TransMedics' Q3 2025 Earnings Call: Contradictions Emerge on Seasonality, Trial Revenue, and 2026 Growth Projections

Date of Call: October 29, 2025

Financials Results

• Revenue: $143.8M, up 32.2% YOY
• EPS: $0.71 basic, $0.66 diluted; net income up 477% YOY
• Gross Margin: 59%, up ~290 bps YOY and down ~260 bps sequentially
• Operating Margin: 16%, up from ~4% in prior year (operating income up 494% YOY; down 36% sequentially)

Guidance:

• Full-year 2025 revenue narrowed to $595M–$605M (midpoint ≈36% growth vs 2024)
• Expect overall gross margins around 60% over coming years, with possible near-term pressure from international expansion
• Targeting at least 750 bps of operating margin expansion for full-year 2025 vs 2024 (operating margin ~16% in 3Q); goal to reach/approach ~30% by 2028
• ENHANCE Heart and DENOVO Lung enrollment expected to begin Q4 2025; remaining IDE conditions to be satisfied early 2026
• Italy NOP program planned to launch H1 2026; additional international rollouts contemplated
• Fleet: 22 jets by end-2025 achieved; double-shifting pilot early 2026 to improve utilization

Business Commentary:

* Strong Financial Performance: - TransMedics reported approximate $144 million in revenue for Q3 2025, representing 32.2% year-over-year growth. - The growth was driven by increased adoption and utilization of OCS technology across organ segments, particularly liver with nearly 41% growth.

• Organ Transplant Volume Trends:
• Transplant logistics service revenue for Q3 was $27.2 million, reflecting 35% year-over-year growth.

• This growth was supported by maintaining approximately 78% coverage of NOP missions requiring air transport, despite seasonal volume variations.

• New Clinical and International Expansion Initiatives:

• TransMedics announced plans to launch its first OUS NOP program in Italy, aiming to establish up to 4 hubs to serve as launch points.

• This initiative is part of a broader strategy to replicate TransMedics' successful NOP model internationally, driven by strong demand for dedicated transplant logistics support.

• Operating Efficiency and Margin Expansion:

• TransMedics achieved operating profit of approximately $23 million for Q3, representing more than 16% of total revenue, up from 4% in Q3 2024.
• Efficiency gains and margin expansion were attributed to improved fleet utilization, cost efficiencies in logistics, and disciplined spending across the organization.

Sentiment Analysis:

Overall Tone: Positive

• "Total revenue for 3Q 2025 was approximately $143.8 million, representing approximately 32.2% growth year-over-year." "Operating profit of approximately $23.3 million...16% of total revenue, up from $3.9 million (~4%) in 3Q 2024." "We are narrowing the range to raise the midpoint of our full year 2025 revenue guidance...$595 million to $605 million."

Q&A:

• Question from K. Gong (JPMorgan Chase & Co, Research Division): I guess, my first is just on the trajectory into 4Q and then after that into 2026. So based on your guide, you're expecting to get to roughly just under 30% in fourth quarter, around [ $155 million-plus ] sales. So how should we think about that as a run rate looking forward into 2026? And should we think about 2025 as being an appropriate year when it comes to seasonality, given we've seen you kind of normalizing more towards market growth as you've grown larger?
  Response: Management will provide 2026 guidance at the next earnings call; current priority is finishing 2025 strong and seasonality in transplants should be expected going forward.

• Question from K. Gong (JPMorgan Chase & Co, Research Division): And then, a quick follow-up just on international. I know the Italy announcement was definitely a pleasant surprise. And I guess, when we think about your efforts to expand beyond that to cover the breadth of Europe, I imagine it won't be quite as straightforward as you can call it that as your efforts in the U.S. But what kind of challenges do you anticipate ahead of you for that? And how long do you think it will take before you can get your NOP and your logistics services in Europe to the same level as they are in the U.S.?
  Response: Europe requires country-specific NOP designs; Italy is the beachhead with a targeted H1 2026 launch and, if successful, will drive wider European rollout over time.

• Question from William Plovanic (Canaccord Genuity Corp., Research Division): I'm going to just start off -- first, I just wanted to get clarity. So you believe that you'll have the final IDE sign-off from FDA on the ENHANCE and DENOVO and enroll -- when you say enroll, treat the first patients or book the first revenue in the first half of '26, is that what you're saying at this point?
  Response: They expect to enroll and book initial trial revenue in Q4 2025 under conditional IDE approvals; remaining IDE conditions to be removed and trials uncapped in early 2026.

• Question from William Plovanic (Canaccord Genuity Corp., Research Division): Okay. Perfect. And then, just trying to understand, on the operating margin guide, you're saying 750 bps, which is 16% for the year, which is $96 million, which -- that's like $10 million on the midpoint of the fourth quarter is only 6.5%. So I'm just trying to understand, as you talk about the build-out of Europe logistics, like can you put a dollar amount on this for us? Is this $10 million, $100 million? Like how should we think about the CapEx required and the timing of those investments?
  Response: CapEx for European NOP is not yet quantified; management will provide more color next year; 2025 margin assumption is conservative and allows upside if results and investments align.

• Question from Matthew Mardula (William Blair & Company L.L.C., Research Division): This is Matthew Mardula on for Ryan Daniels. So I want to touch up with HHS decertifying an OPO in the middle of the year. Have you seen any disruptions from the OPO decertification? And I understand that HHS wants to increase the number of transplants and not have organs go to waste. But could the continued decertification of OPOs impact the number of organ transplants? Or do you just view this as a kind of small minimal risk?
  Response: No disruptions observed; decertification could ultimately be a tailwind by improving transplant efficiency and accountability, and TransMedics can operate under existing or modernized OPO models.

• Question from Christopher Pasquale (Nephron Research LLC): Waleed, logistics penetration has been in the high-70s for 3 straight quarters now. Curious how you think about where that goes over time. Is 80% a bit of a ceiling because the other 20% are drivable? Or do you think that, that number could still go higher as you guys continue to roll out the service?
  Response: Coverage for missions requiring air transport should increase into the low‑to‑mid 80s; ceiling in the low‑80s driven by existing third‑party contracts and some long‑distance mission constraints.

• Question from Christopher Pasquale (Nephron Research LLC): 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?
  Response: NOP Connect has produced positive early feedback; measurable efficiencies expected to materialize through 2026 as subsequent versions are rolled out.

• Question from Joshua Jennings (TD Cowen, Research Division): I wanted to circle back just on the 2025 guidance, revenue guidance update and just the increase of $5 million at the midpoint. Waleed, maybe help us think through, and Gerardo, some of the assumptions baked in there. I mean, was 3Q results better than TransMedics' internal expectations with stronger start than expected? In October, you have another plane. But maybe just help us think through what's driving the guidance increase, a little bit more detail.
  Response: Q3 performance and late‑Q3/early‑Q4 momentum underpin the narrowed FY2025 range; adoption and organ utilization trends are the primary tailwinds.

• Question from Joshua Jennings (TD Cowen, Research Division): Great. And just a follow-up. I think it's clear that there really hasn't been an overhang in terms of some of the headlines that came out on DCD donors and some of the New York Times expose, but wanted to just confirm that. Any impact to donor registrations that you're seeing? And then, maybe give us the status of the wait list for liver, heart and lung transplants. We just anecdotally talked to -- some heavy OCS users have talked about their waitlist going down because volumes have increased dramatically, but I think those have refilled, but maybe help us on those 2 topics.
  Response: No observable impact on donor registrations from recent headlines; waitlist fluctuations are dynamic and transient—management focuses on increasing organ supply and utilization rather than commenting on fluctuating waitlist snapshots.

• Question from Suraj Kalia (Oppenheimer & Co. Inc., Research Division): Waleed, short-term gyrations aside, you guys have delivered on your numbers. Waleed, there is this pervasive belief that incremental liver share gains are -- will be difficult to come by. Can you argue the reverse is true for FY '26? Or your confidence for FY '26 is you would characterize that it's predicated on heart and lung contribution through the trials, the OUS endeavor that you talked about? Just set the stage for us as how you guys are thinking as you shift gears in FY '26?
  Response: Management believes liver penetration remains early with significant upside (DBD and DCD growth); 2026 confidence is driven by liver expansion plus anticipated momentum from next‑gen heart/lung trials and international initiatives.

• Question from Suraj Kalia (Oppenheimer & Co. Inc., Research Division): Fair enough. And Gerardo, if I could, look, our math is your liver shares, you gained by almost 100 bps in the quarter, but your service revenues were obviously down, right? And one of the things that you and Waleed have been telegraphing for some time now is third-party ground transport and third-party flights picked up in the quarter. Gerardo, what -- how should we think about -- is this a blip of the screen? Is this something structural as we look forward? Just help us understand both qualitatively and quantitatively. It would be great.
  Response: No meaningful structural change observed in the split between ground and air transport during Q3; tail‑number tracking doesn't directly reflect revenue—expect similar dynamics in Q4.

• Question from Patrick Wood (Morgan Stanley, Research Division): Waleed, you mentioned double shifting twice at the start in the comments. And just curious how you're seeing that as an opportunity, what that means both financially for you guys, but then also for your customers and the ability to potentially service them faster? Is that a valid thought process? Just how do you see that affecting the business overall?
  Response: Double‑shifting pilot aims to increase missions per plane, maximizing asset utilization and improving capital returns and service margins once scaled.

• Question from Samantha Munoz (Piper Sandler & Co., Research Division): This is Samantha on for Matt. I guess, first, I know the 10,000 transplant target has been out there for a while, but we're now seeing you start to communicate potentially even surpassing that target. I guess, what gives you the confidence that you can get there? And then, how much of that is dependent upon these next-gen heart and lung programs?
  Response: Company is confident in reaching 10,000 transplants without relying on next‑gen heart/lung acceleration; heart/lung and future kidney program will accelerate growth and materially expand the addressable market.

• Question from Samantha Munoz (Piper Sandler & Co., Research Division): If I could sneak in one more also on the next-gen heart and lung programs. It's great to hear that those are going to start enrolling this quarter. How are you thinking about the duration of these trials and how long they're going to take to enroll?
  Response: Trials expected to run roughly 12–18 months; because they are revenue‑generating, quarterly impacts will be visible before full trial completion.

• Question from David Rescott (Robert W. Baird & Co. Incorporated, Research Division): Waleed, I wanted to follow up on some of your comments around the timing of the trial. I'm just looking for maybe some more color on what the -- the difference between starting enrolling the trial in Q4 and having these full conditional limitations, I don't know if limitations, but the full conditions on the trial that gets the IDE fully cleared in Q1. Is it something similar for both heart and lung? Would it be fair to assume maybe the Part A of the heart trial is good to go and start enrolling in Q4 and maybe it's Part B that comes in, in 2026? Just trying to understand what's going on there and maybe whether or not there is any change in the contribution you have baked in from clinical trials in Q4.
  Response: Heart has sizable conditional approval allowing enrollment in both Part A and B in Q4; lung is more limited but straightforward—both are expected to have conditions removed and be uncapped by early Q1 2026; guidance assumes minimal Q4 trial revenue.

• Question from David Rescott (Robert W. Baird & Co. Incorporated, Research Division): Okay. That's very helpful. And maybe on Europe, a 2-part question. I know you provided some comments on it already. But I know the market in Europe is pretty fragmented and there's different agencies, maybe we'll say, that control organ donation and allocation across different end markets, so I guess -- or different countries. I guess, the first part, for Italy, is the assumption that organs that are transplanted through the new service in Italy will likely stay in Italy? Or is it possible that those are going to get moved around transplants in Europe? And then, as it relates to the margin comments there, I know you called out gross margins staying in this 60% range in general, but maybe some near-term headwinds as you expand in Europe. I'm just trying to get a context for the timing of this maybe step-down in margins and step back up in margins and still staying consistent in the 60% range. Maybe there's a difference between gross and operating, but any clarity there would be helpful.
  Response: Initially TransMedics will not alter cross‑border organ movements; focus is on enabling utilization within local geographies (Italy). Long‑term gross margin target ~60%; near‑term margin pressure possible from international investments—more detail to be provided on the Q4 call.

• Question from Michael Matson (Needham & Company, LLC, Research Division): So I had a question on the heart trial design, and this may apply to lung, too, but I wasn't able to find lung in the clinicaltrials.gov yet. But the endpoint is patient and graft survival at 30 days. And so, my understanding is that that's typically, even without using TransMedics in the -- well into the 90s. So -- and I think you're running this study with the intention of showing superiority. So are you going to have -- I mean, is this trial powered enough to actually show superiority from a high-90s number or mid-90s number versus what you're actually going to get with your -- using OCS for those organs?
  Response: Primary endpoint is combined 30‑day patient/graft survival plus freedom from primary graft dysfunction within 72 hours, lowering baseline event rates (to low‑mid 80s) and enabling a superiority‑powered trial.

• Question from Michael Matson (Needham & Company, LLC, Research Division): Okay. That makes a lot of sense. And then just for kidney, I think you said you're going to unveil the design in early '26. But I imagine you're going to have to run a trial there as well, so -- before you can get it approved. So just can you talk about the timing of that? And then, is that also a trial where you would -- when you started, you would actually get paid for those organs as well, like we are with the heart and lung trials?
  Response: OCS Kidney design to be revealed early 2026; a significant, revenue‑generating, superiority‑powered U.S. (and possibly international) trial is planned, with important CMS relevance for reimbursement and cost outcomes.

• Question from Daniel Markowitz (Evercore ISI Institutional Equities, Research Division): 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?
  Response: No meaningful trial revenue was assumed in the updated guidance; any Q4 enrollment impact would be immaterial.

• Question from Daniel Markowitz (Evercore ISI Institutional Equities, Research Division): 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?
  Response: OrganOx acquisition validates the creation of a multibillion‑dollar transplant industry, underscores TransMedics' market leadership and suggests TransMedics may be undervalued.

• Question from Thomas Stephan (Stifel, Nicolaus & Company, Incorporated, Research Division): Apologies if any of this has been asked; jumping between calls. But maybe just one for me. Waleed, market slowed in the third quarter for the second straight year, and we saw somewhat of an accompanying deceleration in OCS. So maybe can you talk about why OCS seemingly faces, I'd just say, a bit of incremental pressure during times when the U.S. transplant market seems to slow down? And then, how should we be thinking about that dynamic maybe if market softness persists?
  Response: OCS performance mirrors endemic transplant seasonality; as TransMedics scales, Q‑to‑Q variability increases (especially among newer/non‑consistent users), but YoY growth and penetration metrics remain the key positive indicators.

• Question from Young Li (Jefferies LLC, Research Division): I'll just keep it to one. So I appreciate all the clarifications and color on the trial enrollment. I guess, I'm kind of curious what factors allow you to enroll these trials faster than the prior trials that you have run?
  Response: Management isn't promising faster enrollment but notes strong center enthusiasm and prior experience (e.g., 90 patients in 9 months for a prior DCD Heart trial) that could support rapid enrollment if execution continues.

Contradiction Point 1

Seasonality Impact on Transplant Volumes

It reflects differing views on the seasonal impact of transplant volumes, which could influence revenue projections and market expectations.

How should we view Q4 sales as a run rate for 2026, and will 2025 normalize with market growth? - K. Gong (JPMorgan Chase & Co., Research Division)

2025Q3: Seasonality in organ transplant is something to expect year after year. 2025 is focused on ending the year strong, and 2026 is expected to be a growth year. - Waleed Hassanein(CEO)

Are the seasonality impacts in July in line with expectations, and how will this impact Q3? - K. Gong (JPMorgan)

2025Q2: We are seeing some signs of seasonality in July, but it is not as pronounced as last year. It's still early, and we expect some seasonal impact in Q3. However, we are seeing slightly less impact than last year. - Waleed Hassanein(CEO)

Contradiction Point 2

OCS Revenue and Trial Impact

It involves expectations regarding the revenue impact of clinical trials on OCS, which could influence financial forecasts and investor expectations.

Does the new 2025 guidance include contributions from heart and lung trials being ahead of schedule? - Daniel Markowitz (Evercore ISI Institutional Equities, Research Division)

2025Q3: No revenue contribution expected, but enrollment will provide early trial signals. - Waleed Hassanein(CEO)

Why did receivables increase significantly from Q4, and will clinical trials add 2-5% to this year's numbers? - Bill Plovanic (Canaccord)

2025Q1: Clinical trials remain a small contributor in 2025, expected to be more significant in future years. - Waleed Hassanein(CEO)

Contradiction Point 3

Clinical Trial Enrollment and Timing

It involves differing perspectives on the enrollment and revenue expectations from clinical trials, which are critical for the company's growth and financial projections.

Will trial enrollment for ENHANCE and DENOVO occur in Q4, and is revenue expected from these trials in Q4? - William Plovanic (Canaccord Genuity Corp., Research Division)

2025Q3: Enrollment and initial revenue from Q4 trials are expected, but FDA conditions will be removed in early 2026 for unconditional trial initiation. - Waleed Hassanein(CEO)

What role does TransMedics play in organ allocation and line-jumping? - William Plovanic (Canaccord Genuity Corp., Research Division)

2024Q4: We expect to contribute material revenue from these trials in 2025. - Waleed Hassanein(CEO)

Contradiction Point 4

Impact of OPO Oversight and DCD Concerns

It highlights differing views on the potential impact of increased oversight on OPOs and concerns surrounding DCD donations, which could influence market perceptions and regulatory dynamics.

Has the decertification of OPOs caused any disruptions, and how might it impact transplant operations? - Matthew Mardula (William Blair & Company L.L.C., Research Division)

2025Q3: No disruption to transplants noted. TransMedics views this as a potential opportunity rather than a risk. - Waleed Hassanein(CEO)

Do you expect increased regulation of OPOs and DCD use to affect your operations negatively, due to concerns about DCD donations? - K. Gong (JPMorgan)

2025Q2: I see some level of organization and oversight as beneficial rather than detrimental. Our technology and NOP operations are designed to work within the current system or any future modifications, and we stay balanced and focused on facts and data. - Waleed Hassanein(CEO)

Contradiction Point 5

Organ Transplant Growth and Market Dynamics

It involves differing views on the growth trajectory of organ transplants and the market dynamics affecting the company's operations.

What should we expect for Q4 sales as a run rate for 2026? Will 2025 normalize to market growth? - K. Gong (JPMorgan Chase & Co., Research Division)

2025Q3: 2025 is focused on ending the year strong, and 2026 is expected to be a growth year. - Waleed Hassanein(CEO)

How should we interpret the quarterly cadence in your TransMedics guidance considering seasonal factors? - K. Gong (JPMorgan)

2024Q4: We anticipate stronger signs by year-end '25 and into early 2026. - Waleed Hassanein(CEO)