Q2 2026 TransMedics Group Inc Earnings Call

Speaker #1: Good afternoon, and welcome to TransMedics Q2 2026 earnings conference call. At this time, I'll participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of today's call.

Speaker #1: Durable pipeline growth ahead of near-term operating leverage. So, alongside our second quarter results, I will spend a meaningful portion of today's call on exactly what we are funding over the next 18 to 24 months, the market's each investment unlocks, and the milestone you should hold us accountable to.

Speaker #1: As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Hannah Jeffrey from the Gilmartin Group for a few introductory comments.

Speaker #2: Thank you. Earlier today, TransMedics released financial results for the quarter ended June 30, 2026. A copy of the press release is available on the company's website.

Speaker #1: 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.

Speaker #2: to TransMedics Q2 2026 earnings conference call. At this time, I'll

Speaker #2: participants are in a listen-only time, all participants are in a mode. We will be facilitating a

Speaker #1: Any statements made during this call that can relate to future events, results, or performance, including expectations or predictions, are forward-looking statements. All forward-looking statements including without limitation are examination of operating trends, the potential commercial opportunity for 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.

Speaker #2: question-and-answer session toward the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the

Speaker #4: Thank you. Earlier today, TransMedics released financial results for the quarter ended June 30, 2026. A copy of the press release is available on the company's call over to Hannah Jeffrey from the website.

Speaker #4: 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

Speaker #4: Before we begin, I would like to remind you that management will make statements during this call, including during the question-and-answer portion, that include forward-looking statements within the meaning of federal securities laws.

Speaker #1: 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.

Speaker #4: call that can relate to future events, results, or performance, including expectations or predictions, are forward-looking statements. All forward-looking statements, including without limitation, 30, 2026.

Speaker #4: call that can relate to future events, results, or performance, including expectations or predictions, are forward-looking statements. All forward-looking statements, including without limitation, 30, 2026.

Speaker #1: Accordingly, you should not place undue reliance on these statements. Additional information regarding these risks and uncertainties appears under the heading "Risk Factors" of our Form 10-K filed with the Securities and Exchange Commission on February 24, 2026, our subsequent SEC filings, and the forward-looking statements included in today's earnings press release.

Speaker #4: Are examination of operating press releases available on the company's website?

Speaker #4: for our products and services, the

Speaker #4: outcomes of new clinical programs, any, and our future financial

Speaker #4: expectations, which include expectations for

Speaker #4: guidance and/or expectations for revenue, gross margins, and operating expenses in 2026

Speaker #1: 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.

Speaker #1: organization and guidance and/or expectations for revenue, gross,

Speaker #1: margins, and operating expenses in 2026 and beyond, are based upon our current estimates and various be expectations for growth in our

Speaker #4: 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.

Speaker #1: These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or defined by these forward-looking statements.

Speaker #1: 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, August 4, 2026.

Speaker #4: Additional information regarding these risks and uncertainties appears under the heading "Risk Factors" of our growth in our organization and services, potential timing, Form 10-K, filed with the Securities and Exchange Commission on forward-looking statements, including without February 24, 2026.

Speaker #1: Accordingly, with respect to predictions or forward-looking statements, you should not place undue reliance on these.

Speaker #1: And with that, I will now turn the call over to Waleed Hassanein, President and Chief Executive Officer.

Speaker #1: regarding these risks and uncertainties appears under the heading "Risk Factors" of our form 10-K, filed with the Securities and Exchange Commission on February 24, 2026.

Speaker #3: Thank you so much, Hannah. Good afternoon, everyone, and thank you for joining TransMedics Q2 2026 earnings call. With me today is Gerardo Hernandez, our Chief Financial Officer.

Speaker #1: Our subsequent SEC filing and the forward-looking statements included in today's earnings press release. These 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.

Speaker #3: Before reviewing our Q2 performance and future catalysts, I want to take a moment to reflect on what we've built at TransMedics. And the unparalleled value we are delivering every day for organ transplant patients globally.

Speaker #3: TransMedics operates a first-in-class, vertically integrated organ transplant platform that rests on four distinct assets: these four assets require several years and substantial capital to create.

Speaker #1: Whether because of new information, future events, or developments,

Speaker #1: or otherwise. This conference call contains time-sensitive information and is accurate only as of the

Speaker #3: First asset is the organ care system or OCS technology. To our knowledge, OCS is the only portable, multi-organ, normothermic perfusion platform commercially available today.

Speaker #1: And with that, I will now turn the call over to our lead, Hassanein, President and Chief Executive Officer.

Speaker #3: Thank you so much, Hannah. Good afternoon, everyone,

Speaker #3: and thank you for joining TransMedics Q2 2026 earnings call. With me today is Gerardo Hernandez, our Chief Financial Officer. Before reviewing our Q2 performance and future catalysts, I want to take a moment to reflect on what we feel at TransMedics.

Speaker #3: Second is the national OCS program or NOP, a dedicated national infrastructure for organ procurement, surgical, and clinical services. Third is TransMedics transplant logistics network, the first transplant dedicated air and ground logistics network in the United States.

Speaker #3: And the unparalleled value we are delivering every day for organ transplant patients globally. TransMedics operates as first-in-class, vertically integrated organ transplant platform that rests on four distinct assets: these four assets require several years and substantial capital to create.

Speaker #3: And fourth, NOP Connect, the first digital ecosystem that is purpose-built to run the end-to-end transplant workflow with full transparency for every stakeholder involved. Each asset is hard to replicate on its own.

Speaker #3: The first asset is the organ

Speaker #3: Together, they form a substantial moat. And we're not stopping here. We are keep we are determined to keep widening that moat. Effective July 1, 2026, we began offering a new service which is donor and recipient clinical screening coordination services.

Speaker #3: To our knowledge, OCS is the only portable, multi-organ, normothermic perfusion platform commercially available.

Speaker #3: or NOP. A dedicated national infrastructure for organ procurement, surgical, and clinical services. Third is

Speaker #3: or NOP. A dedicated national infrastructure for organ procurement, surgical, and clinical services. Third is TransMedics transplant logistics network, the first transplant dedicated air and ground logistics network in the United States.

Speaker #3: Allowing transplant programs for the first time to run more of their workflow efficiently on the transplant TransMedics platform. We continue to believe that this TransMedics platform can support approximately 30,000 transplants by 2032, deriving more than $2 billion in top-line annual revenue, with a healthy operating profile.

Speaker #4: Our subsequent SEC filings and the forward-looking statements included in today's earnings press release.

Speaker #3: Our capital allocation priority has always been and it hasn't has is unchanged, and deliberate. We are focused on durable top-line growth ahead of near-term operating leverage.

Speaker #4: 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

Speaker #3: So alongside our Q2 results, I will spend a meaningful portion of today's call on exactly what we are funding over the next 18 to 24 months, the markets each investment unlocks, and the milestone you should hold us accountable to.

Speaker #3: 1, 2026, we began

Speaker #4: financial projections, expectations,

Speaker #4: statements. Whether because of new information,

Speaker #3: clinical screening coordination services, allowing transplant programs for the first time to run

Speaker #4: otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast statements.

Speaker #3: more of their workflow

Speaker #3: Turning to the quarter, Q2 2026 with the strongest in our history, in both revenue and case volume. Here are the highlights. Total revenue of approximately $190 million.

Speaker #3: TransMedics

Speaker #4: today, August 4, Additional information

Speaker #3: platform. We continue to believe that this TransMedics platform can support approximately 30,000.

Speaker #4: over to Waleed Hassanein, President

Speaker #4: Officer.

Speaker #5: Thank you so much, Hannah. Good afternoon, everyone, and thank you for joining TransMedics' Q2 2026 earnings call. With me today is Gerardo Hernandez, our Chief Financial Officer.

Speaker #3: Up approximately 21% year over year and approximately 9% sequentially. Transplant product revenue of $111 million up approximately 16% year over year and approximately 3% sequentially.

Speaker #5: Before reviewing our Q2 performance and future catalysts, I want to take a moment to reflect on what we've built at TransMedics. And the unparalleled value we are delivering every day for organ transplant patients globally.

Speaker #3: Service revenue of $79 million up approximately 29% year over year and approximately 19% sequentially. Growth was led by LIVAR as approximately which was up approximately 28% year over year and approximately 7% sequentially.

Speaker #5: TransMedics operates a first-in-class vertically integrated organ transplant platform that rests live broadcast today, August

Speaker #5: on four distinct 4, 2026.

Speaker #5: assets: these four assets require several years and substantial capital to create. First

Speaker #3: Part also grew approximately 6% year over year and approximately 23% sequentially. And we expect HART to continue to accelerate in the fourth quarter and beyond as we unlock enhanced Part B.

Speaker #3: TransMedics logistics delivered approximately 41 million dollars. Up approximately 39% year over year and approximately 30% sequentially. This growth is the clearest evidence yet. That vertical integration of logistics is both a growth engine and a structural differentiator for TransMedics.

Speaker #5: platform commercially available today. Second is the national OCS program or NOP. A dedicated national infrastructure for organ procurement, surgical, and

Speaker #5: clinical services. Third is the TransMedics transplant logistics network. The first care system, or OCS transplant-dedicated air and ground,

Total revenue of approximately $190 million, up approximately 21% year-over-year and approximately 9% sequentially.

Speaker #3: It is precisely why we are replicating this network outside of the United States. On average, we covered approximately 86% of NOP mission requiring air transport in the quarter, up from 82% in the first quarter.

Speaker #5: logistics network in the United

Speaker #5: States. And fourth, NOP Connect, the first digital ecosystem that is purpose-built to run the end-to-end transplant workflow with full transparency for every today. stakeholder involved.

Speaker #5: States. And fourth, NOP Connect, the first digital ecosystem that is purpose-built to run the end-to-end transplant workflow with full transparency for every today. stakeholder involved.

Speaker #5: States. And fourth, NOP Connect, the first digital ecosystem that is purpose-built to run the end-to-end transplant workflow with full transparency for every stakeholder involved.

Transplant product revenue of $111 million, up approximately 16% year-over-year and approximately 3% sequentially.

Service revenue of $79 million, up approximately 29% year-over-year and approximately 19% sequentially.

Speaker #3: This resulted in improved operating efficiency. Taking share in this highly competitive transplant logistics market is. Real cost efficiency to transplant centers relative to the other transplant logistics providers in the space.

Speaker #5: Each asset is

Speaker #5: hard-to-replicate on its own.

Growth was led by liver as approximately, um, which was up approximately 28% year-over-year and approximately 7% sequentially.

Speaker #5: Together, they form a substantial offering a new moat. And we're not stopping here. We are keep we are determined to keep widening that moat.

Part also grew approximately 6% year-over-year and approximately 23% sequentially.

Speaker #5: Effective July 1, 2026, we began offering a new service which is donor and recipient clinical screening coordination services. Allowing transplant programs for the first time to run more of their workflow efficiently on Second is the national OCS program the transplant TransMedics

And we expect hard to continue to accelerate in the fourth quarter and Beyond as we unlock enhance Part B.

Speaker #3: Adjusted income from operation of approximately 25.8 million or approximately 14% of revenue delivered while continuing to fund our growth initiative. We ended the quarter with approximately $473 million in cash and cash equivalent given a great confidence in our ability to self-fund our growth investment from the balance sheet and operations.

Transmedic Logistics delivered, approximately 41 million up approximately 39% year-over-year and approximately 30% sequentially.

Speaker #5: platform. service.

Speaker #5: We continue to believe that Which is donor and recipient

Speaker #5: this TransMedics platform can

This growth is the clearest evidence yet that vertical integration of logistics is both a growth engine and a structural differentiator for TransMedics.

Speaker #5: support approximately

Speaker #5: 30,000 transplants by 2032, deriving more than $2

Speaker #3: And finally, on July 1, 2026, we closed our strategic investment in PAG Aviation in Germany. The first step towards establishing TransMedics Aviation Europe and building a pan-European transplant logistics network modeled on our US network that we discussed in the quarter.

It is precisely why we are replicating this network outside of the United States.

Speaker #5: billion in top-line annual revenue, with a healthy operating profile.

On average, we covered approximately 86% of NOP Mission requiring air transport in the quarter, up from 82% in the first quarter.

This resulted in improved operating efficiency.

Speaker #3: We will discuss the implication of this growth investment later on this call. In short, Q2 strength was driven by strong growth across OCS case volume and clinical services, and it was achieved with minimal contribution from enhanced Part B or de novo.

Taking share in this highly competitive transplant logistics market is that

Speaker #3: Which we expect to begin contribute meaningfully late in the fourth quarter and definitely into 2027. Now, let me shift gears and address an important strategic topic.

Adjusted income from operation of approximately, 25.8 million or approximately 14% of Revenue delivered while continuing to fund our growth initiatives.

Speaker #3: As we all know, our stock has been volatile since our last call, as investors weigh our growth investment against near-term operating leverage. We take this matter very seriously.

We ended the quarter with approximately 473 million in cash and cash equivalent given us.

Great confidence in our ability, to self-fund our growth investment from the balance sheet and operations.

Speaker #3: And I want to address it directly with data on both the size of the opportunities we're investing in and our track record of converting investment into significant results and significant shareholder value.

Speaker #3: As I mentioned earlier, our technology, service infrastructure, logistics network, and digital platform well position TransMedics to potentially surpass $2 billion in annual revenue with the strong operating profile at scale.

And finally, on July 1, 2026, we closed our strategic investment in PAD Aviation in Germany, the first step towards establishing TransMedics Aviation Europe and building a pan-European transplant logistics network modeled on our U.S. network that we discussed.

Uh, in the in the quarter.

We will discuss the implication of this growth investment later on this call.

Speaker #3: Four initiatives underpin that path. Each has a defined market, a defined investment window, and a defined milestone. First, HART Along Growth. To try to replicate the LIVAR trajectory.

In short second quarter strength was driven by strong growth across OCS, case volume and Clinical Services and it was achieved with minimum contribution from enhanced Part B or denovo, which we expect to begin contribute meaningfully late in the fourth quarter and definitely into 2027.

Now, let me shift gears and address an important strategic topic.

Speaker #3: Enhanced Part B targets a US HART segment where we hold no clinical indications today. This segment represents approximately 2,200 DBD HART transplanted annually in the US, with roughly 4 hours of preservation time.

As we all know, our stock has been volatile since our last call, as investors weigh our growth investments against near-term operating leverage.

We take this matter very seriously.

Speaker #3: We designed enhanced Part B to serve that segment in two distinct ways. The first is using the OCS for its improved preservation capabilities and enhanced function ex vivo.

And I want to address it directly with data on both the size of the opportunities we're investing in. And our track record of converting investment into significant results and significant shareholder value.

As I mentioned earlier, our technology.

Speaker #3: Second is using CHOPS, a lower-cost technology alternative for transplant programs who may be focusing on controlling cost. De novo is our focused effort to re-establish or frankly resurrect the lung perfusion market in the US and broaden OCS lung adoption.

Service, infrastructure, logistics, network, and digital platform—well, this positions TransMedics to potentially surpass $2 billion in annual revenue, with a strong operating profile at scale.

4 initiatives, underpin that path.

Each has a defined market, a defined investment window, and a defined milestone.

Speaker #3: Together, enhanced and de novo gives TransMedics access to a conservatively estimated 2,000 to 5,000 incremental US HART and lung cases annually. This could materially expand our addressable US opportunity from existing product line.

First.

Part and Loan growth.

to try to replicate the liver trajectory.

Enhance Part B targets: a U.S. heart segment where we hold no clinical indications today.

Speaker #3: As it relates to execution milestone, the IDE supplement incorporating CHOPS, which is the TransMedics controlled hypothermic organ preservation system into the enhanced trial, has been submitted and is currently under FDA review.

This segment represents approximately 2,200 DBD hearts transplanted annually in the US, with roughly 4 hours of preservation time.

To serve that segment in two distinct ways. The first is using the OCS for its improved preservation capabilities and enhanced function ex vivo.

Speaker #3: We expect it to be approved by late Q3 or early fourth quarter. With the lung IDE to follow shortly thereafter. Second initiative is the kidney.

Second is using chops.

A lower-cost technology alternative for transplant programs who may be focusing on controlling costs.

Speaker #3: This will enable us to access the largest transplant market segment in the US, and around the world. Let me give you the details. The US performs more than 21,000 deceased kidney transplants annually.

Denovo, is our focused effort to re-establish or frankly resurrect the lung profusion Market in the US and broaden OCS lung adoption.

Speaker #3: In 2024, approximately 9,200 additional deceased donor kidneys were recovered and never transplanted, largely because of limitations of cold storage preservation. At any given time, approximately 100,000 patients sit on the US kidney waiting list more than 131,000 new ESRD cases are diagnosed each year.

Together, Enhance and Denovo gives TransMedics access to, conservatively estimated, 2,000 to 5,000 incremental U.S. heart and lung cases annually.

This could materially expand our addressable U.S. opportunity from the existing product line.

As it relates to the execution milestone.

The IDE supplement incorporating chops.

Speaker #3: The estimated CMS cost of the waiting list alone is approximately $10 billion annually in the US. Simply stated, the demand for better donor kidney utilization is enormous.

Which is the transmatics controlled hypothermic, organ preservation system into the enhanced trial has been submitted and is currently under FDA review.

We expect it to be approved by late Q3 or early Q4, with the lung IDE to follow shortly thereafter.

Speaker #3: And is a matter of national interest for CMS and for end-stage renal failure patients. Now, let's shift gears to post-transplant outcomes in kidney transplant.

Second initiative is the kidney.

This will enable us to access the largest transplant market segments in the US and around the world.

Let me give you the details.

Speaker #3: Post-transplant outcomes are further constrained by delayed graft function. Which occurs in 26 to 50 percent of US kidney recipients, requiring the patients to go back on dialysis at a significant cost and morbidity.

The US performs more than 21,000 disease. Kidney transplants annually.

Speaker #3: Ischemia and reperfusion preservation injuries are the primary cause of DGF post-kidney transplants. The estimated incremental cost is approximately $25,000 to $45,000 per DGF case.

In 2024, approximately 9,200 additional deceased, donor kidneys were recovered and never transplanted largely largely because of limitations of Cold Storage preservation.

At any given time, approximately 100,000 patients sit on the U.S. kidney waiting list.

Speaker #3: In the US. To summarize, the kidney opportunity is massive. And the clinical need is real and is associated and its associated costs are significant.

More than 131,000 new ESRD cases are diagnosed each year.

The estimated CMS cost of the waiting list alone is approximately 10 billion dollars annually in the US.

Speaker #3: Now, let me explain how OCS kidney could address these issues comprehensively. OCS kidney is being designed as the first portable normal thermic oxygenated perfusion system for kidney transplant.

Simply stated that demand for better donor kidney. Utilization is enormous and is a matter of national interest for CMS, and for end-stage, renal failure patients.

Speaker #3: To significantly reduce ischemia reperfusion injury on the donor kidney. In addition, OCS kidney is designed to include online functional assessment capabilities. We believe that OCS kidney has the potential to significantly increase donor kidney utilization and significantly reduce the incidence of DGF post-transplantation.

Now, let's shift gears to post-transplant outcomes in kidney transplant.

Post-transplant outcomes are further constrained by delayed graft function.

This occurs in 26% to 50% of U.S. kidney recipients, requiring the patient to go back on dialysis at a significant cost and morbidity.

Speaker #3: Which will drive significant cost-efficiencies to CMS. We're building OCS kidney system on our next-gen platform, which is Gen 3.0, which adds meaningful scale and business.

Is schema and reperfusion preservation injuries are the primary cause of dgf post kidney transplant.

The estimated incremental cost is approximately 25,000 to 45,000 per dgf case in the US.

Speaker #3: This is the single largest addressable segment available to us in organ transplantation in the US and around the world. In terms of milestones, the development program is fully underway, and we have begun pre-IDE discussions with FDA to define the best path for the IDE to work on it collaboratively with the agency.

To summarize, the kidney opportunity is massive, and the clinical need is real and associated. And its associated costs are significant.

Now, let me explain how OCS Kidney could address these issues comprehensively.

Speaker #3: In fact, we had our first pre-IDE sub-meeting pre-sub-meeting with the FDA this morning. We're targeting first clinical experience later in 2027, and the program is now entering engineering and manufacturing verification and validation to prepare for the first in-human use.

OCS Kidney is being designed as the first portable normothermic, oxygenated perfusion system for kidney transplant, to significantly reduce ischemia reperfusion injury on the donor kidney.

In addition OCS kidney, is designed to include online functional, assessment capabilities.

Speaker #3: Global demand for OCS kidney is significant. And we are evaluating potential options to capitalize on OUS demand in parallel to our US IDE. The third initiative is international expansion to expand our total addressable market.

We believe that OCS kidney has the potential to significantly increase donor kidney, utilization, and significantly, reduce the incidence of dgf post transplantation, which will drive significant cost efficiencies to CMS.

We're building OCS kidney system on our next gen.

Platform, which is Jen 3.0.

Speaker #3: As we've discussed, we are replicating the successful US NOP and logistics model in Europe, starting with Italy. Where we have secured national reimbursement for machine perfusion and services, that should take effect later this year or early 2027.

Which adds meaningful scale and operating leverage across the business?

This is the single largest addressable segment available to us in organ transplantation, in the US and around the world.

Speaker #3: We're actively engaged in multiple regional transplant logistics tenders in Italy today, and the recent PED aviation investment was the enabling step that makes us eligible to compete for these transplant logistics tenders across Italy and across Europe.

In terms of milestones, the development program is fully underway, and we have begun prior discussions with the FDA to define the best path for the IDE and to work on it collaboratively with the agency.

In fact, we had our first priod sub meeting pres sub with the FDA this morning.

Speaker #3: We are also in discussions with several additional European countries on NOP and logistics. The opportunity in Europe leverages capabilities we've already built materially expanding our addressable market, extends our life-saving impact to European transplant patients, and we view it as a meaningful growth catalyst for 2027 and beyond.

We are targeting first clinical experience later in 2027, and the program is now entering engineering and manufacturing, verification and validation to prepare for the first in-human use.

Global demand for OCS kidney is significant, and we are evaluating potential options to capitalize on OUS demand in parallel to our US IDE.

Initiative is international expansion to expand our total addressable Market.

Speaker #3: Finally, building the technology platform to scale globally and drive significant operating leverage. That is next-gen or OCS Gen 3.0. Gen 3.0 is a complete redesign of the OCS platform.

As we've discussed, we are replicating the successful US NOP and Logistics model in Europe, starting with Italy.

We have secured national reimbursement for machine perfusion and services. That should take effect later this year or early 2027.

Speaker #3: Engineered from the ground up to deliver significant operating leverage and supply chain independence. In addition, it is designed to be highly autonomous and with cloud-based remote monitoring and control capability to enable scaling of clinical usage, and to support operating capacity of 30,000 transplants and beyond globally by 2032.

We're actively engaged in multiple Regional transplant Logistics, Tenders in Italy today and the reason pad Aviation investment was the enabling step that makes us eligible to compete for these transplant Logistics tenders across Italy and across Europe.

We are also in discussions with several additional European countries on NOP and Logistics.

Speaker #3: Now, let me conclude by review of our execution track record. Over the last four years, TransMedics has consistently outperformed growth expectations. With the few exceptions largely driven by seasonal softness while at greater scale.

The opportunity in Europe, leverages capabilities we've already built.

Materially expanding our addressable market extends our life-saving impact to European transplant patients, and we view it as a meaningful growth catalyst for 2027 and beyond.

Speaker #3: We have also consistently delivered strong bottom-line performance. Despite our hyper-focus on top-line growth and deliberate deployment of capital, to build our unparalleled platform. With that as a background, please let me state plainly for the record.

Finally building the technology platform to scale globally and drive significant operating Leverage.

That is next-gen or OCS Jen 3.0.

Gen 3.0 is a complete redesign of the OCS platform. Engineered from the ground up to deliver significant operating, leverage and supply chain Independence.

Speaker #3: TransMedics is and remains a growth-oriented business. Please allow me to repeat it again. TransMedics is and remains a growth-oriented business. We are funding these four growth initiatives over the next 18 to 24 months precisely because they are what carries us to approximately 30,000 plus transplants by 2032, and more than 2 billion dollars in top-line revenue.

In addition, it is designed to be highly autonomous and with cloud-based remote monitoring and control capability to enable scaling of clinical usage, and to support operating, capacity of 30,000 transplants and Beyond globally by 20302.

Now, let me conclude by review of our execution track record,

Speaker #3: Turning to guidance. Recognizing that we are early in Q3, which is a traditionally seasonally soft quarter for transplant procedure volume, and early in the integration path for PAD aviation into our European operation, we are raising the low end of our full year 2026 revenue guidance to a range of $737 million to $757 million.

Over the last four years, TransMedics has consistently outperformed growth expectations.

With a few exceptions, largely driven by seasonal softness, while at greater scale.

we have also consistently delivered, strong bottom line performance,

despite our higher focus on Topline growth and deliberate deployment of capital to build.

Our unparalleled platform.

Speaker #3: Representing 22% to 25% growth over 2025. Importantly, this guidance assume no revenue contribution from PAD aviation investment, and no meaningful incremental revenue from enhanced part B or de novo clinical programs.

With that as a background, please let me state plainly for the record.

Transmedics is and remains a growth oriented business.

Please allow me to repeat it again. Transmedics is and remains a growth oriented business.

Speaker #3: With that, let me turn the call over to Gerardo to review our second quarter financial results in detail.

Speaker #1: Thank you, Waleed. Good afternoon, everybody. I am pleased to share TransMedics second quarter 2026 results. A supplemental slide presentation with additional detail is available in the investor sections of our website.

We are funding these 4 growth initiatives over the next 18 to 24 month. Precisely because they are what carries us to approximately 30,000 plus transplants by 2032 and more than 2 billion dollars in Topline Revenue.

Turning to guidance.

Speaker #1: The second quarter delivers strong revenue growth, sequential gross margin improvement, and an adjusted operating margin of 13.6%. Our results reflect continued strength in the business together with increased investment in R&D and the infrastructure required to support future growth.

Recognizing that we are early in Q3, which is traditionally a seasonally soft quarter for transplant procedure volume, and early in the integration path for PAD Aviation into our European operation.

Speaker #1: Today, I will review our second quarter financial performance, the key drivers of operating expenses, and our updated full year outlook. As introduced last quarter, we report several non-gap measures, including adjusted R&D, SG&A, operating expenses, income from operations, operating margin, net income, and diluted earnings per share.

We are raising the low end of our full year 2026 revenue guidance to a range of $737 million to $757 million, representing 22% to 25% growth over 2025.

Importantly, this guidance assume no Revenue contribution from pad Aviation investment and no meaningful incremental revenue from enhanced Part B or denovo, clinical programs with that. Let me turn the call over to herad to review our second quarter Financial results in detail.

Speaker #1: We believe these measures provide both management and investors with greater visibility into the underlying performance of the business, particularly as we incur certain discrete expenses that may affect comparability between periods.

Thank you, Willie.

Good afternoon, everybody.

I am pleased to share transmedic second quarter 2026 results.

A supplemental slide presentation with additional detail is available in the Investors section of our website.

Speaker #1: Full reconciliations are included in the supplemental materials. Now turning to our second quarter financial performance. Total revenue was approximately $190 million, up 21% year over year, and 9% sequentially, marking the highest quarterly revenue in our history.

The second quarter delivered, strong Revenue, growth sequential, gross margin Improvement and an adjusted operating margin of 13.6%.

Our results reflect continued strength in the business, together with increased investment in R&D and the infrastructure required to support future growth.

Speaker #1: US transplant revenue was approximately $184 million, up 21% year over year, and 10% sequentially, by organ, liver contribute with approximately $148 million, heart approximately $33 million, and million.

Today, I will review our second quarter financial performance, the key drivers of operating expenses and our updated full year outlook.

Speaker #1: International revenue was approximately $5 million, up 26% year over year, reflecting continued progress as we expand our presence in Europe. We remain in the early innings of our European growth story and, as we continue to build scale, we expect some quarterly variability.

As introduced last quarter, we report several non-GAAP measures, including adjusted R&D, SDNA, operating expenses, income from operations, operating margin, net income, and diluted earnings per share.

Compatibility between periods.

Speaker #1: Product revenue was approximately $111 million, up 16% year over year, and 3% sequentially, led by liver. Service revenue was approximately $79 million, up 29% year over year, and 19% sequentially, service revenue represented 41% of total revenue, the increase was primarily driven by broader adoption of TransMedics logistics and pricing adjustments to offset higher fuel costs.

Full reconciliations are included in the supplemental materials.

Now, turning to our second quarter financial performance,

Product Revenue was approximately 190 million of 21 year and 9% sequentially marking, the highest quarterly Revenue in our history.

Speaker #1: Total gross margin was 59.6%, up approximately $140 basis points sequentially, and down approximately $180 basis points year over year. The sequential improvement was driven primarily by service margin, which increased from approximately 27% in the first quarter of 2026 to 35% in the second quarter, reflecting higher fleet utilization, improved operating efficiency, and continued optimization of our service offerings.

Us transplant Revenue was approximately 184 million of 21%, year-over-year and 10% sequentially by organ. Liver contribute with approximately 148 million heart, approximately 33 million and long, approximately 2 million.

International revenue was approximately $5 million.

Of 26% year-over-year reflecting continued progress. As we expand our presence in Europe.

We remain in the early innings of our European growth story, and

As we continue to build scale, we expect some quarterly variability.

Speaker #1: Product gross margin was 77%, broadly stable sequentially. The year over year decline primarily reflects the higher mix of service revenue and certain temporary product cost pressures, including inventory provisioning and trial-related solution costs.

Product Revenue was approximately 111 million of 16% year-over-year and 3% sequentially. Led by liver.

Service revenue was approximately $79 million, up 29% year-over-year and 19% sequentially.

Speaker #1: These factors were partially offset by improved performance in TransMedics logistics and continued operating efficiencies. We expect some normalization in service margin during the second half, while remaining above historical levels.

Therapist Revenue represented 41% of total revenue.

The increase was primarily driven by broader adoption of transmedic logistics and pricing adjustments to offset higher fuel cost.

Speaker #1: Adjusted operating expenses were $87 million, up approximately 46% year over year, and approximately 5% sequentially. OCS kidney next-generation OCS and our enhanced and de novo clinical programs accounted for approximately half of the year over year increase, or about $14 million, investments in our new headquarters and our new disposable manufacturing facility in Mirandola, Italy, represented another approximately 20% of the incremental investment, or about $5 million.

Gross margin was 59.6%, up approximately 140 basis points sequentially, and down approximately 180 basis points year-over-year.

Improvement was driven primarily by service margin, which increased from approximately 27% in the, in the first quarter of 2026 to 35% in the second quarter reflecting higher Fleet, utilization improved operating efficiency and continued optimization of our service offerings.

Product gross margin was 77%, broadly stable sequentially.

Speaker #1: The Mirandola investment is an important step in strengthening our supply chains through greater vertical integration. The sequential increase was concentrated in these strategic growth programs.

The year-over-year decline primarily reflects the higher mix of service revenue and certain temporary product cost pressures including in inventory provisioning and trial related solution costs.

Speaker #1: Excluding these investments, operating expenses declined sequentially, demonstrating continued discipline across the broader cost base. Adjusted R&D was approximately $32 approximately 99% year over year, primarily driven by investment in the strategic growth programs.

These factors were partially offset by improved performance in TransMedics Logistics and continued operating efficiencies.

We expect some normalization in service margin during the second half, while remaining above historical levels.

Speaker #1: Adjusted SG&A was approximately 55.8 million, up approximately 27% year over year, and down approximately 4% sequentially, the year over year increase primarily reflects our summer wheelhead quarters and investment in NOP network, IT infrastructure, and international expansion.

Adjusted operating expenses were $87 million, up approximately 46% year-over-year and approximately 5% sequentially.

OCS kidney next Generation OCS and our enhanced inovo clinical programs, accounted for approximately half of the year-over-year increase, or about 14 million

Speaker #1: Sequentially, SG&A declined as non-recurrent payroll-related costs recorded in the first quarter did not repeat and consulting spending decreased following the completion of several projects.

Investments in our new headquarters and our new disposable manufacturing facility in mirandola, Italy, represented another approximately. 20% of the incremental investment or about 5 million.

The Miranda investment is an important step in strengthening our supply chain through greater vertical integration.

Speaker #1: For the second half, we expect adjusted operating expenses for the existing TransMedics business to be broadly in line with the first half, with R&D remaining elevator and SG&A tightly managed.

The sequential increase was concentrated in these strategic growth programs.

Excluding these investments' operating expenses, the client is sequentially demonstrating continued discipline across the broader cost base.

Speaker #1: Adjusted income from operations was 25.8 million, representing an adjusted operating margin of 13.6%, most of the year over year decline, reflects the planned increase in strategic investment, with the balance attributable to the gross margin factors discussed earlier.

Adjusted R&D was approximately $32 million.

of approximately 99% year-over-year, primarily driven by investment in the strategic growth programs.

Speaker #1: Adjusted net income was 16.2 million, and adjusted diluted earnings per share was 44 cents. Diluted weighted average number of shares were approximately 40.7 million.

Adjusted SDNA was approximately $55.8 million, up approximately 27% year-over-year and down approximately 4% sequentially.

The gain over here primarily reflects our summer will have quarters and investment in NOP network, IT infrastructure, and international expansion.

Speaker #1: For modeling purposes, interest expense was 7.2 million in the quarter, including approximately 3.8 million related to the financed lease for our new summer wheelhead quarters, we expect headquarters-related interest expense of approximately 15.3 million for the full approximately $29 million, partially offset by approximately $12 million of interest income.

Sequentially, a decline as non-recurring payroll related costs recorded in the first quarter did not repeat, and consulting spending decreased following the completion of several projects.

For the second half, we expect adjusted operating expenses for the existing transmedics, business to be broadly in line with the first half.

with R&D, remaining elevated, and SG&A tightly managed.

Speaker #1: Our effective tax rate was 24.3% in the quarter, and we expect approximately $26% for the full year. We ended the quarter with $473 million in cash and cash equivalents, and approximately $18 million in restricted cash, primarily related to headquarters lease, which is reported separately.

Adjusted income from operations was 25.8 Million representing, an adjusted operating margin of 13.6%.

Most of the year-over-year decline, reflects the planning increase in Strategic investment with the balance attribute.

Speaker #1: Now let me turn to pad aviation. The transaction closed in July 1st of 2026, and pad will be consolidated in our financial statements beginning in the third quarter.

Speaker #1: Paths existing third-party charter business will be reported within non-OCS revenue. Future transplant logistics revenue generated by path in support of our European platform will be reported within service revenue consistent with our US transplant logistics business.

Speaker #1: While we understand path historical performance and its charter business, we have not yet established an operating track record under TransMedics, to provide a standalone estimate with the level of confidence and precision we expect from our guidance.

Speaker #1: Path is an important strategic investment that provides the aviation infrastructure required to support our European transplant logistics platform. As we integrate the business and increase the utilization of transplant missions over time, we expect its financial profile to improve, in the near term, however, its initial consolidation will be diluted to both gross margin and operating margin beginning in the third quarter.

Speaker #1: Now turning to our 2026 outlook. As Waleed noted, excluding the impact of pad aviation, we are raising the lower end of our full year 2026 revenue guidance to a range of $737 million, to $757 million, representing growth of approximately 22% to 25% compared to 2025.

Speaker #1: This guidance assumes no incremental revenue from enhanced Part B and de novo. We are confident in our updated guidance because at the midpoint, it reflects a second half sequential growth pattern broadly consistent with the average observed over the past two years.

Speaker #1: For the second half of 2026, we expect gross margin excluding the impact of pad aviation of approximately 59%, looking beyond 2026 and excluding pad aviation we expect gross margin to remain broadly around current levels over the next two to three years as we continue to invest in international expansion.

Speaker #1: Over time, greater scale and utilization across our international platform, together with the efficiencies designed into OCS kidney and next-generation OCS, should support a sustainable gross margin profile of approximately 60% with potential for further improvement.

Speaker #1: In terms of operating margin, our prior expectation was for a full year adjusted operating margin of approximately 16%, or about $250 basis points below our 2025 level of 18.5%.

Speaker #1: We now expect full year adjusted operating margin excluding the impact of pad aviation of approximately 12.5% to 14%, the range primarily reflects potential variability in revenue performance, while the reduction from our prior expectation primarily reflects the higher planned investment in OCS kidney.

Speaker #1: This represents a deliberate acceleration of key strategic growth programs, rather than a broad-based expansion of our overhead structure. Our capital allocation priorities remain focused on long-term value creation, supporting innovation across our technology and clinical pipeline, strengthening our NOP and international platform, and building systems and infrastructure required to support scale.

Speaker #1: We also continue to evaluate selective strategic opportunities that can further strengthen and expand our platform subject to discipline strategic and financial criteria. To summarize, the second quarter delivered record revenue sequential gross margin improvement, and material higher service profitability.

Speaker #1: We raised the lower end of our full year revenue guidance excluding pad aviation to $737 million to $757 million, and we expect full year adjusted operating margin excluding pad aviation of approximately 12.5 to 14%, while maintaining a strong liquidity position.

Speaker #1: And with that, I'll turn the call over to Waleed for closing remarks.

Speaker #2: Thank you so much, Gerardo. Overall, we're pleased with our second quarter performance, and more importantly, confident in what lies ahead as we execute against the growth initiatives we outlined today.

Speaker #2: Please allow me to be direct about how we see our business and how to model TransMedics. We are building TransMedics to be a growth business in the near, mid, and long term.

Speaker #2: Operating margin will vary quarter to quarter with the pace of the investment required to fuel that growth. We are equally committed to delivering a strong operating profile at scale.

Speaker #2: And we will report progress against these initiatives every quarter. On execution, our track record speaks for itself. Few years ago, our plan to vertically integrate logistics was widely questioned.

Speaker #2: Today, TransMedics transplant logistics is a significant growth driver, and operational differentiator for our business. Importantly, TransMedics is approaching an approximately $800 million annualized revenue run rate, yet with substantial growth initiatives still in front of us and ahead of us.

Speaker #2: Finally, we remain grounded and humbled in the life-saving impact of the OCS technology, our NOP services, our world-class team, and committed to our mission of expanding access and improving clinical outcomes for patient in need of organ transplantation worldwide.

Speaker #2: With that, I will turn the call over to the operator for questions. Operator?

Speaker #3: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again.

Speaker #3: We ask that you please limit yourself to one question and one follow-up. Thank you. Your first question comes from Allen Gong with JP Morgan.

Speaker #3: Your line is open.

Speaker #4: Thanks for the question, team. I just had one to start off with your service performance in the quarter. I definitely I think stronger than we had been expecting, and the growth of pace you were disposables business even ahead of this new initiative that you're launching on the service side.

Speaker #4: So I know, like, I think you had talked to some increase in dry runs in the quarter, but how should we think about the drivers of that increase, and what are you seeing so far in the third quarter when it comes to that dry run dynamic or any others?

Speaker #2: Thank you, Allen. We have never discussed increase in dry run pace. We don't see an increase in dry run rate. We didn't see it in Q2.

Speaker #2: We didn't see it in Q3. And I'll leave it at that.

Speaker #4: I guess then, like, what drove that increase in service revenues, right? Because I think, like, maybe naively that disposables and service should go grow, you know, pretty hand in hand, given especially, you know, on the aviation side, you service an increased percentage of your flights using NOP.

Speaker #4: So that would increase it a bit, but I think the growth disparity is a little bit stark there. So what drove that increase in service revenues kind of above product revenues?

Speaker #2: Gaining market share in logistics. Gaining a lot of efficiency in our logistics, improving our margins, pricing adjustment to buffer against the increase in cost, new centers so that's these all combined lead to that picture.

Speaker #1: I see an increase in dry run rate; we didn't see it in Q2, we didn't see it in Q3. And I'll leave it at that.

Speaker #2: I guess then, like, what drove that increase in service revenues, right? Because I think, like, maybe naively that disposables and service should go grow, you know, pretty hand-in-hand given—especially, you know, on the aviation side you service—you know, an increased percentage of your flights using NOP.

Speaker #3: Your next question comes from Josh Jennings with TD Cowan. Your line is open.

Speaker #5: Hi, good afternoon. Thanks, William, Gerardo, for taking the question. Translations on a strong quarter. It seems that the third quarter is starting off strong too, looking at some of the transplant public transplant volume data.

Speaker #2: So that would increase it a bit, but I think the growth disparity is a little bit stark there. So what drove that increase in service revenues kind of above product revenues?

Speaker #5: But maybe and that's a continuation on the back half of Q2. Maybe help us think about the market growth dynamics that you're seeing in US, heart, lung, and liver transplant volumes, and what's driving the acceleration, if that is, in fact, occurring.

Speaker #1: Gaining—gaining market share in logistics. Gaining a lot of efficiency in our logistics, improving our margins, pricing adjustment to buffer against the increase in cost, new centers, so that's—these all combined lead—lead to that picture.

Speaker #2: Thank you, Josh. We agree we started Q3 very, very strong. We, in fact, I mean, it's not a secret, it's published on Twitter every day, that July was the highest aviation month for the business.

Speaker #2: But July is not Q3. And we are entering into August, and we all know what happens in August. So we're encouraged, as I said, there are new centers coming on board.

Speaker #3: Your next question comes from Josh Jennings with TD Cowan. Your line is open.

Speaker #4: Hi, good afternoon. Thanks, William and Gerardo, for taking the question. Translations on a strong quarter. It seems that the third quarter is starting off strong too, looking at some of the transplant—public transplant volume data.

Speaker #2: There are new initiatives that are driving growth. Plus, we're gaining market share in our logistics and clinical services. So we're cautiously optimistic about Q3.

Speaker #4: But maybe—and that's a continuation on the back half of Q2—maybe help us think about the market growth dynamics that you're seeing in U.S. heart, lung, and liver transplant volumes, and what's driving the acceleration, if that is in fact occurring.

Speaker #2: We need to see how the rest of the quarter unfolds before we formulate an opinion. We're focusing on our part of the equation, Josh.

Speaker #1: Thank you, Josh. We agree we started Q3 very, very strong. We, in fact, I mean, it's not a secret, it's published on Twitter every day, that July was the highest aviation month for the business.

Speaker #2: We're driving more utilization, more cases, more services. You know, what happened in the national level, you know, again, we keep a track of it, but our primary focus is growing our own adoption and our own portion of the market, so.

Speaker #1: But July is not Q3. And we are entering into August, and we all know what happens in August. So we're encouraged, as I said, there are new centers coming on board, there are new initiatives that are driving growth.

Speaker #2: And we feel we're the team is doing a great job at that. But it's early in Q3, Josh. I don't want anybody on the call to think that Q3 this year is going to be significantly different.

Speaker #1: Plus, we're gaining market share in our logistics and clinical services. So you know, we're cautiously optimistic about Q3. We need to see how the rest of the quarter unfolds before we—you know, we formulate an opinion.

Speaker #2: Until we see it significantly different. So far, we had a great July, but again, we still have two more months to go, and August we're starting to see some kind of, you know, we know what happened in August.

Speaker #1: We're focusing on our part of the equation, Josh. We're driving more utilization, more cases, more services. You know, what happened in the national level—you know, again, we keep a track of it, but our primary focus is growing our own market, our own adoption, and our own portion of the market, so.

Speaker #2: People take vacations, and centers go, you know, hunker down. So we have to wait and see.

Speaker #5: Understood. That makes sense. Maybe just one follow-up just on the controlled hypothermic organ preservation system, or CHOPS. And I'm not sure if you if I missed this, but any update just on the 510(k) pathway?

Speaker #5: And maybe help us think about when you could have clearance in hand and just the commercial opportunity outside of the benefit you'll receive from CHOPS being included in enhanced Part B and de novo, but just the overall commercial opportunity helping frame that up for us.

Speaker #1: And we feel we're—the team is doing a great job at that.

Speaker #4: Thank you.

Speaker #1: But it's early in Q3, Josh. I don't want—I don't want anybody on the call to think that Q3 this year is going to be significantly different until we see it significantly different.

Speaker #5: Thanks for taking the question.

Speaker #2: Thanks. Thank you, Josh. Josh, as you know, we like to walk before we run, before we sprint. So right now, the focus is getting the IDE approval to get to unlock the trial.

Speaker #1: So far, we had a great July, but again, we still have 2 more months to go. And August, we're starting to see some kind of, you know, we know what happened in August.

Speaker #2: The next frontier for us will be the 510(k). I think realistically speaking, this is a H1 2027 horizon for us. As far as the opportunities that it unlocks, as I stated earlier, at least, at least 2,200 annual cases in the US DBD hearts that are done with approximately four hours of preservation.

Speaker #1: People take vacations, and centers go, you know, hunker down. So we have to wait and see.

Speaker #4: Understood. That makes sense. Maybe just one follow-up, just on the controlled hypothermic organ preservation system, or CHOPS, and I'm not sure if you—if I missed this—but any update just on the 510(k) pathway?

Speaker #4: And maybe help us think about when you could have clearance in hand, and just the commercial opportunity outside of the benefit you'll receive from CHOPS being included in enhanced Part B and de novo, but just the overall commercial opportunity—helping frame that up for us.

Speaker #2: So that's why we framed it as such in prepared remarks.

Speaker #5: And can you can it be used in other indications, or are you focusing on heart first, Waleed? Sorry for the.

Speaker #2: Again, we don't talk about our active discussions with FDA, and we're actively discussing all this with FDA. But when you look at, you know, what CHOPS does, there's no reason why we shouldn't have indications beyond heart.

Speaker #4: Thanks for taking the question.

Speaker #1: Great, thanks. Thank you, Josh. Josh, as you know, we like to walk before we run, before we sprint. So right now, the focus is getting the IDE approval to unlock the trial.

Speaker #1: The next frontier for us will be the 510(k). I think, realistically speaking, this is an H1 2027 horizon for us. As far as the opportunities that it unlocks, as I stated earlier, at least 2,200 annual cases in the U.S.

Speaker #2: But I'll leave it at that.

Speaker #3: Your next question comes from Bill Plovanic with Canaccord. Your line is open.

Speaker #6: Great. Thanks. Good evening, and thanks for taking my questions. Waleed, first question is, I was wondering if you could unpack the statement that you're adding donor and recipient screening services starting July 1.

Speaker #1: DBD hearts that are done with approximately 4 hours of preservation. So that's why we framed it as such in the prepared remarks.

Speaker #6: I'm trying to understand the potential impact from that from a, you know, from a volume standpoint, from a revenue standpoint. You know, providing that service, what does that do for the customers and how does that impact transmedics?

Speaker #4: And can you—can it be used in other indications, or are you focusing on heart first, Waleed? Sorry for the—

Speaker #1: Again, we—we don't talk about our active discussions with the FDA, and we're actively discussing all this with the FDA. But when you look at, you know, what CHOPS does, there's no reason why we shouldn't have indications beyond heart.

Speaker #2: Thank you, Bill. And we've been talking about this for a long time. It's a natural kind of progression to what we do. I'll focus on why we're doing it rather than what the centers could do.

Speaker #1: But I'll leave it at that.

Speaker #3: Your next question comes from Bill Plavanic with Canaccord. Your line is open.

Speaker #2: Because that's what I can control. We're doing it because we've always stated that the transplant market or the transplant workflow is highly complex and highly unorganized.

Speaker #5: Great, thanks. Good evening, and thanks for taking my questions. Waleed, first question is: I was wondering if you could unpack the statement that you're adding donor and recipient screening services starting July 1.

Speaker #2: There's many cooks in the kitchen. And we always believed that harmonizing that workflow into one streamlined of services technology transparency, accessibility, could be a catalyst for what transmedics is doing.

Speaker #5: I'm trying to understand the potential impact from that from a, you know, from a volume standpoint, from a revenue standpoint. You know, providing that service, what does that do for the customers, and how does that impact transmedics?

Speaker #1: Thank you, Bill. And we've been talking about this for a long time. It's a natural kind of progression to what we do. I'll focus on why we're doing it rather than what the centers could do.

Speaker #2: So we launched that service. We signed up a major healthcare system in Boston. We are going to experiment with that, pilot that over the next few quarters, and the hope is, one, the center would see the value, and we would see the potential impact.

Speaker #1: Because that's what I can control. We're doing it because we've always stated that the transplant market, or the transplant workflow, is highly complex and highly unorganized.

Speaker #2: It's early, but we're excited about this initiative. It gives us visibility to the national donor pool that's coming for support these centers and give them access to our platforms.

Speaker #1: There's many cooks in the kitchen. And we always believed that harmonizing that workflow into one streamlined services technology, transparency, accessibility, could be a catalyst for what transmedics is doing.

Speaker #2: Whether digital platforms, OCS platforms, logistics services, and it's streamlined the process for them, to drive more efficiency and more transplants.

Speaker #6: And then just following up on the earlier question, on regarding I'm sorry. Sorry, I lost my train of thought there. The enhanced heart trial and the de novo lung trials, you know, these have been delayed and they kind of continue to get delayed.

Speaker #1: So we launched that service. We signed up a major healthcare system, in Boston, we are going to experiment with that, pilot that over the next few quarters, and the hope is, one, the center would see the value, and we would see the potential impact.

Speaker #6: I don't know if you could characterize the conversations with the FDA or what gives you confidence that we'll be able to at least start the de novo lung before year-end and get into the enhanced Part B early next year, if I'm accurately hearing you.

Speaker #1: It's early, but we're excited about this initiative. It gives us visibility to the national donor pool that's coming for allocation. It, you know, it allows us to support these centers and give them access to our platforms, whether digital platforms, OCS platforms, logistics services, and it streamlines the process for them, to drive more efficiency and more transplants.

Speaker #6: What gives you confidence that we're actually more towards the end of the goal line with those IDEs rather than kind of stuck in the neutral here?

Speaker #6: Thanks for taking my questions.

Speaker #2: Thank you, Bill. Listen, again, there's a reason why we don't comment on our discussions with FDA. You know, FDA owns the timeline. We are working collaboratively with them.

Speaker #5: And then, just following up on the earlier question on regarding—I'm sorry. Sorry, I lost my train of thought there. The enhanced heart trial and the de novo lung trials, you know, these have been delayed and they kind of continue to get delayed.

Speaker #2: We believe we have done everything that we've been asked to do. I'll leave it at that. The heart is ahead of the lung. Right now, and it has been to date.

Speaker #5: I don't know if you could characterize the conversations with the FDA, or what gives you confidence that we'll be able to at least start the de novo lung before year-end and get into the enhanced Part B early next year, if I'm accurately hearing you?

Speaker #2: So that's why we are predicting that once we gain visibility on the IDE for heart, we will use that as a stepping stone to get the lung IDE amendment approved.

Speaker #5: What gives you confidence that we're actually more towards the end of the goal line with those IDEs rather than kind of stuck in the neutral here?

Speaker #2: We have to remind the audience that what I'm talking about is not the IDE approval per se. We, I mean, everybody knows that IDE amendment is anywhere between 30 and 60 days.

Speaker #5: Thanks for taking my questions.

Speaker #1: Thank you, Bill. Listen, again, there's a reason why we don't comment on our discussions with FDA. You know, FDA owns the timeline. We are—we are working collaboratively with them.

Speaker #2: The problem is, after that, we need to go back to the centers and, you know, notify the IRBs and focusing on, you know, getting actual cases done with that approval.

Speaker #1: We believe we have done everything that we've been asked to do. I'll leave it at that. The heart is ahead of the lung, right now, and it has been to date.

Speaker #2: So I'm not necessarily focusing on FDA approval per se. I'm focusing on the tangible outcome, the impact on our quarterly print, which is doing cases with that IDE.

Speaker #1: So that's why we are predicting that once we gain visibility on the IDE for heart, we will use that as a stepping stone to get the lung IDE amendment approved.

Speaker #6: Thank you.

Speaker #3: Your next question comes from Ryan Daniels with William Blair. Your line is open.

Speaker #5: Yeah, hello. This is Matthew Mardula. I'm for Ryan. Thank you for taking the questions, and thank you for all the details on the call.

Speaker #1: We—we have to remind the audience that what I'm talking about is not the IDE approval per se. We—I mean, everybody knows that IDE amendment is anywhere between 30 and 60 days.

Speaker #5: And I kind of want to follow up on the previous question, but ask it in a different way. Can you give us an update on the percentage or amount of the de novo enhanced clinical trials that have been completed so far?

Speaker #1: The problem is, after that, we need to go back to the centers and, you know, notify the IRBs and focusing on, you know, getting actual cases done with that approval.

Speaker #5: I know in your prepared remarks you discussed a minimal contribution Q2, but any update on that contribution and then just overall the completion of the clinical trials so far?

Speaker #1: So I'm not necessarily focusing on FDA approval per se. I'm focusing on the tangible outcome: the impact on our quarterly print, which is doing cases with that IDE.

Speaker #2: Sure. Matt, thank you for the question. I would, as I stated several times, I believe over the last few months, enhanced Part B will be completed before year-end.

Speaker #5: Thank you.

Speaker #2: There's no question in our mind. But enhanced Part A, I'm sorry, Part A, I apologize if I stated B. Enhanced Part A is going to be completed before year-end this year.

Speaker #3: Your next question comes from Ryan Daniels with William Blair. Your line is open.

Speaker #4: Yeah, hello, this is Matthew Mardula on for Ryan. Thank you for taking the questions, and thank you for all the details on the call.

Speaker #2: There's no doubt about it. The slow to take in full gear is Part B for the heart and de novo. We've done a handful of cases in each.

Speaker #4: And I kind of want to follow up on the previous question, but ask it in a different way. Can you give us an update on the percentage or amount of the de novo enhanced clinical trials that have been completed so far?

Speaker #2: Nothing really to hang our hat on. So that's why I said there was no meaningful contribution in Q2 from these two. The only way we can really put that to test is by getting that IDE approval IDE supplement approved and giving the center the freedom to use control arm that is not hampered by competitive dynamics.

Speaker #4: I know in your prepared remarks you discussed a minimal contribution from enhanced Part B and de novo in Q2, but is there any update on that contribution? And then, just overall, the completion of the clinical trials so far?

Speaker #1: Sure. Matt, thank you for the question. I would, as I stated several times, I believe over the last few months, enhanced Part B will be completed before year-end.

Speaker #2: So we expect that once it happens, we expect we hope for rapid adoption and rapid enrollment. And again, we're keeping our focus around 12 to 18 months from initiation of the, you know, enrollment of the study.

Speaker #1: There's no question in our mind. But enhanced Part A—I'm sorry, Part A; I apologize if I stated B. Enhanced Part A is going to be completed before year-end this year.

Speaker #1: There's no doubt about it—the slow to kick in full gear is Part B for the heart and de novo. We've done a handful of cases in each.

Speaker #2: So we're still within the bounds of 2027. But we need to start seeing uptake, and we need to get that IDE approved in the timelines we outlined.

Speaker #1: There's nothing really to hang our hat on. So that's why I said there was no meaningful contribution in Q2 from these two. The only way we can really put that to the test is by getting that IDE supplement approved and giving the center the freedom to use a control arm that is not hampered by competitive dynamics.

Speaker #5: Perfect. Thank you for that. And one very quick follow-up regarding the international growth. You talked about securing reimbursement for both machine perfusion and services internationally that should take effect later this year, or early 2027.

Speaker #5: Sounds like initial conversations internationally are going better than expectations. Can you give us some insights into that growth internationally? And I know it's still early, but any big picture ideas as well as with the kind of tenders and contracts?

Speaker #1: So we expect that once it happens, we expect—we expect, we hope for rapid adoption and rapid enrollment, and again, we're keeping our focus around 12 to 18 months from initiation of the, you know, enrollment of the study.

Speaker #5: In Italy as well as expanding outside of Italy.

Speaker #2: Matt, that's an important question, but I want to kindly correct the question. I did not say that we secure reimbursement for the product and service across Europe.

Speaker #1: So we're still within the bounds of 2027. But we need to start seeing uptake, and we need to get that IDE approved in the timelines we outlined.

Speaker #2: I said we secured a budget in Italy only in Italy that budget that I'm referring to is in Italy. And that's where we the regional budgets have been ratified in Q2, and we expect the going through the bureaucratic steps to get that budget dispersed is underway in Italy.

Speaker #4: Perfect. Thank you for that. And one very quick follow-up regarding the international growth. You talked about securing reimbursement for both machine perfusion and services internationally that should take effect later this year, or early 2027.

Speaker #4: It sounds like initial conversations internationally are going better than expected. Can you give us some insight into that international growth? I know it's still early, but do you have any big-picture ideas, especially regarding tenders and contracts?

Speaker #2: And we hope to get through that bureaucratic process by end of this year, beginning of next. I'm referring specifically on Italy. All the other dynamics across Europe are targeting or prioritizing countries that already have budgets for reimbursement.

Speaker #4: In Italy, as well as expanding outside of Italy.

Speaker #1: Matt, that's an important question, but I want to kindly correct the question. I did not say that we secure reimbursement for the product and service across Europe.

Speaker #2: For example, Netherlands, France, the UK, those have budgets already approved. What we're doing, however, is we're expanding our outreach to compete not just for the technology and the transplant, but also for logistics, which their budgets are large, already approved and already at the national tender level.

Speaker #1: I said we secured a budget in Italy, only in Italy, that budget that I'm referring to is in Italy. And that's where we—the regional budgets have been ratified in Q2, and we expect the going through the bureaucratic steps to get that budget dispersed is underway in Italy.

Speaker #2: That's what we are competing for. And that's where we see a near-term potential growth opportunity as a first step towards broader OCS NOP growth across Europe.

Speaker #1: And we hope to get through that bureaucratic process by the end of this year, or the beginning of next. I'm referring specifically to Italy. All the other dynamics across Europe are targeting or prioritizing countries that already have budgets for reimbursement.

Speaker #5: Perfect. Thank you for all the clarification.

Speaker #3: Your next question comes from Matt O'Brien with Piper Sandler. Your line is open.

Speaker #4: Hi, this is Sam on for Matt. Thank you so much for taking our question. I guess we still waiting on the CMS final role regarding OPO recertification.

Speaker #1: For example, Netherlands, France, the UK, those have budgets already approved. What we're doing, however, is we're expanding our outreach to compete not just for the technology and the transplant, but also for logistics, which their budgets are large, already approved and already at the national tender level.

Speaker #4: You know, how are you planning for the potential opportunity here and what do you think transmedics' role would look like and the benefits transmedics if it could become an OPO?

Speaker #2: Thank you, Sam. We are waiting exactly like everybody else so we hope that decision will be made sometime in the second half of this year.

Speaker #1: That's what we are competing for. And that's where we see a near-term potential growth opportunity as a first step towards broader OCS NOP growth across Europe.

Speaker #2: We are waiting ready and able if we're fortunate to be given the opportunity to compete for as many DSAs as CMS would allow us to participate at.

Speaker #4: Perfect. Thank you for all the clarification.

Speaker #3: Your next question comes from Matt O'Brien with Piper Sandler. Your line is open.

Speaker #6: Hi, this is Sam on for Matt. Thank you so much for taking our question. I guess we're still waiting on the CMS final role regarding OPO recertification.

Speaker #2: But until that happens, we have to continue to do what we're doing. We see two significant benefits. The first is to our ability to leverage technology clinical leadership and clinical expertise to expand the donor pool.

Speaker #6: You know, how are you planning for the potential opportunity here, and what do you think transmedics' role would look like and the benefits transmedics if it could become an OPO?

Speaker #1: Thank you, Sam. We are waiting exactly like everybody else. So we hope that decision will be made sometime in the second half of this year.

Speaker #2: And to increase the utilization of the existing donor pool using OCS technology. Reduce the overall cost by eliminating frankly costly and unnecessary excessive procedures that really hasn't demonstrated its ability to increase organ supply like NRP.

Speaker #1: We are waiting ready and able if we're fortunate to be given the opportunity to compete for as many DSAs as CMS would allow us to participate at.

Speaker #2: But again, if that doesn't happen, we will continue to operate in the same mode that we're operating in. And all of everything we discussed today from a growth opportunities you noticed does not include us becoming an OPO.

Speaker #1: But until that happens, we have—we have to—we have to continue to do what we're doing. We see two significant benefits. The first is to our ability to leverage technology clinical leadership and clinical expertise to expand the donor pool.

Speaker #2: So because this is a binary decision, it's either going to happen or it's not going to happen. So that's why we can't count on it until it happens.

Speaker #4: Okay, great. Thanks for that. And then also I want to continue the conversation on the really strong flight performance that's happened in the past few months.

Speaker #4: I know you mentioned market share gains. You know, could you talk a little bit about how double-shifting the aircraft is going and how durable do you think this momentum is in the flight performance?

Speaker #1: And to increase the utilization of the existing donor pool using OCS technology. Reduce the overall cost by eliminating—frankly, costly and unnecessary excessive procedures that really hasn't demonstrated its ability to increase organ supply like NRP.

Speaker #2: Thank you, Sam. I think the growth is primarily market share gain. The double-shifting is what improved the margin. So there are two different things.

Speaker #1: But again, if that doesn't happen, we will continue to operate in the same mode that we're operating in, and everything we discussed today from a growth opportunities perspective will remain unchanged.

Speaker #2: The growth in revenue is primarily market share gain. And other vendors reported earlier today that they lost a major account. Where do you think that major account went to?

Speaker #1: You notice does not include us becoming an OPO. So because this is a binary decision, it's either going to happen or it's not going to happen.

Speaker #2: It came to us. The double-shifting give us significant operating leverage. So how durable it is, we think it's durable. And again, we will let the print speak for itself.

Speaker #1: So that's why we can't count on it until it happens.

Speaker #6: Okay, great. Thanks for that. And then, also, I want to continue the conversation on the really strong slide performance that's happened in the past few months.

Speaker #6: I know you mentioned market share gains. You know, could you talk a little bit about how double-shifting the aircraft is going and how durable do you think this momentum is in the flight performance?

Speaker #3: Your next question comes from Patrick Wood with UBS. Your line is open.

Speaker #5: Awesome. Thanks, guys. Given the time, I'll just keep it to one. Curious about Germany and what it was that drove you, I guess, as the next steps to be looking at that market.

Speaker #1: Thank you, Sam. I think the growth is primarily market share gain. The double-shifting is what improved the margin. So there are two different things.

Speaker #5: I think they're kind of unique in the DCD isn't really on the table at the moment. What was it about Germany just size and scale and patience?

Speaker #1: The growth in revenue is primarily market share gain. And other vendors reported earlier today that they lost a major account. Where did—where do you think that major account went to?

Speaker #5: Why was that the right next move after Italy? Thanks.

Speaker #2: Patrick, first congratulations on the new role and thank you for the question. We I want to clarify one point. We are not in Germany today.

Speaker #1: It came to us. The double-shifting gives us—give us significant operating leverage. So

Speaker #2: We made a major strategic investment in PAD aviation in Paderborn, Germany, because of its central location. In Europe, we can access any potential European country or donor site within two hours of flight from Paderborn.

Speaker #3: Your next question?

Speaker #1: So, how durable is it? We think it's durable, and again, we will let the print speak for itself.

Speaker #2: That's what we make the investment in, but we're not active in Germany because of lack of reimbursement. We still negotiating with the German reimbursement authority.

Speaker #3: Your next question comes from Patrick Wood with UBS. Your line is open.

Speaker #5: Awesome. Thanks, guys. Given the time, I'll just keep it to one. Curious about Germany and what it was that drove you, I guess, as the next steps to be looking at that market.

Speaker #2: And also as you know, there's no DCD donation in Germany. So it's a complex market and you know we are actively engaged there, but we don't see them as a near-term growth catalyst for us.

Speaker #5: I think they're kind of unique in the DCD, isn't it, really on the table at the moment. What was it about Germany, just size and scale and patience?

Speaker #5: Why was that the right next move after Italy?

Speaker #5: Gotcha. Very clear. Thanks, guys.

Speaker #4: Thanks.

Speaker #1: Patrick, first, congratulations on the new role, and thank you for the question. I want to clarify one point: we are not in Germany today.

Speaker #3: Your next question comes from Daniel Markowitz with Evercore ISI. Your line is open.

Speaker #5: Good afternoon. Thanks for taking my questions. I was curious on the consulting fees in the first half and some of the findings of that work.

Speaker #1: We made a major strategic investment in PAD Aviation in Paderborn, Germany, because of its central location. In Europe, we can access any potential European country or donor site within two hours of flight from Paderborn.

Speaker #5: So sort of asking a different way what some of the folks before me have asked. If I recall correctly, it was focused on OUS market development.

Speaker #5: I guess I'm curious, what was the focus of the diligence and what did you find that gave you the confidence to accelerate investments here?

Speaker #1: That's what we make the investment in, but we're not active in Germany because of lack of reimbursement. We still negotiating with the German reimbursement authority.

Speaker #5: I think some investors want a better understand and get more confidence that some of these cost-conscious markets seem right for OCS and logistics adoption.

Speaker #1: And also, as you know, there's no DCD donation in Germany. So it's a complex market, and, you know, we are—we are actively engaged there, but we don't see them as a near-term growth catalyst for us.

Speaker #5: Thank you.

Speaker #2: Daniel, thank you for the question. I'll start and I'll let Gerardo comment if he has anything to add. I think we learned a ton specifically about the existence of these significant budgets for organ transplant logistics.

Speaker #5: Gotcha. Very clear. Thanks, guys.

Speaker #3: Your next question comes from Daniel Markovitz with Evercore ISI. Your line is open.

Speaker #2: Significant budgets for increasing the utilization of donor pools. Which we believe could be a first step towards expanding the overall clinical adoption in Europe.

Speaker #4: Good afternoon. Thanks for taking my questions. I was curious about the consulting fees in the first half, and some of the findings from that work.

Speaker #4: So sort of asking a different way, what some of the folks before me have asked. If I recall correctly, it was focused on OUS market development.

Speaker #4: I guess I'm curious, what was the focus of the diligence, and what did you find that gave you the confidence to accelerate investments here?

Speaker #2: And they gave us a roadmap to all the tenders upcoming over the next several quarters. Across Europe, which is guiding us of who where and how we can compete.

Speaker #4: I think some investors want a better understand and get more confidence that some of these cost-conscious markets seem right for OCS and logistics adoption.

Speaker #2: Gerardo, would you like to add anything?

Speaker #4: Thank you.

Speaker #1: Nope. I think you carry on the name.

Speaker #1: Daniel, thank you for the question. I'll start, and I'll let Gerardo comment if he has anything to add. I think we learned a ton specifically about the existence of these significant budgets for organ transplant logistics.

Speaker #5: Very helpful. Thank you. And then just to follow up on PAD aviation, all the guidance metrics were kind of XPAD, but can we get a sense for what the level of investment will look like and how that might impact the P&L both near-term and maybe call it through the rest of this year and into next year?

Speaker #1: Not yet. I think as we mentioned, we're not prepared just yet to provide any number or any metric. However, I think by Q3, we should be able to align the internally, we should be able to provide some guidance for the remaining of the year.

Speaker #1: Significant budgets for increasing the utilization of donor pools. Which we believe could be a first step towards expanding the overall clinical adoption in Europe.

Speaker #2: The only thing I would add to that, Daniel, is I want to caution the audience and the listeners that PAD aviation investment is not summit aviation investment.

Speaker #1: And they gave us a roadmap to all the tenders upcoming over the next several quarters. Across Europe, which is guiding us of who where and how we can compete.

Speaker #2: Summit aviation, we had a huge bent-up demand in the United States. PAD is just the beginning. It's the first step towards establishing that. So we're not going to be as bullish in capital deployment until we see the demand justifies that.

Speaker #1: Gerardo, would you like to add anything?

Speaker #2: Nope. I think you carry on the name.

Speaker #4: Very helpful. Thank you. And then just to follow up on PAD Aviation, all the guidance metrics were kind of expad, but can we get a sense for what the level of investment will look like and how that might impact the P&L both near-term and maybe call it, you know, through the rest of this year and into next year?

Speaker #2: So it's going to be slightly different to the summit aviation. Investment. But we will provide more color and more detail in Q3.

Speaker #2: Not yet. I think, as we mentioned, we're not prepared just yet to provide any number or any metric. However, I think by Q3, we should be able to align internally, and we should be able to provide some guidance for the remainder of the year.

Speaker #5: That makes sense. Thank you for the directional color.

Speaker #3: Your next question comes from Young Li with Jefferies. Your line is open.

Speaker #1: The only thing I would add to that, Daniel, is I want to caution the audience and the listeners that PAD Aviation investment is not Summit Aviation investment.

Speaker #5: All right. Great. Thanks for taking the question. I'll just keep it to one. Maybe just to follow up on the prior OPO question and lines of conversation.

Speaker #1: Summit Aviation, we had a huge pent-up demand in the United States. PAD is just the beginning—it's the first step towards establishing that. So we're not going to be as bullish in capital deployment until we see the demand justifies that.

Speaker #5: This kind of curious about, I guess, maybe if you can update us on the next milestone, so it's the modernization act. Any changes in timelines and expectations there as well as just, you know, you talked about OPO pressures in, you know, one Q this year.

Speaker #1: So, it's going to be slightly different from the Summit Aviation investment, but we will provide more color and more detail in Q3.

Speaker #5: How has that dynamic evolved? How much have you seen in two Q and expectations for second half impact?

Speaker #4: That makes sense. Thank you for the directional color.

Speaker #2: Thank you, Young. Thank you for the question. Young, I'm I really I really would love to address this in a, you know, in a direct way.

Speaker #3: Your next question comes from Young Lee with Jefferies. Your line is open.

Speaker #4: All right. Great, thanks for taking the question. I'll just keep it to one—maybe just to follow up on the prior OPO question and line of conversation.

Speaker #2: There are no updates. We're waiting for CMS. CMS may delay the decision point. CMS may decide that they're not going to allow outside entities to participate.

Speaker #4: This kind of curious about, I guess, maybe if you can update us on the next milestones with the modernization act, any changes in timelines, and expectations there.

Speaker #2: TransMedics is going to continue to grow and expand, regardless of that initiative. The dynamic around the OPO, you know, we printed Q2. Everybody's looking at the OPTN data like we all do.

Speaker #4: As well as, just, you know, you talked about OPO pressures in, you know, Q1 this year. How has that dynamic evolved? How much have you seen in Q2?

Speaker #2: I think we are we're I don't see that dynamic impacting the overall numbers. And as I said, I am laser in the team are laser focused on our own adoption, our own expansion, our own growth.

Speaker #4: And expectations for second half impact?

Speaker #1: Thank you, Young. Thank you for the question. Young, I really would love to address this in a, you know, in a direct way.

Speaker #2: I worry about providing commentary that is really not directly related to TransMedics that could be misperceived. That's why I'm addressing it in that fashion.

Speaker #1: There are no updates. We're waiting for CMS. CMS may delay the decision point. CMS may decide that they're not going to allow outside entities to participate.

Speaker #2: At the end of the day, CMS has the ball. CMS has is on the clock. Everybody and their mothers are waiting for CMS to make a decision.

Speaker #1: TransMedics is going to continue to grow and expand, regardless of that initiative. The dynamic around the OPO, you know, we printed Q2. Everybody's looking at the OPTN data like we all do.

Speaker #2: Until they make a decision, we have no update, unfortunately, or no updates. So I'll leave it at that.

Speaker #5: Understood. Thank you.

Speaker #3: Your next question comes from Suraj Kalia with Oppenheimer and Company. Your line is open.

Speaker #1: I think we are we're I don't see that dynamic impacting the overall numbers. And as I said, I am laser in the team, are laser-focused on our own adoption, our own expansion, our own growth.

Speaker #5: Hi, Waleed. Gerardo, can you hear me all right?

Speaker #2: Loud and clear.

Speaker #5: Gentlemen, congrats on a nice quarter. So Waleed, a couple from my side and I'll pose them upfront. The you mentioned about the census that you all had signed for additional service platforms and the value of the TransMedics provides.

Speaker #1: I worry about providing commentary that is really not directly related to TransMedics that could be misperceived. That's why I'm addressing it in that fashion.

Speaker #5: Maybe if you could shed it for us, what how do you define value in this specific context? That is question number one. And Waleed, question number two would be the 10,000 organs by 2028.

Speaker #1: At the end of the day, CMS has the ball. CMS is on the clock. Everybody and their mothers are waiting for CMS to make a decision.

Speaker #1: Until they make a decision, we have no update, unfortunately, or no updates. So I'll leave it at that.

Speaker #5: Look, kidneys seems highly unlikely to contribute by that time. And enhanced part B or sorry, if enhanced part A is completed, right, the DBD standard criteria label expansion will also come presumably late 2027.

Speaker #4: Understood. Thank you.

Speaker #3: Your next question comes from Suraj Talia with Oppenheimer & Company. Your line is open.

Speaker #5: So help us tie the different pieces together on the 10,000 units outlook by 2028. Gentlemen, thank you.

Speaker #4: Hi. Well, hey Gerardo, can you hear me all right?

Speaker #1: Loud and clear.

Speaker #2: Thank you, Suraj. Let me start by addressing the second piece first. The 10,000 transplants by 2028 was established at the JP Morgan conference, I believe, in January of 2023.

Speaker #4: Gentlemen, congrats on a nice quarter. So, Waleed, a couple from my side, and I'll pose them up front. You mentioned the census that you'll assign for additional service platforms.

Speaker #4: And the value that TransMedics provides. Maybe if you could shed for us, what how do you define value in this specific context? That is question number one.

Speaker #2: So we never factored chops. We never factored kidney. The 10,000 transplants is on the current platform, heart, lung, liver, at the current pace at the current how do you call it?

Speaker #4: And Waleed, question number two would be the 10,000 organs by 2028. Look, kidneys seem highly unlikely to contribute by that time. And enhanced Part B—oh, sorry, if enhanced Part A is completed, right, the DBD standard criteria label expansion will also come, presumably late 2027.

Speaker #2: Adoption, proportioned. Kidney is what gets us from 10 to 20, and that's by 2030. And 2032, that includes international numbers. So I don't want anybody to be confused that 2028 or the 10,000 transplants has any of enhanced part B or chops?

Speaker #4: So help us tie the different pieces together on the 10,000 units outlook by 2028. Gentlemen, thank you.

Speaker #1: Thank you, Suraj. Let me start by addressing the second piece first. The 10,000 transplants by 2028 was established at the J.P. Morgan Conference, I believe, in January of 2023.

Speaker #2: No, this is all on those all came after that goal was set. So our expectation is to meet that goal with or without chops, with B.

Speaker #1: So we never factored chops. We never factored kidney. The 10,000 transplants is on the current platform, heart, lung, liver, at the current pace at the current how do you call it?

Speaker #2: So that's number two. Number one, it's simply stated, Suraj, TransMedics has built an infrastructure that is delivering significant value. Across the entire transplant ecosystem.

Speaker #1: Adoption, proportioned. Kidney is what gets us from 10 to 20, and that's by 2030. And 20 2032, that includes international numbers. So I don't want anybody to be confused that 20 2028 or the 10,000 transplants has any of enhanced part B or chops?

Speaker #2: We know that transplant ecosystem is very choppy. It's very segmented. And there's significant inefficiencies both from workflow organ utilization and expense. By efficientizing that entire workflow, by providing additional technologies like our digital ecosystem, by having the command center run the entire process for the transplant program, we become a trusted partner to transplant programs.

Speaker #1: No, this is all on those—all came after that goal was set. So our expectation is to meet that goal with or without CHOP, with or without enhanced Part B.

Speaker #2: We hope that that partnership translates over time to broader adoption and deeper utilization. That's simply stated. That's the approach.

Speaker #1: So that's number two. Number one, it's simply stated, Suraj, TransMedics has built an infrastructure that is delivering significant value across the entire transplant ecosystem.

Speaker #5: Thank ank you.

Speaker #3: Your next question comes from Mike Matson with Needham. Your line is open.

Speaker #1: We know that transplant ecosystem is very choppy. It's very segmented. And there's significant inefficiencies both from workflow organ utilization and expense. By efficientizing that entire workflow, by providing additional technologies like our digital ecosystem, by having the command center run the entire process for the transplant program, we become a trusted partner to transplant programs.

Speaker #5: Yeah, thanks. I'll just limit it to one, but, you know, just on this pad deal. So I guess I'm a little confused what you're getting with the deal.

Speaker #5: Does this company I assume they own some planes. And then the charter business that they have, the non-medical charter business, sounds like that's going to continue but I assume that'll kind of wind down over time as you ramp up the OCS part of their business.

Speaker #5: Is that all fair statements? Thanks.

Speaker #1: We hope that that partnership translates over time to broader adoption and deeper utilization. That's simply stated. That's the approach.

Speaker #2: Mike, thank you for the question. What we're getting with the pad aviation is the license to operate in Europe. This is not a small undertaking.

Speaker #4: Thank you.

Speaker #2: What we expect to happen again, similar to Summit, but will take a slightly longer pathway because of the demand. Is we will transition out of the charter business into 100% transplant operations of transplant missions over time, as the demand ramps up.

Speaker #3: Your next question comes from Mike Madsen with Needham. Your line is open.

Speaker #4: Yeah, thanks. I'll just limit it to one, but, you know, just on this pad deal. So, I guess I'm a little confused what you're getting with the deal.

Speaker #4: Does this company I assume they own some planes and then the charter business that they have, the non-medical charter business. Sounds like that's going to continue but I assume that'll kind of wind down over time as you ramp up the OCS part of their business.

Speaker #2: The company has a large number of pilots. A fairly sizable fleet that they operate doesn't necessarily mean they own. And we're leveraging all of that to minimize our capital expenditures early on until the demand is there to justify us buying our own planes.

Speaker #4: Is that all fair statement? Thanks.

Speaker #1: Mike, thank you for the question. What we're getting with the PAD aviation is the license to operate in Europe. This is not a small undertaking.

Speaker #2: But to get access to the aviation license to operate in Europe and internationally, and get access to having 40 plus pilots under our command, and an efficient fleet, that is available.

Speaker #1: What we expect to happen again, similar to Summit, but will take a slightly longer pathway because of the demand. Is we will transition out of the charter business into 100% transplant operations or transplant missions over time, as the demand ramps up.

Speaker #2: And the ability to participate in all these transplant logistics centers across Europe as the first step towards expanding our medical device adoption is critical.

Speaker #2: In Europe. So that's why we yeah. Go ahead.

Speaker #1: The company has a large number of pilots. A fairly sizable fleet that they operate doesn't necessarily mean they own. And we're leveraging all of that to minimize our capital expenditures early on until the demand is there to justify us buying our own planes.

Speaker #5: No, that's great. That answers my question. Makes a lot of sense. Thank you.

Speaker #2: Thank you.

Speaker #3: Your next question comes from David Rescott with Baird. Your line is open.

Speaker #5: Oh, great. Thanks for taking the questions here. I guess I'll also limit it to one and congrats on the results here. I appreciate the comments on this, you know, this delta between the service and product revenue that you saw from a growth perspective.

Speaker #1: But to get access to the aviation license to operate in Europe and internationally, and get access to having 40-plus pilots under our command, and an efficient fleet that is available, and the ability to participate in all these transplant logistics centers across Europe as the first step towards expanding our medical device adoption is critical.

Speaker #5: In the quarter, but curious if you could provide any more color as to whether or not that was, you know, seen more either on the heart or liver side or DCD versus DBD, just curious to hear why exactly or where exactly you've seen that bigger step up.

Speaker #1: In Europe. So that's why we yeah. Go ahead.

Speaker #5: And then I guess is it fair to assume that the remainder for the remainder of 2026, that this higher effectively service revenue dollar per transplant, you know, should remain into the back half of the year?

Speaker #4: No, that's great. That answers my question. Makes a lot of sense. Thank you.

Speaker #1: Thank you.

Speaker #3: Your next question comes from David Rescott with Baird. Your line is open.

Speaker #5: Thank you.

Speaker #4: Oh, great. Thanks for taking the questions here. I guess I'll also limit it to one and congrats on the results here. I appreciate the comments on this, you know, this delta between the service and product revenue that you saw from a growth perspective.

Speaker #2: David, I'm sorry. Can you please repeat the first part of the question about DBD and DCD? I missed that. I apologize.

Speaker #5: Oh, yeah, can you hear me still?

Speaker #2: Yeah, yeah, I can hear you now.

Speaker #5: Yeah. Yeah, yeah. I was just curious. Excuse me. If this higher service revenue dollar was seen more or more specifically coming from, you know, either liver or heart or DCD, liver, DBD, liver, you know, just curious if any of those specific organs were seeing a higher service utilization.

Speaker #4: In the quarter, but curious if you could provide any more color as to whether or not that was, you know, seen more either on the heart or liver side or DCD versus DBD, just curious to hear why exactly or where exactly you've seen that bigger step up.

Speaker #4: And then I guess is it fair to assume that the remainder for the remainder of 2026, that this higher effectively service revenue dollar per transplant, you know, should remain into the back half of the year?

Speaker #2: Yeah. Thank you, David, for the question. Service is associated with OCS use and they go hand in hand. So when we have higher service dollars, it's associated with OCS use for the most part.

Speaker #4: Thank you.

Speaker #1: David, I'm sorry. Can you please repeat the first part of the question about DBD and DCD? I missed that. I apologize.

Speaker #2: You know, and the delta is potentially dry runs. Because our team gets deployed and we charge for the service. So that could be the delta.

Speaker #4: Oh, yeah, can you hear me still?

Speaker #1: Yeah, yeah, I can hear you now.

Speaker #4: Yeah. Yeah, yeah. I was just curious. Excuse me. If this higher service revenue dollar was seen more or more specifically coming from, you know, either liver or heart or DCD, liver, DBD, liver, you know, just curious if any of those specific organs were seeing a higher service utilization.

Speaker #2: But we see it across the board. We see it in liver. We see it in heart. We see it in lung when lung is used.

Speaker #2: You know, nobody can operate the OCS without service.

Speaker #4: And David, if I can add something there. We're expecting that in the second half, the gross margin of service will normalize a little bit.

Speaker #1: Yep. Thank you, David, for the question. Service is associated with OCS use and they go hand in hand. So when we have higher service dollars, it's associated with OCS use for the most part.

Speaker #4: We'll remain above historical levels, but we'll certainly not be comparable to the one in Q2. Service margin is closely linked to volume. So as we have more volume, we should be able to achieve those new levels of gross margin.

Speaker #1: You know, and the delta is potentially dry runs. Because our team gets deployed, and we charge for the service, so that could be the delta.

Speaker #4: But for instance, in Q3, when volume goes down, there is no way we can achieve those levels. I hope that answers your question.

Speaker #5: Yeah, thank you.

Speaker #3: Your next question comes from Tom Stephan with Stifel. Your line is open.

Speaker #1: But we see it across the board. We see it in liver. We see it in heart. We see it in lung when lung is used.

Speaker #1: You know, nobody can operate the OCS without service.

Speaker #5: Great. Hey guys, thanks for taking the question. I'll leave it to one. But I want to ask about 2027. Sort of in the context of street, I think roughly $3 of earnings next year.

Speaker #5: And David, if I can add something there. We're expecting that, in the second half, the gross margin of service will normalize a little bit.

Speaker #5: Maybe Gerardo for you, just curious if you can help us think about 27 OPEX or maybe 27 operating margin. This year, I think you said the midpoint of the new guide around 13%.

Speaker #5: We'll remain above historical levels, but we'll certainly not be comparable to the one in Q2. Service margin is closely linked to volume, so as we have more volume, we should be able to achieve those new levels of gross margin.

Speaker #5: Last year was, I think, 18 to 19%. So do we think about 2027 op margin somewhere in between? Maybe closer to either of those ends, being 13 or 19%?

Speaker #5: But, for instance, in Q3, when volume goes down, there is no way we can achieve those levels. I hope that answers your question.

Speaker #5: Just any directional commentary would be helpful. You know, as we try to reset our models a bit, down to the bottom line, maybe to ask in more bluntly, for 27 earnings, should we be above or below $2?

Speaker #4: Yeah, thank you.

Speaker #3: Your next question comes from Tom Stefan with Stifel. Your line is open.

Speaker #5: Thanks.

Speaker #4: Yeah, thank you. Thank you for the question. Operating margin, it's a clear it's clearly linked in the case of TransMedics to basically three elements.

Speaker #4: Great. Hey guys, thanks for taking the question. I'll leave it to Juan. But I want to ask about 2027. Sort of in the context of street and I think roughly $3 of earnings, next year, maybe Gerardo for you, just curious if you can help us think about 27 OPEX or maybe 27 operating margin.

Speaker #4: One, it's our scale, so the volume that we have. Two, it's the usual gross margin. But three, and probably more importantly, it's capturing the benefits that we have designed within OCS 3.0 and Kidney.

Speaker #4: This year, I think you said the midpoint of the new guide is around 13%. Last year, it was, I think, 18% to 19%. So, should we think about the 2027 operating margin as somewhere in between?

Speaker #4: To improve our gross margin. Those three elements will drive a long-term operating margin that will be sustainable to the levels that I have mentioned before.

Speaker #4: Maybe closer to either of those ends, being 13% or 19%? Just any directional commentary would be helpful. You know, as we try to reset our models a bit, down to the bottom line—maybe to ask more bluntly—for '27 earnings, should we be above or below $2?

Speaker #4: Right now, for 2027, it's early to say which is the right forecast. The reason for that is because we need to see how the second half of this year evolves in terms of the different projects that we currently have.

Speaker #4: Thanks.

Speaker #4: To make sure that we have clarity on a reasonable 2027 view. Let me put you one example. We, for instance, the clinical programs, we had significant investment in 2020.

Speaker #5: Yeah, thank you. Thank you for the question. Operating margin—it's clearly linked, in the case of TransMedics, to basically three elements.

Speaker #5: One, it's our scale. So the volume that we have. Two, it's the usual gross margin. But three, and probably more importantly, it's capturing the benefits that we have designed within OCS 3.0 and Kidney to improve our gross margin.

Speaker #4: But now that we have the late that those programs are delayed, that investment is going to next year. We need to see how the rest of the programs evolve as I said, to have better clearer visibility.

Speaker #4: And then we will be able to provide a better view. So with that, I don't want to go into more details, but certainly in Q4, we will have better view and provide guidance on 2027.

Speaker #5: Those three elements will drive a long-term operating margin that will be sustainable to the levels that I have mentioned before. Right now, for 2027, it's early to say which is the right forecast.

Speaker #5: Understood. Thanks.

Speaker #3: This concludes the question and answer session. I'll turn the call to Waleed for closing remarks.

Speaker #5: The reason for that is because we need to see how the second half of this year evolves in terms of the different projects that we currently have.

Speaker #2: Thank you, operator. Thank you all very much for taking the time to be in this call and looking forward to our next call. Thank you.

Speaker #2: Have a great evening.

Speaker #5: To make sure that we have clarity on a reasonable 2027 view. Let me put you one example. We, for instance, the clinical programs we had significant investment in 20206.

Speaker #5: But now that we have delayed that those programs are delayed, that investment is going to next year. We need to see how the rest of the programs evolve as I said to have better clear visibility and then we will be able to provide a better view.

Speaker #5: So with that, I don't want to go into more details, but certainly in Q4 we will have a better view and provide guidance on 2027.

Speaker #4: Understood. Thanks.

Speaker #3: This concludes the question and answer session. I'll turn the call to Waleed for closing remarks.

Speaker #1: Thank you, operator. Thank you all very much for taking the time to be on this call. I look forward to our next call. Thank you.

Speaker #1: Have a great evening.