TransMedics Group, Inc.

projections, expectations, predictions, or forward-looking statements, whether because of new information, future events, or developments, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 5th, 2026. And with that, I will now turn the call over to Waleed Hasmeen, President and Chief Executive Officer.

Thank you so much, Hannah. Good afternoon, everyone, and welcome to Transmedics First Quarter's 2026 Earnings Call. As always, joining me today is Gerardo Hernandez, our Chief Financial Officer. Our vision has always been bold and growth-oriented. Since inception, Transmedics has been relentless in our pursuit to transform organ transplant therapy by increasing utilization of donor organs and improving the clinical outcomes of transplant patients through technology and service innovation and by disrupting the status quo. To accomplish this, we've been deliberate yet aggressive in our strategic investment in growth initiatives. We believe that 2026 is a critical and transformational year that stands to cement transmedics near, mid, and long-term growth trajectories and global market position. In the U.S., we're actively engaged in growing our heart and lung franchises by advancing our enhanced heart and de novo lung programs to expand our clinical evidence to support broader adoption. In parallel, We are also completing the development of the OCS kidney platform using our Gen 3.0 platform. Our OCS kidney platform will enable us to access the largest segment of the global transplant market, which is kidney transplantation. This will happen for the first time in the history of transmedics. We strongly believe that once regulatory approvals are in hand, OCS kidney will derive significant growth for our abdominal franchise. And we're not stopping here. We're also actively engaged in upgrading our heart, lung, and liver devices to Gen 3.0 platform, which will enable us to gain significant future operating leverage and increase clinical adoption of the OCS platform in these critical organ transplant segments. Our growth initiatives also now go beyond warm perfusion. We recently unveiled the Transmedics Controlled Hypothermic Organ Preservation System, or TRAPS, CHOPS is designed to expand our product offering to cover new segments of the transplant market best served with cold static storage. And finally, our growth initiatives now extend beyond the U.S. to important international markets. In Europe, we are undertaking a bold initiative to replicate the NOP clinical service and transplant logistics model to catalyze European OCS adoption and potentially expand our total addressable market. I will provide details on each of these exciting initiatives on today's call. As you can see from our ongoing growth initiatives, our focus remains on long-term value creation with continued investment across each pillar of our growth strategy. Specifically, I want to highlight that this is a strategic and proactive decision. And we fully expect that our financial performance over the next several quarters will reflect these necessary investments in people, infrastructure, and technology development as we capitalize on the opportunities in front of us. Based on everything we know today, we are highly encouraged and inspired by what's ahead for Transmedics. We are committed to executing our plan to drive significant growth for Transmedics and for the global transplant markets broadly. As I've stated repeatedly, I truly believe that transmedics remain in the early innings of our long-term growth opportunity. I'm excited to report that our first quarter performance that reflects a strong start for 2026. Despite the broader volatility and the transient negative impact of the U.S. Transplant Modernization Act on OPO performance and the overall donor numbers in the U.S., we managed to deliver a solid quarter to start the year. Here are the key operational highlights for 1Q2026. Total revenue for 1Q2026 was $174 million, representing approximately 21% growth year over year, and approximately 8% sequential growth from 4Q2025. U.S. transplant product revenue grew by 22% year-over-year and approximately 7% sequentially to $102 million, while OUS transplant revenue grew approximately 39% year-over-year and approximately 17% sequentially to $6 million. We delivered an adjusted operating profit of approximately $18.1 million in Q1, representing approximately 10.4% of total revenue in 1Q, while continuing to make significant investment to fuel our growth. Importantly, we ended 1Q with $462 million of cash and cash equivalents, while making substantial investments in the growth initiatives above. Transplant logistics services revenue for 1Q2026 was approximately $32 million, up from $26.1 million in 1Q2025, representing approximately 22% year-over-year growth, and up from $28.6 million in 4Q2025, representing approximately 12% sequential growth. In Q1, we maintained coverage of approximately 82% of our NOP mission requiring air transport. We expect to maintain 22 operational aircraft in the U.S. fleet throughout 2026. As we discussed, we are now focused on maximizing the utilization of our U.S. fleet and improving efficiency and capacity by double-shifting a portion of the fleet to meet the growing clinical demand. We will detail key findings from this initiative at year end. Overall, we are pleased by our strong performance that was fueled by growing OCS cage volume, increased clinical adoption. Importantly, we're also encouraged that we achieve these results without any contribution of enhanced and de novo clinical programs due to the enrollment timing of these important programs. Speaking of enhance and de novo, let me shift to provide a detailed update on our strategic initiative to unlock these two important clinical programs to help us grow our cardiothoracic franchise in the U.S. At the recent IHLT conference in April, we unveiled our transmedics-controlled hypothermic organ preservation system, or CHOPS. CHOPS is a true active cooling device designed to provide a variety of temperature conditions ranging from 4 to 12 degrees Celsius to meet the user's needs. This represents a unique and optimized approach that we believe is superior to the styrofoam boxes that are used for cold static storage of organs today. These boxes use phase-changing material or cold packs that are extremely variable and are nearly impossible to control or adjust preservation temperatures with. CHOPS will be an FDA-registered and regulated organ preservation device made by Transmedics and will serve as the control arm of the Enhance and DeNovo programs once the IDE supplement is approved. This would be a huge strategic win for Transmedics, as it stands to help avoid any reliance on competitive products as we conduct our important clinical programs for heart and lungs. We plan to file the IDE supplement within the next few weeks, and we expect this to be approved and implemented in early Q3 2026. Importantly, In parallel to these clinical programs, we fully intend to file a 510K application to clear this device for commercial use in the U.S. Once cleared by FDA, CHOPs would expand Transmedics' platform of organ preservation technologies and enable us to address shorter preservation times for organs that may be best suited for cold storage. As we highlighted in our last call, The panic and confusion caused by the competitive reaction to our clinical programs somewhat delayed our enhanced Part B and Vinobo enrollment. We not only addressed this challenge by introducing CHOPS, but we are now going after the niche market with superior, more validated cooling technology and our best-in-class NOP infrastructure. Said differently, beyond facilitating our trial enrollment, We are expanding our product portfolio to ensure that Transmedics is well-positioned to provide transplant programs around the world with the widest range of products to meet their clinical needs across the full spectrum of organ transplantation. We plan to accomplish this goal based on best-in-class technologies, best-in-class clinical services, and with the most cost-efficient and reliable logistical network in the market. Now let me move to share update on our strategic initiatives that we see as an important catalyst for our business. First is the National Transplant Modernization Act. In March, 2026, Transmedic submitted our detailed comments on CMS proposed rulemaking language for the new U.S. transplant system to advance U.S. transplant modernization initiatives. Our public comments focused on several key topics. First, on the system-wide benefits of allowing new entities with proper national infrastructure that are not current OPOs to participate in the new transplant ecosystem by becoming either a multi-regional or even national OPOs. This is to help maximize U.S. donor organ utilization for transplants. Importantly, it would provide a mechanism for fair competition and maximize transparency while driving cost efficiency to the U.S. transplant ecosystem. Second, on the benefits of using FDA-approved portable perfusion technologies to maximize donor organ utilization in the U.S., while limiting the use of unproven, fairly expensive, and potentially detrimental techniques that were organically introduced into the market over the last several years. Third, on the benefits of enabling for-profit entities to participate so long as they are strictly adhering to all performance metrics proposed by CMS and complying with all the financial disclosure requirements. Fourth, on the benefits of allowing new entities to bid to replace as many of the decommissioned OPO regions as they can support. And finally, we highlighted the potential benefits of requiring these new participating entities to provide technology and clinical support services to existing OPOs. Again, our proposal was intended to maximize the benefits to the U.S. transplant ecosystem in general and not just to one entity. If CMS agrees with this direction, Transmedics fully intend to submit bids for donor service areas, or DSAs, associated with decommissioned OPOs later this year or early next. Again, our goal is to drive efficiency, transparency, maximize patient access, and organ utilization for transplants in the U.S. The second growth initiative is NOP Europe. As we've discussed, we are actively building infrastructure and staffing in Italy across four hubs to cover northern and southern Italy. Meanwhile, we're actively engaged and applying for Italian organ transplant air and ground logistics tenders for a few Italian regions as we speak. We are also actively engaged with Benelux region, to establish NOP in the Netherlands and Belgium to create NOP hubs that are staffed by a dedicated clinical transmedic staff to manage OCS cases in these countries. Another important element to our European NOP strategy is to create the first ever dedicated and integrated transplant logistics network to cover the broad European transplant logistics demand. On that front, we announced last week that we've entered into a definitive agreement with a major European charter flight operator, PAD Aviation, or P-A-D Aviation, to partner on creating this European air logistics network. PAD is located in Paderborn, Germany, which is within one to two hour distance from all the major trans-land hubs across Europe. Importantly, they are operating a fleet of same model aircraft that we use in our US fleet, Embraer Phenom 300Es. Simply stated, We're planning to replicate the success of the U.S. NOP in Europe to potentially expand or nearly double our total addressable market, increase OCS clinical adoption, and provide efficient and dedicated transplant logistics service across Europe using our dedicated logistics network. The third growth initiative is the OCS Kidney Program. As we discussed in the last call, this represents our next frontier, with kidney expected to be the first organ to launch on our OCS Gen 3.0 technology platform. Gen 3.0 technology platform will comprise a completely redesigned form factor, hardware, software, and perfusion system that is smaller, lighter, with lower part count, purposefully designed for automated assembly and high reliability. Currently, the development program is running at full speed, and we hope to introduce the final design device and a potentially working device at the American Transplant Congress in Boston in late June. Looking ahead, we are still targeting early 2027 for our US IDE submission for our kidney program. We are extremely excited about this program as it stands to unlock a substantial incremental market opportunity measured in tens of thousands of kidney transplant procedures globally. The fourth growth initiative is OCS technology Gen 3.0, upgrade for both liver, heart, and lung systems. This program is running in parallel to the kidney program to bring significant technology upgrade to our current liver, heart, and lung systems and help catalyze our clinical adoption in these transplant segments. Again, we are intentionally developing our Gen 3 platform to gain supply chain and operating leverage with lower part counts and less reliance on critical third-party suppliers. As you can see, our growth strategy is multifaceted, with catalysts lined up across the short, mid, and long terms. We're excited and laser-focused on investing to ensure the successful execution of these initiatives throughout 2026 and beyond. Now, let me conclude by stating that based on all the dynamics we see today, both in the U.S. transplant ecosystem and at the macro level, we are reiterating our revenue guidance for the full year 2026 between $727 million to $757 million, representing a 20% to 25% growth over full year 2025. We may revisit the guidance later in the year as we gain more visibility on the pace of enhanced and de novo enrollment and other dynamics in the U.S. transplant ecosystem. With that, let me turn the call to Gerardo to cover the detailed financial results for the quarter.

Thank you, Walid. Good afternoon, everybody.

I am pleased to share Transmedics' first quarter 2026 results. Please note that a supplemental slide presentation with additional details is available in the investor section of our website. As Walid highlighted, we started 2026 with solid execution and continued momentum across our platform. Importantly, consistent with the priorities we highlighted on our previous earnings call and throughout 2025, Q1 also marked the beginning of an accelerated phase of investment and execution for Transmedics. We are advancing multiple initiatives designed to support future growth, strengthen our operating capabilities, and position us to capture the opportunities ahead. This includes continuous progress across different programs, international expansion efforts, jobs, and as announced last week, our agreement to invest in pad aviation to support the development of a dedicated organ transplant logistics network in Europe that Walid mentioned before. Together, These initiatives and these actions demonstrate our ability to move quickly and boldly in allocating capital to execute on strategic opportunities that we believe can further fuel long-term profitable growth. And as Walid said, let me repeat, these actions are designed to further fuel long-term profitable growth. Beginning Q1, we are introducing certain non-GAAP financial measures, including adjusted R&D expense, adjusted SG&A expense, adjusted operating expenses, adjusted income from operations, adjusted net income, adjusted diluted earnings per share, and adjusted operating margin. We use these non-GAAP financial measures to support financial and operational decision-making and to evaluate period-to-period performance. We believe these measures are useful to both management and investors because they provide meaningful supplemental information regarding our core operating performance. particularly as we begin to incur certain discrete expenses and because they offer greater transparency into the key metrics management uses in running the business. Examples of these discrete expenses include costs related to strategic initiatives, corporate development activities, headquarter relocation, and implementation of our new ERP. A reconciliation between GAAP and non-GAAP results is included in the supplemental materials available in our website. Now turning to our Q1 financial performance. Total revenue for the quarter was approximately $174 million, representing 21% growth year-over-year and 8% growth sequentially. Growth was led by strong liver performance, continued progress in heart, and increasing contribution from our integrated logistics platform. U.S. transplant revenue was approximately $167 million, of 20% year-over-year and 8% sequentially. by organ, liver contributed with approximately $139 million, heart with approximately $26 million, and lung with approximately $2 million. International revenue was approximately $5.6 million, up 39% year-over-year and 17% sequentially. International revenue growth was primarily driven by heart, with smaller contribution from lung. We are encouraged by the progress we are seeing internationally as we continue to build our presence and advance our expansion plans. At the same time, the business remains at an early stage and quarterly variability is expected due to reimbursement and market dynamics. Total product revenue for the quarter was approximately $108 million, up 22% year-over-year and 8% sequentially, reflecting continued strong liver performance and modest growth in heart. Service revenue for the first quarter was approximately $66 million, up 19% year-over-year and 9% sequentially. Growth was driven primarily by logistics revenue, supported by increased utilization of the Transmedics aviation fleet. Together, these results reflect continued demand for the OCS platform and the value of our integrated NOP model. Total gross margin for the first quarter was approximately 58%. broadly consistent with recent quarters and down approximately 331 basis points year-over-year. The year-over-year decline was driven primarily by increased internal supply chain activity to replenish inventory across our hubs and position inventory in support of the novel and enhanced programs, as well as continued investment in NOP networks, which together with certain one-time items impacted the margin, and we would expect this to normalize in the coming quarters. Sequentially, as mentioned before, gross margin remained broadly stable at approximately 58%. Underlying performance in the quarter was encouraging, with operational improvement largely offset by ongoing internal supply chain costs to support the NOVA and enhanced programs, continuing investments in NOP capabilities, and certain one-time items that we would expect to normalize in the coming quarters as mentioned before. Adjusted operating expenses for the first quarter were approximately $83 million, up approximately 42% year-over-year and 17% sequentially. Adjusted R&D increased approximately 45% versus the first quarter of 2025, primarily driven by the continued development of our OCS kidney program and our next-generation OCS platform. The increase also reflects ongoing product development activities in Mirandola, Italy, and headcount growth as we continue to strengthen our development capability across the U.S. and the Mirandola site. Sequentially, the increase in adjusted R&D was primarily driven by continuing investment in OCS Kidney and our next-generation OCS platform, with a smaller contribution from increased product development activity in Mirandola. Adjusted SD&A increased approximately 41%, primarily reflecting the continued investment to strengthen NOP network and IT capabilities, the initial impact of our new headquarters in Somerville, and consulting and market research in support of international expansion plans. Some of these factors also drove the sequential increase, particularly continued investment in NOP network and international expansion initiatives. Adjusted income from operations for the quarter was approximately $18 million, representing an adjusted operating margin of approximately 10%. The year-over-year decrease in operating margin primarily reflects the timing and scale of our planned investment in 2026, as well as the gross margin dynamics discussed earlier. Adjusted net income was approximately $11 million, or $0.30 per diluted share. As Walid mentioned before, we ended the quarter with approximately $462 million in cash. Cash generation from operations remained solid during the quarter, and our balance sheet remained strong and continues to provide us with the flexibility to invest in the business, support our clinical and international expansion plans, and evaluate strategic opportunities that can strengthen our platform. Now turning to our 2026 financial outlook. We are reiterating our full year 2026 revenue guidance of $727 million to $757 million, representing a 20% to 25% growth over the full year of 2025. We continue to expect growth to be driven primarily by increased transplant volume supported by OCS and NOP platforms, expansion of service revenue, and progress across our clinical and international initiatives. In terms of gross margin, we continue to expect our long-term gross margin profile to remain around the 60%. As I shared before, as we continue to invest ahead of growth and expand geographically, we do expect some near-term pressure. We feel confident in our long-term profitability goals. As we continue to scale the business, we expect to capture additional operating leverage while also benefiting from initiatives that are planned to be margin-accretive over time, including our Kidney Program, our Next Generation OCS, and our Next Generation OCS. Taken together, these factors reinforce our confidence in the long-term profitability of the business. And again, as Wally said, let me repeat, taken together, these factors reinforce our confidence in the long-term profitability potential of the business. In terms of capital allocation, our focus remains on driving long-term value. We are concentrating our investment in three key areas. First, fueling growth through continued R&D investment, strengthening our NOP network, and targeting expansion into selected international markets. Second, building a stronger foundation through enhanced systems, processes, talent, and organizational capabilities to improve efficiency, scalability, and execution. And third, enhance our infrastructure and strategic optionality, including our new global headquarters, manufacturing and product development upgrades, and selectively strategic opportunities that can further strengthen our platform. Overall, our first quarter performance reflects continued execution, discipline, investment, and progress across several strategic initiatives. Several strategic initiatives that aim to expand our TAM and materially strengthen long-term position. We are moving with conviction and investing strategically in capabilities required to support future growth, improve scalability, and drive long-term value creation. And with that, I'll turn the call over to Walid for closing remarks.

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

Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again. For today's session, we do request that you please limit yourself to one question to get through as many questionnaires as possible.

One moment, please, for your first question. Your first question comes from the line of Bill Blavanek of Canaccord Genuity.

Your line is open.

Great, thanks. I'm going to focus on CHOPs, if I could. And just, you know, could you please help us understand the strategy behind CHOPs, the thought on cannibalizing your existing uses? And then, you know, are you still planning on hitting that 10,000 organ target? Does that include CHOPs or is that incremental? And then also, just any thoughts on CHOPs for liver and kidney? Thanks for taking my question.

Thank you, Bill. I want to clarify one thing right off the gate. CHOPS is not cannibalizing anything. CHOPS is tackling a segment of the market, specifically DVD hearts that are like two hours of preservation that we're not being used at today. You know, so CHOPS is not cannibalizing. It's additive to our market share, and it's specifically focused on these short transport runs that are currently going on static cold storage. So, that's number one. Number two, the strategy behind it was to find a better way to develop the control arm with better technique than the standard styrofoam boxes that are currently being sold for static cold storage, but also presented an opportunity for us to provide a broader product portfolio to meet those centers that Their volume is primarily shorter distance, and they don't invest in DCD or longer distance organ procurement. Finally, our goal right now is on heart and lungs. In that order, we do not see – obviously, it would be approved for organ preservation, cold static storage for organ preservation, but we have not made a decision yet is it going to be rolled out for liver and kidney as well. We think the kidney cold static preservation is really – a disaster and we are trying to transform all this to machine perfusion. CHOPs is specifically designed for the cardiothoracic platform.

Thank you. Your next question comes from the line of Joshua Jennings of TDKelvin. Your line is open.

Hi, good afternoon. Thanks for taking the questions. just build on discussion on ISHLT will lead, and just with the enhanced Part A and Part B programs, you know, optimal scenario being kind of win-win-win, potentially driving day-only surgeries for high-risk DCD hearts, showing superiority in DVD short transports, and also opening up this advanced cold storage CHOPs opportunity, and maybe just help me better understand the dynamics there, if you would, and how Enhance Part A, Part B can help drive stronger heart penetration, OCS heart penetration. Thanks for taking the question.

Thank you, Josh. As we've stated before, Enhance was designed exactly to accomplish the goals you outlined. We wanted to give the market a safe, reproducible, and effective way to do morning-hour heart transplants. We wanted to give the market a better way to preserve DCD hearts and better way to preserve long-distance and long-preservation time extended criteria hearts, minimizing edema and resulting in better function and enhancing function on OCS. That was primarily the design of Enhance. In addition, we wanted to penetrate that segment of the market that I called earlier DVD hearts that are, call it sub-four hours of preservation, which currently the vast majority of those are being transported using styrofoam boxes with cold packs. That's part D of enhance. So yes, the vision, the strategy of enhance still intact. Unfortunately, the competitive dynamic caused a little bit of a confusion and resulted in a little bit of a delay to launching these two parts, specifically Part B, and we found a solution for it that completely enhanced, fully independent from any competitive dynamics. So we are as excited as always and as we've ever been enhanced, and we just can't wait to get the IDE supplement approved and getting the program rolling. So, again, from where we sit here, we see this as a huge opportunity for us to catalyze adoption in heart across all market segments in heart and still have an optionality for centers that are not, for whatever reason, are not focused on any of the, you know, sort of expanding portion of the hard market of DCV or long-distance procurement and just are happy with the cold storage to offer a product that is, we believe, will provide them, meet their expectation and provide them potentially a better solution, but on our platform, which is CHOPS. So, as you said, Josh, we look at this as a win-win-win from Transmedic's perspective. We just have to be patient. We have to execute on the strategy. We have to finish the program. You know, from where we sit, Part A is going slightly ahead of schedule. We're excited about what we're seeing. The market is giving us early feedback on how the hearts are behaving today. coming off OCS, which is exactly as we predicted it would be. But again, we need to finish the program, and then we expect good things.

Your next question comes from Helen Kong of J.P. Morgan. Your line is open. Michael, thanks for the question.

I had a quick one on what you're seeing in the market. I know inter-quarter you had talked to some disruption that you were seeing at OPOs, especially as they're grappling with some of the potential changes proposed in the BTN modernization. But I'm curious to hear what you're seeing so far in the second quarter. Are you seeing the same level of challenges? Are you seeing it get better? Are you seeing it worsen? And how should we think about, you know, your growth in second quarter in light of that?

Thank you, Alan. The specific things that we're seeing is what everybody's seeing, which is that the overall donor, disease donor numbers have been below expectation and below last year. And we saw that throughout the first quarter and April continued. We hope that will reverse. We usually don't pay too much attention to inter-quarter variability, but we are paying attention this year because of the dynamic with the Modernization Act. If you remember, we predicted that we would see some volatility in deceased donor numbers, which is the mechanism that OPOs kind of register their displeasure with that transformation. and we've seen it reverse, and we have all the confidence that it will reverse. When it will reverse, we don't know, but we don't expect it to be a chronic thing, and we expect actually when it reverses, it will not just bounce back to baseline, but we expect some acceleration. That's what we've seen over the history over the last 20 years. When this happens, the that dynamic kind of plays out as outlined. Got it.

Thanks. And sorry if I missed it from the prepared remarks and bouncing around. You know, I understand that, you know, the new strategy that you are approaching for your clinical trials. Do you have an expectation for when you think you can get those IDE approvals and then how quickly you can get those trials started afterwards?

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

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

Hello. This is Matthew Mardula on for Ryan. Thank you for taking a question. And I might have missed this, so I apologize. But what is the guidance for operating margins this year? And is just the operating margin growth more weighted in the second half and investments more front loaded, given what we've seen in Q1? Any more color into margins and its trajectory for the second half would be greatly appreciated. Thank you.

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

So I'd rather not go into those levels of details now.

Your next question comes from Chris Pasquale of Nefron Research. Your line is open.

Thanks. Well, I also wanted to ask about the enhanced de novo trials. And the CHOPS program seems like a great addition to the portfolio. But previously, you were comparing OCS to establish hypothermic organ storage approaches in those studies. Now, by including CHOPS in the trials, you effectively have two investigational arms being compared against each other. So, I guess kind of a two-part question is, one, does that complicate the interpretation of the results? Do you worry at all about not having a clean outcome here in terms of physicians being able to interpret what the data says? And then two, you're theoretically introducing a harder control arm here if you really believe that you're going to do a better job controlling the temperature of those organs. And so does that make you at all concerned about the margin of improvement you're going to be able to show in the studies? Thank you.

Chris, excellent question and thank you for asking it. So, let me address it in several sections. The first segment is there's no such thing as well-established cold storage other than ice. With what we've seen over the years is there's these hypotheses and claims that are being thrown out there in the marketplace by handful of newcomers to the space that haven't been really substantiated. In fact, even the variation in temperature we've seen at the last ICHOP that did not show any significant difference than 4 degrees to 8 degrees versus 10 degrees. None of these hypotheses have really materialized. So for us, we're not concerned at all that we are lowering the standard. The opposite is true. We're actually elevating the game and saying, listen, if you as a center wants your organ to be stored between 4 and 8, we have a device that we can validate that it's between 4 and 8. If you want it at 10, we have a device that validates it at 10. So that's number one. Number two, we've discussed the second part, which is, you know, comparing two investigational arms. The chops will not be investigational by the time we interpret the trial results. That's the plan that we discussed with FDA, and I'll leave it at that. Three, am I worried about raising the bar on the control arm? No, I think the OCS will prove its value because, again, these programs are designed to show several value points. And, again, we know that even if we deliver superiority results, there will be a segment of the market that's still focused on cold static storage just because of cost, just because of limited volume, or what have you. And in this case, Transmedics would gain market share in that segment that today we don't have a product to sell to these needs. So, net-net, we are extremely... focused on getting these programs executed. We are, we believe we found the best solution out. In fact, I would, you know, I would, at risk of quoting the FDA, the FDA called it a creative and elegant solution. So we will go and execute the trials and we're confident that Our strategy is going to pan out on many fronts. We just can't wait to get these programs fully activated and we get out of this confusion that was created by the panic that was thrown into the mix by our competitors.

Thank you. Your next question comes from the line of Suraj Kalia of Oppenheimer. Your line is open. Hi, Wally. Can you hear me all right? Can hear you perfect, Suraj.

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

Great. Suraj, thank you for asking this important question. The opposite is true, Suraj. The thing is, again, this question implies that the market is actually working with highly scientific, highly validated technologies. The opposite is true. There are transplant, major transplant programs are going to Home Depot and buying either Yeti coolers or Ryobi coolers, and they're operating with them day in and day out. And guess what? None of these Kulas have been validated or designed or even FDA approved for that intended purposes. We are elevating the game. We are a company that pride itself of developing and delivering level one evidence to the highest clinical standards and to the FDA standards. That's number one. Number two, as I said in my prepared remarks, and I will reiterate it again here, CHOPs is designed to be a fully registered and regulated FDA medical technology, which means by definition, Suraj, as you know, that we have to go through an exorbitant amount and exhaustive testing to validate that the design meets the intended purpose. None of the technologies I'm talking about have gone through that. So that's a hyperbole assumption. The opposite is true. We are actually... I am with Chris's spectrum is the one that, you know, that is more realistic, that we are elevating the game on the control arm. But even then, we're not concerned because we see significant value and also we provide solutions across the spectrum of values achieved that would be achieved and enhanced in the novel.

Your next question comes from the line of Matthew O'Brien of Piper Sandler. Your line is open.

Hi, this is Samantha on for Matt. Thank you so much for taking our question. I also wanted to talk about the clinical trials and CHOPs. I guess first, kind of a two-parter, can you first just quantify and put into numbers for us how much of the market CHOPs are expected to address? And then I'm also trying to square the design of these trials You know, you mentioned the superiority, so these trials are essentially trying to say that OCS is a better technology versus now cold storage and CHOPs, but then also the decision to launch CHOPs, you know, presumably this inferior technology. Thank you.

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

No, that's okay. Oh, the quantification.

Yeah, quantification. I'll give you one example. I'll give you one example. 2025 U.S. heart transplant total volume was 4,646 hearts. Okay? You need to know that 46% of that total market, which is 2,131, were DBD hearts preserved less than four hours. Our portion of that market is measured in single digits. So that is a market that is today all going to cold storage techniques. The Styrofoam cooler, the Ryobi cooler, the Yeti cooler, Why not provide an answer to that? Yes, we should gain a greater portion of that by demonstrating superiority or demonstrating better outcomes, but there will be a segment of that market still out there that the surgeon or the clinicians would need access to cold storage techniques. Let's provide them the solution and provide them the clinical service of NOP and the logistics associated with it.

Well, thank you. Your next question comes from the line of Daniel Markowitz of Evercore.

Your line is open.

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

Daniel, thank you for asking this important question, which, as we understand, has been creating this black cloud overhang over transmedics. People forgot who transmedics is and which market segment we deal with. We're not United Airlines or Delta. We are an organ transplant company. So, you need, everybody needs to remember that we are operating in a highly competitive environment where there are other charter operators and companies that service the same market that we are servicing from a logistics standpoint. Historically, for the last four or five decades, transplantation has survived and grown. when oil prices was high, when oil prices was low. How? Because the market has a mechanism to recover the cost of these when the prices go up. In fact, you know, so because of that competitive dynamic, I cannot share with you on an open mic the detail of how Transmedics is doing it. All I can share with you is I can assure you, and I assure all the listeners on this call, that Transmedics is doing the absolutely right thing by our customers, and we are having the ability to control our logistics and our fleet, and the network effect that was created here gives us maximum operating leverage on dealing with fuel prices. I'll give you one example. We are monitoring fuel prices by hub, and we have the maximum flexibility of moving hubs and floating our fleet to make sure that we are not incurring unnecessarily higher fuel charges so we don't pass these charges. unnecessarily high fuel charges to the transplant program. But, again, the results speak for themselves. If fuel charges are truly that insurmountable challenge, we would not be able to print the results we printed here. And to put everybody's mind at ease, fuel charges is a small component of our operating flight hour cost. So, it is covered, and our network is the most cost-efficient way to deal with this problem until it's resolved.

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

Great.

Thanks for taking the questions. I want to follow up on some of the margin commentary. gross and operating. First on the gross margin side, I think historically Q1 is typically or has been in the past two or three years the high watermark for gross margins. So curious, Juan, if if that is the way that we should be thinking about, you know, the cadence for the year, if there's any maybe transient impacts there. And then I appreciate some of the comments already on the operating margin side. But just trying to get a sense maybe for, you know, some of the puts and takes that you saw in Q1. versus what you're expecting to maybe normalize or work its way out as you get in the back half of the year. Maybe chops is a piece of that. Just be curious on any more color on the gross and operating margin numbers in the quarter and then for the year. Thank you.

Right. Thank you, David, for the question. In terms of gross margin, as I shared in the call, we're looking and we're expecting, convinced that we can, that the right margin for the business is around 60%. We're investing ahead of that, and because of that, we are seeing some pressure in the margin in the short term. I saw, let's say, significant changes positive impact operational impact in the in the quarter in q1 that was mostly offset by some uh a good portion of that was transient expenses so my view is that for the rest of the year uh we should see a recovery towards a or long-term goal I'm not sure we're going to get all the way to the long-term goal this year or even next year. That's why it's long-term. But I see and I believe that this is the quarter where it should be more the floor rather than the ceiling.

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

Thanks for taking the question. I think you mentioned the enhanced Part A trial is enrolling slightly ahead of schedule. I guess I'm wondering, you know, how does that sort of inform or change your expectations for Part B enrollment timing? Once that restarts in 3Q, is 12 to 18 months still the right timeframe for enhanced Part B and de novo enrollment, or can you enroll faster than that?

Young, thank you for the question. I'll answer the second part first. We still are holding the 12 to 18 months timeframe. That hasn't changed. I think I caution to compare Part A to Part B. They're two different components. But remember, it's the same centers that will be enrolling in Part A or Part B. So, again, it's all about value. If the center sees the value and sees the clinical outcomes in their hands, we expect the trial enrollment to pick up. For me, right now, I'm focusing on getting the IDE supplement approved, getting the troughs into the control arm, and removing all the confusion by competitors so we can get Part B enrolled. De Novo is actively enrolling, and we enrolled a handful of patients already, despite some of the confusion, thanks to the TransLine program stepping up and moving forward. But I think it will accelerate even further once CHOPS is introduced as the control arm or an option for the control arm.

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

Yeah, thanks. So just on the CHOPS devices that are going to be used in the trials, will you be getting paid for those? And then just generally, can you talk about what kind of pricing we should expect on that, both in the trials and then when you're selling it to the customers in the open market? Thanks.

Mike, I appreciate very much the question. Unfortunately, I cannot discuss the commercial structure of CHOPs yet. The priority is to get it through the IDE process, and all I can say is this is going to be a part of our NOP service offering, and I leave it at that.

Thank you. Your next question comes from Tom Stiffen of Stifel. Your line is open.

Great. Hey, guys. Thanks for taking the questions. Apologies if this has been asked. I'm jumping between calls. So, Gerardo, maybe for you, for the 20% to 25% guidance on revenue in the core business for 26, you know, when I look at growth over the last, call it, year or so, you know, 40% plus growth in 1H, 30% plus in 2H and then 1Q. 1Q was a bit over 20. So, like, with that trend in mind, what gives you confidence that the growth rate rest of year will remain stable in the core business or even accelerate a bit moving forward in order to kind of hit that full year 20% to 25%? Thanks.

Hi. Thank you for the question. Well, basically, when we look at the phasing and the history of the transplant volume in the U.S., we can see how the remaining of the year, it continues to strengthen. So we're not expecting any change to the global volume, except for the one that Walid mentioned before in terms of any potential disruption due to the Modernization Act. Now, we believe that we can, that we will deliver within the 20 to 25% growth with that. I think that's really what makes us confident. We're seeing the results. We're seeing the adoption. And that, together with the last year's performance, it really shows how the market trend is going. So there is nothing really that would prevent us to get to that range, at least as I see it today.

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

Thank you. There are no further questions at this time.

I'll now turn the call over to Waleed Hassaneen, President and Chief Executive Officer, for closing remarks.

Thank you all very much for spending your afternoon with us. We're looking forward to one-on-one calls. I appreciate it. Have a great evening, everyone.

This concludes today's conference call. You may now disconnect.