TransMedics Group (NASDAQ:TMDX) reported record second-quarter revenue as growth in liver procedures, clinical services and transplant logistics offset increased spending on product development, international expansion and infrastructure.
Total revenue for the quarter ended June 30 rose 21% year over year and 9% sequentially to approximately $190 million. Transplant product revenue increased 16% to $111 million, while service revenue climbed 29% to $79 million. Service revenue accounted for 41% of total revenue during the quarter.
Logistics Growth Supports Service Revenue
TransMedics’ logistics business generated approximately $41 million in revenue, up 39% from the prior-year quarter and 30% sequentially. The company said its TransMedics Logistics network covered about 86% of National OCS Program missions requiring air transport, compared with 82% in the first quarter.
Hassanein attributed the service-revenue performance to logistics market-share gains, operational efficiencies, pricing adjustments intended to offset higher costs and new transplant-center customers. He said the company did not see an increase in dry-run rates during either the second or third quarter.
Chief Financial Officer Gerardo Hernandez said total gross margin was 59.6%, improving about 140 basis points sequentially but declining roughly 180 basis points year over year. Service margin rose to 35% from approximately 27% in the first quarter, supported by higher fleet utilization and operating efficiencies. Product gross margin was 77%, broadly stable sequentially.
The year-over-year gross-margin decline reflected a greater mix of service revenue as well as temporary product cost pressures, including inventory provisioning and trial-related solution costs, according to Hernandez. The company expects service margin to normalize somewhat in the second half while remaining above historical levels.
Investment Priorities Include Kidney, Clinical Programs and Europe
Management emphasized that TransMedics is prioritizing long-term revenue growth over near-term operating leverage. The company is funding four principal initiatives over the next 18 to 24 months: expanding heart and lung adoption, developing its OCS Kidney platform, building a European logistics network and advancing its next-generation OCS Gen 3.0 platform.
Hassanein said the company expects its platform could support approximately 30,000 transplants globally by 2032 and generate more than $2 billion in annual revenue. The target includes current heart, lung and liver operations, new clinical programs, kidney development and international expansion.
For heart and lung, TransMedics is pursuing ENHANCE Heart Part B and the DENOVO Lung program. The company said the programs could provide access to an estimated 2,000 to 5,000 incremental U.S. heart and lung cases annually. The FDA is reviewing an investigational device exemption supplement incorporating the company’s Controlled Hypothermic Organ Preservation System, or CHOPS, into the ENHANCE trial. Management expects approval by late in the third quarter or early in the fourth quarter, followed by a lung IDE submission.
Hassanein said ENHANCE Heart Part A is expected to be completed before year-end. Part B and DENOVO Lung have each completed only a handful of cases so far, he said, and did not make a meaningful contribution to second-quarter results. Management expects the clinical programs to be completed within 12 to 18 months after enrollment accelerates.
The company also said it has started pre-IDE discussions with the FDA for OCS Kidney, including its first pre-submission meeting. TransMedics is targeting first clinical experience for the kidney program later in 2027.
“This is the single largest addressable segment available to us in organ transplantation in the U.S. and around the world,” Hassanein said, citing more than 21,000 deceased-donor kidney transplants performed annually in the U.S.
European Platform Begins With PAD Aviation Investment
On July 1, TransMedics closed its strategic investment in PAD Aviation, a Germany-based aviation operator. The company said PAD provides aviation licensing, pilots and fleet access needed to establish TransMedics Aviation Europe and compete for transplant-logistics tenders across the region.
Hassanein clarified that the investment does not mean TransMedics has begun commercial operations in Germany. Instead, he said PAD’s location in Paderborn provides access to potential European donor sites within roughly two hours of flight time. Germany is not viewed as a near-term growth catalyst because of reimbursement limitations and the absence of donation after circulatory death procedures, he added.
TransMedics said it has secured a machine-perfusion and services budget in Italy that is expected to take effect later this year or in early 2027 following administrative steps. The company is also pursuing regional transplant-logistics tenders in Italy and is evaluating opportunities in other European countries with existing reimbursement budgets.
PAD will be consolidated beginning in the third quarter. Hernandez said the business will initially dilute gross margin and operating margin, and the company is not yet providing standalone financial guidance for PAD. Management expects to provide additional detail after further integration work in the third quarter.
Guidance Raises Revenue Floor, Lowers Margin Outlook
TransMedics raised the low end of its full-year 2026 revenue outlook, excluding PAD Aviation, to a range of $737 million to $757 million. The guidance represents growth of approximately 22% to 25% over 2025 and assumes no revenue contribution from PAD and no meaningful incremental revenue from ENHANCE Part B or DENOVO.
The company expects second-half gross margin, excluding PAD, of approximately 59%. It now forecasts a full-year adjusted operating margin of approximately 12.5% to 14%, excluding PAD, below its earlier expectation of about 16%.
Hernandez said the reduced margin outlook primarily reflects accelerated investment in OCS Kidney rather than a broad expansion of overhead. Adjusted operating expenses were $87 million in the quarter, up 46% year over year. About $14 million of that increase was tied to OCS Kidney, next-generation OCS, and the ENHANCE and DENOVO programs, while approximately $5 million was related to the company’s new headquarters and disposable manufacturing facility in Mirandola, Italy.
Adjusted income from operations was $25.8 million, representing a 13.6% operating margin. Adjusted net income was $16.2 million, or $0.44 per diluted share. TransMedics ended the quarter with approximately $473 million in cash and cash equivalents.
Management said it remains cautious on the seasonally softer third quarter despite a strong July, which Hassanein described as the company’s highest aviation month. The company said it will provide a fuller outlook for 2027 when it reports fourth-quarter results.
About TransMedics Group (NASDAQ:TMDX)
TransMedics Group, Inc is a medical device company headquartered in Andover, Massachusetts, that specializes in advanced organ preservation and transport systems for transplantation. The company’s flagship technology, the Organ Care System (OCS), maintains donor organs in a near-physiologic, warm, beating state during transportation, with the aim of extending preservation times and improving post‐transplant outcomes. TransMedics’ solutions address a critical need in transplantation by reducing ischemic injury and expanding the donor organ pool.
TransMedics currently markets two commercially available OCS platforms.
