights for Q4 2025. Total revenue for Q4 2025 was $160.8 million, representing approximately 32% growth year-over-year and approximately 12% sequential growth from Q3 2025. U.S. transplant revenue grew approximately 11% sequentially to $155 million, while OUS transplant revenue grew approximately 33% sequentially to $5 million. Finally, we delivered an operating profit of approximately $21.3 million in Q4, representing approximately 13.2% of total revenue for fourth quarter, while making substantial investments to fuel our growth.

Now, let me provide the financial results for the full-year 2025. Total revenue for the full-year 2025 was $605.5 million, representing approximately 37% growth year-over-year. We delivered operating profit of approximately $108.6 million, representing approximately 18% of total revenue for the full-year 2025. Importantly, we ended the year with approximately $488.4 million of cash and cash equivalents. Shifting now to TransMedics transplant logistics, infrastructure, and performance. TransMedics transplant logistics service revenue for Q4 was approximately $28.6 million, up from $21.7 million in Q4 2024, representing approximately 32% year-over-year growth and up from $27.2 million in Q3, representing approximately 5% sequential growth....

Throughout Q4, we owned and operated 22 aircraft. In Q4, we maintained coverage of approximately 80% of our NOP missions requiring air transport, compared to 75% in the same period in 2024. We are very pleased by our strong performance in Q4 and full-year 2025. That was fueled by growing OCS case volume and increased clinical adoption. Importantly, as we predicted, our performance enabled growth in overall U.S. liver and heart transplant volumes for the 3rd consecutive year, driven primarily by OCS NOP cases. This is really unprecedented and frankly, humbling. As we do every year, I would like to share full-year OCS transplant volumes and overall U.S. transplants per organ. Here are the key highlights: For the 3rd consecutive year, we grew the total OCS transplant volume. As of February 2022...

2026, our internal company data and UNOS database records show that there were 5,139 total U.S. OCS transplant performed in the full-year 2025. Let me repeat this. As of February 22nd, 2026, our internal company and UNOS database records show that OCS was responsible for 5,139 transplants performed in the full-year 2025, up from 3,735 U.S. OCS transplants in 2024. The overall transplants represented approximately 26% of the total 19,833 U.S. transplants for the year, for heart, lung and liver in 2025, and up from 20% of the 2024 U.S. transplant volume for the same organs. Importantly, for the third consecutive year, we saw growth in overall U.S. liver and heart and lung transplant volumes.

For the full-year 2025, there were 19,833 liver, heart, and lung transplants, up from 18,894 in 2024. We strongly believe that the OCS NOP once again played a key role in driving overall liver and heart market growth due to the increased use of DCD and DBD donors in the U.S. Since 2022, U.S. national transplant volumes for liver, heart and lung grew at a rate of 25%, including OCS NOP transplant volume. Without OCS volume, national volumes for the same organs would have declined by approximately 1% over the same period. Please allow me to repeat this: U.S. transplant volumes for liver, heart and lung grew up 25% with OCS NOP, and would have declined by approximately 1% without OCS NOP case volume.

Based on these facts, we believe that we are delivering on our vision of growing the overall U.S. market. Said differently, we are expanding the overall market, not just taking share. Now, let me discuss our clinical adoption per organ. For liver, in 2025, OCS liver transplant represented 4,197 transplants, or 36% of the overall liver transplant volume in the United States. That is up from 26% in the same period in 2024. For heart, OCS transplant represented 854 cases, or approximately 18% of the overall heart transplant volume, and modestly up from the 17% seen in 2024. For lung, the numbers are small. OCS lung transplants represented only 88 cases, or approximately 2%.

Thank you, Waleed. Good afternoon, everybody. I am pleased to share TransMedics' fourth quarter 2025 results. Please note that a supplemental slide presentation with additional details is available in the investor section of our website. As Waleed highlighted, we sustained strong momentum through the fourth quarter, closing the year with solid performance following an expected seasonally softer third quarter in U.S. transplant activity. As discussed in our Q3 call, our rapid growth in prior years often masked the natural seasonality in the U.S. transplant activities. At our current scale, those dynamics are more visible. As we have seen, these fluctuations tend to normalize over the full-year. Total revenue for the quarter was approximately $161 million. U.S. transplant revenue was approximately $155 million, up 33% year-over-year and 11% sequentially.

By organ, liver contributed with $127 million, heart, $26 million, and lung, $2 million. International revenue was $4.8 million, up 24% year-over-year and 33% sequentially. Revenue by organ was $3.9 million in heart, $0.2 million in lung, and $0.7 million in liver. Growth was primarily driven by liver and heart. While we continue to make progress in our international expansion plans, the business remains at an early stage, and quarterly variability is expected due to reimbursement and market dynamics. Product revenue for the fourth quarter was $100 million, up 34% year-over-year and 15% sequentially, reflecting continued momentum across both liver and heart programs. Service revenue for the fourth quarter was $60 million, up 29% year-over-year and 8% sequentially.

The primary driver of growth was logistics revenue, which increased 32% year-over-year and 5% sequentially, reflecting continued expansion and strong utilization of our aviation fleet compared to 2024. Together, these results reflect strong organ utilization, continued OCS adoption, and increasing leverage of our integrated logistics platform. Total gross margin for the quarter was approximately 58%, down 110 basis points year-over-year and 70 basis points sequentially. The year-over-year decline primarily reflects higher clinical service costs associated with expansion of our NOP program, increased logistics discounts, and higher freight expenses. The sequential decrease was mainly driven by inventory-related charges associated with our year-end inventory procedures and higher freight costs from expedited shipments to replenish our costs. Total operating expenses for the fourth quarter of 2025 were $72 million, up 14% year-over-year and 18% sequentially.

The year-over-year growth was mainly driven by increased R&D investment to advance our innovation pipeline and expand product development capabilities, including targeted additions to our technical and development teams. SG&A growth reflected continued IT infrastructure expansion, strategic growth initiatives, and selective headcount investments to support scale. Sequentially, the increase was largely driven by higher R&D investments related to development and testing activities, as well as incremental SG&A investments supporting growth and expansion initiatives. Operating income for the quarter was $21 million, 146% year-over-year and down 9% sequentially. The sequential decrease was primarily driven by higher operating expenses associated with increased investments during the quarter. Operating margin expanded to 13%, compared to 7% in the fourth quarter of 2024. Net income for the fourth quarter was $105 million, a significant increase both year-over-year and sequentially.

Net profit included an income tax benefit of $83.8 million, compared to an income tax provision of $0.1 million in 2024, mainly related to the release of the valuation allowance. The release of the valuation allowance on our deferred tax assets is not merely an accounting adjustment, but a strong indication of our confidence in the sustainability of our long-term profitability, grounded in continued growth and scalability. This decision followed a thorough and rigorous evaluation of the applicable accounting and tax standards. Earnings per share were $3.08, and diluted earnings per share were $2.62 for the fourth quarter of 2025. We ended the year with $488 million in cash, up $22 million from September 30th of 2025, driven by strong operating cash generation and continuous disciplined working capital management.

Overall, our fourth quarter performance reflects another quarter of strong execution, operational efficiency, and continued advancement across our clinical programs. As we operate at greater scale, the TransMedics team continues to demonstrate focus and discipline, investing in growth while maintaining strong financial and operational performance. Let me summarize our full-year 2025 results. full-year revenue reached approximately $605 million, representing 37% growth over 2024. Growth was led by liver, which grew almost 49%, and continued strength in heart at almost 15%. Lung revenue was lower compared to 2024. U.S. transplant revenue reached approximately $585 million, reflecting a 38.6% growth year-over-year. Our international transplant revenue ended the year at $16.7 million, representing a 9.3% year-over-year growth, primarily driven by liver and heart.

Breaking it down by category, product revenue totaling $372 million, while service revenue contributed with $233 million. Breaking it down by organ, liver revenue reached $461 million, heart revenue reached $126 million, and lung reached approximately $15 million. School revenue for the year was $4 million. Gross margin for the full-year was 59.9%, up from 59.4% in 2024, reflecting logistics efficiencies and scale benefits. A portion of these gains was strategically shared with customers through logistic discounts enabled by our integrated network. Margins also reflect incremental costs related to our double shifting program and higher expedited hub replenishment expenses. Total operating expenses were $254 million, up 13% year-over-year.

The increase was primarily driven by a 23% increase in R&D investments, reflecting continuing investment in our innovation pipeline and product enhancements. SG&A grew almost 10% year-over-year, reflecting ongoing expansion of our IT infrastructure and investment in strategic growth initiatives. Operating margin expanded from 8.5% in 2024 to 18% in 2025, a significant achievement in a year where gross margin improved only modestly. This performance demonstrates that the primary driver of margin expansion in our model is operating leverage as revenue scale, supported by a strong discipline to cost management. Net profit for the year was $490 million, compared to approximately $36 million in 2024. We saw benefits from strong operating performance, as well as the previously mentioned one-time income tax benefits recognized during the fourth quarter related to the deferred tax assets.

Thank you so much, Gerardo. Overall, we're very proud of our 2025 results as we delivered 37% year-over-year growth and achieved positive cash flow from operating activities. We did this while investing in our pipeline and continuing to build our infrastructure to capitalize on our highly differentiated OCS technology and service offering. We are now laser-focused on executing in our initiatives in the potentially transformative 2026 year and are excited about what's ahead. In conclusion, we are humbled and proud of the significant life-saving impact of our OCS technology and NOP service and dedicated team, and remain committed to our mission of expanding access and improving clinical outcomes to patients in need of organ transplantation worldwide. With that, I will now turn the call to the operator for Q&A. Operator?

Thanks for the question. Congrats on the really good quarter to end the year. I guess my question is going to be on guidance, if I'm limiting it to one. You know, you're guiding a step above the street, even after factoring in the beat in the quarter. When we think about the midpoint of the range, you clearly have a lot of moving parts next year between underlying growth and liver and heart and the enrollment of the clinical trials, and you also have Italy in the back half. When it comes to, you know, those three dynamics, can you talk, you know, broadly about your expectations for those and how that factors into your guidance philosophy?

Thanks, Alan. As always, we take guidance very, very seriously at TransMedics, and, you know, we have huge opportunities ahead of us, as we outlined, Gerardo and myself. Also we have a few challenges and, you know, a few moving dynamics. In our guidance, we factored in all of the above, and issued what we believe is a realistic guidance that would enable us to execute and let the execution and performance dictate what do we do, or if we need to revisit the guidance. We feel confident on the guidance that we are putting forth here, as it bakes in all the uncertainties, all the opportunities and uncertainties in front of us.

you know, again, we will go and execute, and we let the execution and the results and the performance dictate, if we need to revisit the guidance as we move forward throughout the year. Next question, operator.

Hi, good afternoon. Thanks, great to see the strong start to the end of the year. Appreciate the breakout of the catalyst late in 2026. Just hope to ask a question on OCS Liver. Waleed, you've talked publicly about a registry publication coming up in the near term. It could be a huge catalyst for liver adoption. I know you can't front run the results here, but I was wondering, one, just, I mean, could we see some cost-effectiveness data published in the near term? Just thinking about that element of OCS Liver as new competition is coming into place and just are you seeing any competitive headwinds out there that are new in 2026 for the OCS Liver franchise? Thank you.

Thank you, Josh. I think let me address that question in three pieces. The first piece is, there are health economic data on liver transplant that's already published, many of them, for the last two years, single center experience. That's already in the print. What's coming is really the unequivocal, drop the mic, statistical superiority in the most important outcomes after liver transplantation, which would justify and support all the evidence that's been built in having more than 14 or 15 publications now already in print, out there. Those publications that are coming, they're aggregated of thousands of cases, they're coming out of our registry, and many of them are already under review.

I cannot comment when are they gonna come out because obviously I cannot interfere with the review process given that these are very high impact journals. The last piece, you know, the comment about competition. Listen, we're very cognizant of everything that moves in the field of organ transplant. We are not seeing competitive dynamic impacting our ability to execute in 2026 and beyond, and I will leave it at that. Next question, operator, please.

Hi, it's Zachary, I'm from Bill. Thank you for taking the question. Just a quick one. Can you provide more details on NOP Connect 2.0? I believe you talked about that on the last earnings call, saying it would provide you operational efficiencies. Can you talk about what you've seen early on so far? Thank you.

Thank you, Zach. We've seen a lot. We've seen it's now at the platform, I would say the vast majority of our cases are now coming through the NOP 2.0, NOP Connect 2.0. We're seeing efficiency in the management, we're seeing efficiency in the billing. Again, these are early days, early quarters. As we look forward, we see continuous improvement and expansion of our digital ecosystem. This is our second legacy after the OCS.

This digital ecosystem is now fully integrated, fully supporting significant portion of the national transplant volume in the U.S. Our commitment is to continue to support it, continue to expand it, to provide the best service for our customers, but the best and the broadest transparency about the status of the organ, the management of the organ, as well as the financial billing around TransMedics services. We're very encouraged by what we're seeing. We're gonna continue to make strategic investments in the digital platform to continue to expand and efficientize our market adoption of OCS. Next question, please, operator.

Hey, Waleed, Gerardo, Tamer, Nick. Excellent quarter. Can you hear me all right, Waleed?

We can hear you loud and clear, Suraj.

Perfect. Waleed, forgive me, I'll just kind of quickly sneak into. It seems like you guys gained about 400 bps of liver share in Q4. Why was that? Waleed, your comments about Part B of OCS ENHANCE. Look, the numbers are suggesting you guys are gonna exit FY 2026 with approximately 6,300 organs. If I parlay your clinical trial commentary, it means, like, you're not expecting a lot of contribution. You all must have put in some safeguards in place if Paragonix or others threw a wrench in the control arm. Could you share some additional color on, you know, how do you keep the ball moving in Part B? Gentlemen, congrats again.

Thank you, Suraj. The first part of the question about the liver execution. Listen, this is a testament to the outcomes of the OCS liver. This is a testament to our clinical leadership of the liver program. This is pure TransMedics execution excellence. Period, full stop. That answered part one. Part B, listen, this is not our first rodeo. We're the company that have supported and completed the largest number of randomized and single-arm trials in the history of organ transplant. None of these cold static storage technologies have ever seen one FDA randomized or non-randomized trial. We were prepared, and we somewhat expected this.

We will execute part B. It will be hopefully a significant success for TransMedics. It might take you know, few extra months to navigate through this dynamic. The bottom line is we're extremely confident in our strategy, in our design, in our technology, and it says a lot when the control arm is worried about randomizing against OCS. Again, we're humbled by it. We're not letting that distract us from the task at hand. As we committed, we are gonna complete this study with the best protocol and the best randomization and with a control arm. Next question, please, operator.

Hello, this is Matthew O'Brien on for Ryan. Thank you for taking the questions, and congrats on the quarter. I kind of want to piggyback on that question, but I want to focus on the feedback you have received regarding the heart clinical trials. Given that you have already mentioned doing a handful of heart transplants for the trial, and I know it is still early in the process and ongoing, but I'm curious to hear what transplant surgeons' feedback has been on the trials as they progress. I kind of believe you previously mentioned in meeting all expectations, so I'm curious how that has trended. Is there anything in particular transplant surgeons have called out regarding the device and maybe expressed more interest in using the device more in the future?

If I tell you, if I answer that's a great question, Matt, and I appreciate the question. If I answer that question, I might as well have seen the results. The trial is just early in the process. It's good feedback. It speaks to the value of everything we're trying to execute. I would leave it at that, and I hope to have more meaningful presentations by users of the technology, not by TransMedics, at the ISHLT symposium. Next question, please.

Great. Thanks for taking the question. Congrats on the results here. I wanted to ask, been hopping around a bit, so I'm not sure if it's been covered yet, but you know, the CMS's proposal on some of the OPO changes, there's obviously a lot of stuff going on just on the OPO front in general. Wondering if you could give us some updated thoughts on the state of affairs just on the broader OPO environment and whether or not, you know, there's any, you know, benefit that you could see or if this is, you know, building out some of the thoughts on the OCS service in general and how we should think about this potentially over the longer term.

Thank you, David. All I could say is organ transplant system in the United States is going through really a significant transformation, hopefully to the positive. We are supportive of the CMS language, proposed language. We're supportive of Senator Wyden's proposed bill to open up the historical closed transplant system to more competition, more transparency, more efficiency, more high standards of execution and metric performance metrics. We are going to try to play a bigger role to support the vision, the growth and overall transplant in the United States, saving more American lives, delivering, you know, cost-effective therapy to patients in need, that's costing CMS, you know, billions and billions of dollars, but also support existing OPOs in their missions.

We look at our role as it's a win-win opportunity for TransMedics to play a bigger role but also support existing OPOs. That's all I can comment on at the moment. Next question, please.

Guys, congrats on the quarter, and thanks for taking my question. I wanted to ask on the operating margin guide for 2026. It sounds like the gross margins may see some volatility as you expand internationally, and then OpEx as a percent of sales is expected to increase as well to get to that 250 bps of contraction year-over-year. I guess, can you give us the breakout of how much of the margin contraction is coming from some expansion dynamics that weren't really areas of investment yet in 2025? Things like international expansion, the trial spend, that are kind of, I guess, one-time in nature?

With so many exciting investment opportunities, what are you looking at that tells you that it'll make sense to get the business back to significant margin expansion in 2027 and 2028, as opposed to continuing to bring money into investments?

Right. The big drivers of almost 50% of the incremental investment that we have in 2026 is driven by really 3 elements. One, it's the completion of our clinical programs, OCS ENHANCE and the Novo. The second part is the completion of our OCS Kidney development, and the third one is the continued development of our OCS next generation or 3.0, as we are calling it recently. Those 3 elements account for a little bit more than half of incremental investment, and those, by nature, are transitory. Once we complete those elements, that's what gives me the confidence that spend should normalize, and then we should be able to start capture and operating leverage as we continue to grow. I hope that answers the question.

Very helpful. Thank you.

Next question, please.

Yeah, thanks for taking my question. Just wanted to get some clarification on your comments on the part B of the ENHANCE trial around the competitive issue that you called out. I guess the comparator's static cold storage, does that really mean one of these, you know, cooler type technologies that's out there? Is the competitor sort of trying to prevent their product from being used or in the trial or being enrolled in this trial? Is that the issue? I guess I don't completely understand what's happening there.

Yes. That's exactly what's happening. Not everybody is using ice. Static cold storage boxes using phase-changing elements are being used, and the makers of that Styrofoam box is refusing to randomize their technology to ours.

Okay. Got it. I mean, I guess, how do you plan to kind of work around that or address that?

Wait and see.

Okay. Thank you.

Yeah. I mean, we have to, we had, you know, we had hoped that this won't be the case, but we are kind of somewhat expecting it. We have a plan to bypass that and, you know, you know, at the end of the day, it's the transplant programs that need to take control of the trial. TransMedics will support them with the right control arm that would be acceptable to FDA.

Okay. Got it. Thank you.

Thanks. Waleed, you had a really nice quarter in liver, but heart and lung were both a little bit lower than we expected. Was there anything that you noticed in those segments of the business around the end of the year? In particular, I'm wondering if the trials, you know, which got going a little bit slower than expected, might have caused any disruption or if there were any other dynamics there that would sort of explain the deceleration we saw.

The lung, Chris, as you know. Thank you for the question. The lung, as you know, that's, it's a, you know, it's a rounding error for us, really, I wouldn't read too much into the lung dynamic. I think most, frankly speaking, most of the lung centers were waiting to see the FDA approval to start launching into de novo. The heart, I would say, has a similar impact, also there has been a couple of other activities and trials wrapping up in the second half of 2025 that may have played a role.

One is the cold perfusion trial, but that's wrapped up, and then the other one is a couple of centers decided to do something, you know, that they are doing organically. That, again, we will address all these dynamics at the ISHLT symposium. As we sit here, we don't any of these dynamics, we believe, wholeheartedly, it's transient in nature, and all that's gonna get washed with ENHANCE firing up and DENOVO, hopefully, getting initiated here pretty soon. We're looking forward to seeing the impact of ENHANCE part A and part B, and hopefully, we can reverse that these dynamics throughout 26 and into 27.

Thanks.

Thank you all very much. Looking forward to speaking again to report on Q1 results. Have a wonderful evening, everyone. Thank you.