TransMedics Q3 net income falls to $17.1M
Nine-month revenue reached $566.886 million, while net income and operating cash flow were below the prior-year figures.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
TransMedics Group, Inc. (TMDX) reported third-quarter 2026 revenue of $203.005 million, compared with $143.823 million a year earlier, while net income was $17.073 million versus $24.319 million. For the first nine months, revenue was $566.886 million versus $444.730 million, while net income was $39.070 million versus $84.908 million. Operating cash flow for the nine-month period was $77.846 million, compared with $158.327 million in 2025.
Cash was $492.962 million as of September 30, 2026; management said it expects this cash to fund operations, capital expenditures and debt service for at least the next 12 months. TransMedics completed a minority investment in Germany-based PAD Aviation on July 1, 2026, which it expects to support aviation transportation capabilities and logistics services in Europe.
The company also entered a lease for an approximately 498,286-square-foot Somerville headquarters, with annual base rent of $23.9 million beginning in January 2028. It has a purchase option for $374.6 million if exercised on or before December 31, 2027, and says it is reasonably certain to exercise it. The convertible notes had $459.996 million of principal as of September 30, 2026 and mature June 1, 2028.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue reached $203.005 million, versus $143.823 million a year earlier.
Negative
- Major pointMaterial weakness in internal control over financial reporting identified.
- Moderate pointThird-quarter net income was $17.073 million, versus $24.319 million a year earlier.
- Moderate pointNine-month operating cash flow was $77.846 million, versus $158.327 million in 2025.
- Minor pointNine-month net income was $39.070 million, versus $84.908 million in 2025.
Filing Explained
By September 30, 2026, shares outstanding were 34,722,408, versus 34,267,802 at December 31, 2025, reducing unchanged holders' percentage ownership.
This Form 10-Q reports that, as of
The CIBC borrowing is in repayment: monthly installments began in July 2026,
Common shares outstanding were 34,722,408 on
Key Figures
Key Terms
Capped Calls financial
initial conversion rate financial
finance lease financial
valuation allowance financial
anti-dilutive effect financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were TMDX's third-quarter 2026 revenue and net income?
How much operating cash flow did TMDX report for the first nine months of 2026?
Does TMDX expect its cash to fund operations for the next 12 months?
What are the terms of TMDX's Somerville headquarters lease?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
(Address of principal executive offices) |
(Zip code) |
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
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|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ |
Accelerated filer |
☐ |
|
Non-accelerated filer |
☐ |
Smaller reporting company |
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|
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 2, 2026, the registrant had
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described or referenced in the section titled “Risk Factors,” which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report and should not be relied upon as predictions of future events. Factors or events that could cause our actual results to differ may emerge from time to time, and we are not able to predict all of them. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments, or otherwise, except as may be required by applicable law.
Some of the key factors that could cause actual results to differ include:
i
ii
TransMedics Group, Inc.
Table of Contents
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PART I—FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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1 |
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Condensed Consolidated Balance Sheets |
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1 |
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Condensed Consolidated Statements of Operations |
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2 |
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Condensed Consolidated Statements of Comprehensive Income |
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3 |
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Condensed Consolidated Statements of Stockholders’ Equity |
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4 |
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Condensed Consolidated Statements of Cash Flows |
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6 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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23 |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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36 |
Item 4. |
Controls and Procedures |
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36 |
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PART II—OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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37 |
Item 1A. |
Risk Factors |
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37 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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37 |
Item 5. |
Other Information |
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37 |
Item 6. |
Exhibits |
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38 |
Signatures |
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39 |
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iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)
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September 30, |
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December 31, |
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2026 |
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2025 |
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Assets |
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Current assets: |
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Cash |
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$ |
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Accounts receivable |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Finance lease right-of-use assets, net |
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— |
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Operating lease right-of-use assets, net |
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Deferred tax assets |
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Restricted cash |
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Goodwill |
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Acquired intangible assets, net |
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Other non-current assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Current portion of long-term debt, net |
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Deferred revenue |
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Operating lease liabilities |
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Total current liabilities |
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Convertible senior notes, net |
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Long-term debt, net |
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Finance lease liability |
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— |
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Operating lease liabilities, net of current portion |
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Other long-term liabilities |
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— |
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Total liabilities |
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Commitments and contingencies (Note 11) |
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Stockholders’ equity: |
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Preferred stock, |
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— |
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— |
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Common stock, |
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Accumulated other comprehensive income (loss) |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
|
Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenue: |
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Net product revenue |
$ |
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$ |
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$ |
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$ |
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Service revenue |
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Total revenue |
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Cost of revenue: |
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Cost of net product revenue |
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Cost of service revenue |
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Total cost of revenue |
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Gross profit |
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Operating expenses: |
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Research, development and clinical trials |
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Selling, general and administrative |
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Total operating expenses |
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Income from operations |
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Other income (expense): |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
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Interest income and other income (expense), net |
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Total other expense, net |
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( |
) |
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( |
) |
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( |
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( |
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Income before income taxes |
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(Provision) benefit for income taxes |
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( |
) |
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( |
) |
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( |
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Net income |
$ |
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$ |
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$ |
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$ |
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||||
Net income per share: |
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Basic |
$ |
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$ |
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$ |
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$ |
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Diluted |
$ |
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$ |
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$ |
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$ |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
|
|
Three Months Ended September 30, |
|
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Nine Months Ended September 30, |
|
||||||||||
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2026 |
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2025 |
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2026 |
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2025 |
|
||||
Net income |
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$ |
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$ |
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$ |
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$ |
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||||
Other comprehensive income (loss): |
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||||
Foreign currency translation adjustment |
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( |
) |
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( |
) |
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||
Comprehensive income |
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$ |
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$ |
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$ |
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$ |
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||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
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Accumulated |
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Other |
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Comprehen- |
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Total |
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|||||
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Common Stock |
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sive Income |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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(Loss) |
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Deficit |
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Equity |
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|||||
Balances at December 31, 2025 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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||||
Issuance of common stock upon the |
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— |
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— |
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Issuance of common stock in connection |
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— |
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— |
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Net issuance of common stock upon |
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( |
) |
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— |
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— |
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( |
) |
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Stock-based compensation expense |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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( |
) |
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— |
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( |
) |
Net income |
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— |
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— |
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— |
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||
Balances at March 31, 2026 |
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( |
) |
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Issuance of common stock upon the |
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— |
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— |
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|||
Restricted common stock forfeitures |
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( |
) |
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— |
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— |
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— |
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— |
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Net issuance of common stock upon |
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( |
) |
|
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— |
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— |
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( |
) |
|
Stock-based compensation expense |
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— |
|
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|
|
|
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— |
|
|
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— |
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|
||
Foreign currency translation adjustment |
|
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— |
|
|
|
— |
|
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|
( |
) |
|
|
— |
|
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|
( |
) |
Net income |
|
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— |
|
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— |
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— |
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|
||
Balances at June 30, 2026 |
|
|
|
|
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( |
) |
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( |
) |
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|||
Issuance of common stock upon the |
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— |
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— |
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|||
Issuance of common stock in connection |
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— |
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— |
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|||
Net issuance of common stock upon |
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( |
) |
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— |
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— |
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( |
) |
|
Stock-based compensation expense |
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— |
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|
|
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— |
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— |
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||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income |
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— |
|
|
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— |
|
|
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— |
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|
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|
|
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|
||
Balances at September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
(Unaudited)
|
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Accumulated |
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|||||
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Other |
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|||||
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Comprehen- |
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Total |
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|||||
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Common Stock |
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sive Income |
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Accumulated |
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Stockholders’ |
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||||||||
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Shares |
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Amount |
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(Loss) |
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Deficit |
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Equity |
|
|||||
Balances at December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Issuance of common stock upon the |
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— |
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— |
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|||
Issuance of common stock in connection |
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— |
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— |
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|||
Restricted common stock forfeitures |
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( |
) |
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— |
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— |
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— |
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— |
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Vesting of restricted stock units |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balances at March 31, 2025 |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Issuance of common stock upon the |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balances at June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Issuance of common stock upon the |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Issuance of common stock in connection |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Vesting of restricted stock units |
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Balances at September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
TRANSMEDICS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Deferred taxes |
|
|
|
|
|
— |
|
|
Non-cash interest expense |
|
|
|
|
|
|
||
Non-cash operating lease expense |
|
|
|
|
|
|
||
Unrealized foreign currency transaction (gains) losses |
|
|
|
|
|
( |
) |
|
Loss on disposal of fixed assets |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventory |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Other non-current assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
|
|
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Deferred revenue |
|
|
( |
) |
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
PAD Aviation investment, net of cash acquired |
|
|
( |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Repayments of long-term debt |
|
|
( |
) |
|
|
— |
|
Proceeds from issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
||
Proceeds from issuance of common stock in connection with employee |
|
|
|
|
|
|
||
Tax withholding payments related to net settlement of restricted stock units |
|
|
( |
) |
|
|
( |
) |
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and restricted cash |
|
|
( |
) |
|
|
|
|
Net increase in cash and restricted cash |
|
|
|
|
|
|
||
Cash and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of non-cash activities: |
|
|
|
|
|
|
||
Transfers of inventory to property, plant and equipment |
|
$ |
|
|
$ |
|
||
Purchases of property, plant and equipment included in accounts payable |
|
$ |
|
|
$ |
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
|
||
Finance lease liability arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
— |
|
|
Purchases of property, plant and equipment included in other long-term liabilities |
|
$ |
|
|
$ |
— |
|
|
Deferred payment liability in connection with PAD Aviation investment |
|
$ |
|
|
$ |
— |
|
|
Reconciliation of cash and restricted cash: |
|
|
|
|
|
|
||
Cash |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash and restricted cash shown in the statement of cash flows |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
TRANSMEDICS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of the Business and Basis of Presentation
TransMedics Group, Inc. (“TransMedics Group” and, together with its consolidated subsidiaries, the “Company”) was incorporated in the Commonwealth of Massachusetts in October 2018. TransMedics, Inc. (“TransMedics”), an operating company and wholly owned subsidiary of TransMedics Group, was incorporated in the State of Delaware in August 1998. The Company is a medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. The Company developed the Organ Care System (“OCS”) to replace a decades-old standard of care. The OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. The Company’s OCS technology replicates many aspects of the organ’s natural living and functioning environment outside of the human body. The Company also developed its National OCS Program (“NOP”), an innovative turnkey solution to provide outsourced organ procurement, OCS perfusion management and transplant logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS. The Company’s transplant logistics services include aviation transportation, ground transportation and other coordination activity.
The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company believes that its existing cash of $
The Company is subject to risks and uncertainties common to companies in the medical device industry and of similar size, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations. Products currently under development will require additional research and development efforts, including additional clinical testing and regulatory approval, prior to commercialization. These efforts require additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities. The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, the Company may not obtain necessary government regulatory approval on its expected timeline, or at all, and approved products may not prove commercially viable. The Company operates in an environment of rapid change in technology and competition. In addition, the Company is subject to risks and uncertainties related to its aviation transportation services, including, but not limited to, compliance with Federal Aviation Administration (“FAA”) regulations, pilot availability and operational disruptions.
The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying unaudited interim financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of September 30, 2026 and results of operations for the three and nine months ended September 30, 2026 and 2025 and cash flows for the nine months ended September 30, 2026 and 2025 have been made. The Company’s results of
7
operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2026 or any other period.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these unaudited condensed consolidated financial statements include, but are not limited to, revenue recognition, the valuation of inventory, the valuation of assets acquired and liabilities assumed in business combinations, including goodwill, the valuation of stock-based awards and income taxes. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. As of the date of issuance of these unaudited condensed consolidated financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update estimates, judgments or revise the carrying value of any assets or liabilities. Actual results may differ from those estimates or assumptions.
Risk of Concentrations of Credit, Significant Customers and Significant Suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and accounts receivable. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. As of September 30, 2026 and December 31, 2025, the Company’s allowance for credit losses was
Certain of the components and subassemblies included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers, as are sterilization services. Although the Company seeks to reduce dependence on those limited sources of suppliers, manufacturers and service providers, the partial or complete loss of certain of these sources could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
The carrying values of the Company’s accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The carrying value of the Company’s long-term debt approximates its fair value (a Level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate. The Company’s
8
Spare Parts Inventory
Foreign Currency Translation
The functional currency of each of the Company’s foreign subsidiaries is the currency of the local country. Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars using the period-end exchange rates, and income and expense items are translated into U.S. dollars using average exchange rates in effect during each period. The effects of these foreign currency translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity.
The Company also incurs transaction gains and losses resulting from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded. Realized and unrealized foreign currency transaction gains (losses) are included in the condensed consolidated statements of operations as a component of other income (expense). Realized and unrealized losses totaled $
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326) to introduce a practical expedient to calculating current expected credit loss by assuming that the current conditions as of the balance sheet date will not change for the remaining life of the asset. This expedient can only be applied to current accounts receivable and current contract assets. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025 and interim periods within those annual periods, and this update is applied prospectively. The Company
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 allows for adoption using either a prospective or retrospective method. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which removes all references to software development project stages and requires entities to start capitalizing software costs when both of the following occur: (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted as of the beginning of a fiscal year. The amendments can be applied prospectively, retrospectively, or via a modified prospective transition method. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 establishes authoritative guidance for accounting for government grants received by business entities, and clarifies the appropriate accounting in an effort to reduce diversity in practice and increase consistency of application across business entities. ASU 2025-10 is effective for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. Adoption of this guidance can be
9
applied via a modified prospective approach, a modified retrospective approach, or a retrospective approach. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this guidance on its consolidated financial statements.
3. Strategic Investment in PAD Aviation service GmbH
On July 1, 2026, the Company, through its wholly owned subsidiary TransMedics GmbH, completed a strategic investment in PAD Aviation service GmbH (“PAD Aviation”), a Germany-based private aviation operator. The investment was made pursuant to a share purchase agreement under which TransMedics GmbH acquired a minority interest in PAD Aviation and all remaining interest was transferred by the sellers directly to a Netherlands Stichting (“PAD Aviation Partner”). The investment supports the Company’s ongoing efforts to build a dedicated organ transplantation air and ground logistics network in Europe.
The Company evaluated PAD Aviation under the variable interest entity (“VIE”) model and determined that PAD Aviation is a VIE. The investment in PAD Aviation has been made for it to provide aviation services principally on behalf of the Company, and the Company, through these arrangements with PAD Aviation, has the power to direct the activities that most significantly affect PAD Aviation’s economic performance. The Company also has the right to receive benefits and the obligation to absorb losses that could potentially be significant to PAD Aviation. Accordingly, the Company is the primary beneficiary of PAD Aviation and has included PAD Aviation in its condensed consolidated financial statements since the investment date. The consolidation of PAD Aviation for financial reporting purposes does not reflect legal ownership or control of PAD Aviation for purposes of applicable aviation regulations.
The investment in PAD Aviation was accounted for as a purchase of a business under ASC Topic 805, Business Combinations. The preliminary purchase consideration of $
The Company’s condensed consolidated financial statements reflect the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on fair value as of the date of the investment. The Company’s estimate of preliminary purchase consideration is subject to change upon finalizing working capital adjustments.
Assets Acquired and Liabilities Assumed: |
|
|
|
|
Accounts receivable and other current assets |
|
$ |
|
|
Property, plant and equipment |
|
|
|
|
Intangible assets |
|
|
|
|
Goodwill |
|
|
|
|
Total assets acquired |
|
|
|
|
Accounts payable and other current liabilities |
|
|
( |
) |
Deferred tax liabilities |
|
|
( |
) |
Total allocation of purchase price consideration, |
|
$ |
|
|
The identifiable intangible assets consist of customer relationships and a trade name and are being amortized to selling, general and administrative expenses over their estimated useful lives of
The Company incurred total transaction costs of $
PAD Aviation’s creditors do not have recourse to the general credit of the Company, and its assets are not available to satisfy obligations of the Company’s other subsidiaries. The Company has
10
4. Inventory
Inventory consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Finished goods |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
5. Property, Plant and Equipment, Net
Property, plant and equipment, net consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Transplant aircraft |
|
$ |
|
|
$ |
|
||
Transplant aircraft equipment |
|
|
|
|
|
|
||
Flight school aircraft |
|
|
|
|
|
|
||
OCS Consoles |
|
|
|
|
|
|
||
Manufacturing equipment |
|
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Internal-use software |
|
|
|
|
|
|
||
Laboratory equipment |
|
|
|
|
|
|
||
Office, trade show and training equipment |
|
|
|
|
|
|
||
Building |
|
|
|
|
|
— |
|
|
Leasehold improvements |
|
|
|
|
|
|
||
Construction-in-progress |
|
|
|
|
|
|
||
Land |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
During the three and nine months ended September 30, 2026, total depreciation and amortization expense, including finance lease amortization (see Note 11), was $
The Company capitalized costs associated with the development of internal-use software of $
Substantially all of the Company’s tangible property, plant and equipment are held in the United States.
6. Goodwill and Intangible Assets
Goodwill relates to the Company’s 2023 acquisition of Summit Aviation, Inc. and Northside Property Group, LLC (“Summit”) and the Company’s 2026 PAD Aviation investment. Goodwill is not amortized, but instead is reviewed for impairment at least annually or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. To date, the Company has had
11
The change in goodwill during the nine months ended September 30, 2026 was as follows (in thousands):
Balance at December 31, 2025 |
|
$ |
|
|
Increase related to PAD Aviation |
|
|
|
|
Balance at September 30, 2026 |
|
$ |
|
Acquired intangible assets as of September 30, 2026, which only related to the Company’s 2026 PAD Aviation investment, consisted of the following (in thousands):
|
|
|
|
|
September 30, 2026 |
|
||||||||||
|
|
Weighted Average |
|
|
Gross Amount |
|
|
Accumulated Amortization |
|
|
Carrying Value |
|
||||
|
|
(in years) |
|
|
|
|
|
|
|
|
|
|
||||
Customer relationships |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Acquired intangible assets as of December 31, 2025, which only related to the Company’s 2023 Summit acquisition, consisted of the following (in thousands):
|
|
|
|
|
December 31, 2025 |
|
||||||||||
|
|
Weighted Average |
|
|
Gross Amount |
|
|
Accumulated Amortization |
|
|
Carrying Value |
|
||||
|
|
(in years) |
|
|
|
|
|
|
|
|
|
|
||||
Customer relationship |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
During the first quarter of 2026, the Company updated its estimate of the remaining useful life of acquired intangible assets from its acquisition of Summit based on its determination that the remaining economic benefit was substantially realized. This change in estimated useful life resulted in the recognition of $
The change in the Company’s acquired intangible assets during the nine months ended September 30, 2026 was as follows (in thousands):
Balance at December 31, 2025 |
|
$ |
|
|
Increase related to PAD Aviation |
|
|
|
|
Amortization |
|
|
( |
) |
Balance at September 30, 2026 |
|
$ |
|
Amortization expense is recorded within selling, general and administrative expense. Amortization expense was $
Year Ending December 31, |
|
|
|
|
2026 (three months) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
12
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2026 |
|
|
2025 |
|
||
Accrued payroll and related expenses |
|
|
$ |
|
|
$ |
|
||
Accrued transportation costs |
|
|
|
|
|
|
|
||
Accrued clinical trials expenses |
|
|
|
|
|
|
|
||
Accrued external research and development expenses |
|
|
|
|
|
|
|
||
Accrued property, plant and equipment |
|
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
|
||
Accrued third-party surgeon costs |
|
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
|
||
|
|
|
$ |
|
|
$ |
|
||
Certain prior year amounts have been reclassified to conform to the current-period presentation.
8. Long-Term Debt and Financing Arrangements
Convertible Senior Notes
The Notes consisted of the following (in thousands):
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2026 |
|
|
2025 |
|
||
Principal amount of convertible senior notes |
|
|
$ |
|
|
$ |
|
||
Less: Current portion of convertible senior notes |
|
|
|
— |
|
|
|
— |
|
Convertible senior notes, net of current portion |
|
|
|
|
|
|
|
||
Debt discount, net |
|
|
|
( |
) |
|
|
( |
) |
Convertible senior notes, net of discount and current portion |
|
|
$ |
|
|
$ |
|
||
As of September 30, 2026, the estimated fair value of the Notes was $
On May 11, 2023, the Company issued $
The initial conversion price of the Notes is approximately $
13
Before
The Company may redeem for cash all or any portion of the Notes (subject to the partial redemption limitation set forth in the Indenture), at its option, if the last reported sale price of the Company’s common stock has been at least
During the three and nine months ended September 30, 2026, the Company recognized $
Capped Call Transactions
In connection with the offering of the Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institution counterparties (the “Option Counterparties”). The Capped Calls are generally intended to reduce or offset the potential dilution to the common stock upon any conversion of the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Notes. The Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $
Each of the Capped Calls has an initial strike price of approximately $
Long-term Debt
Long-term debt consisted of the following (in thousands):
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
2026 |
|
|
2025 |
|
||
Principal amount of long-term debt |
|
|
$ |
|
|
$ |
|
||
Less: Current portion of long-term debt |
|
|
|
( |
) |
|
|
( |
) |
Debt discount, net |
|
|
|
( |
) |
|
|
|
|
Long-term debt, net of current portion |
|
|
|
|
|
|
|
||
Debt discount, net |
|
|
|
|
|
|
( |
) |
|
Long-term debt, net of discount and current portion |
|
|
$ |
|
|
$ |
|
||
In July 2022, the Company entered into a credit agreement with Canadian Imperial Bank of Commerce (“CIBC”), pursuant to which the Company has borrowed $
14
Borrowings under the CIBC Credit Agreement bear interest at an annual rate equal to either, at the Company’s option, (i) the secured overnight financing rate for an interest period selected by the Company, subject to a minimum of
All obligations under the CIBC Credit Agreement are guaranteed by the Company and each of its material subsidiaries. All obligations of the Company and each guarantor are secured by substantially all of the Company’s and each guarantor’s assets, including their intellectual property, subject to certain exceptions. Under the CIBC Credit Agreement, the Company has agreed to customary representations and warranties, events of default and certain affirmative and negative covenants to which it will remain subject until maturity.
During the three and nine months ended September 30, 2026, the Company recognized $
9. Stock-Based Compensation
2019 Stock Incentive Plan
The 2019 Stock Incentive Plan (the “2019 Plan”) provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), unrestricted stock, unrestricted stock units, and other stock-based awards to employees, directors, and consultants of the Company and its subsidiaries. The number of shares of common stock of TransMedics Group initially available for issuance under the 2019 Plan was
Shares withheld in payment of the exercise or purchase price of an award or in satisfaction of tax withholding requirements, and the shares covered by a stock appreciation right for which any portion is settled in stock, will reduce the number of shares available for issuance under the 2019 Plan. In addition, the number of shares available for issuance under the 2019 Plan (i) will not be increased by any shares delivered under the 2019 Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises and (ii) will not be reduced by any awards that are settled in cash or that expire, become unexercisable, terminate or are forfeited to or repurchased by TransMedics Group without the issuance of stock under the 2019 Plan. On May 20, 2026, the shareholders of the Company approved an amendment to the Amended and Restated 2019 Stock Incentive Plan (the “Amended 2019 Plan”) to among other things, (i) increase the number of shares of the Company’s common stock available for issuance thereunder by
15
issuance of an aggregate of up to five percent of the shares authorized under the Amended 2019 Plan and (iv) provide for “double-trigger” vesting of awards following a change in control. As of September 30, 2026,
2021 Inducement Plan
In August 2021, the Company’s board of directors approved the TransMedics Group, Inc. Inducement Plan (the “Inducement Plan”). Pursuant to the terms of the Inducement Plan, the Company may grant nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock, RSUs and performance awards to individuals who were not previously employees or directors of the Company or individuals returning to employment after a bona fide period of non-employment with the Company. A total of
2019 Employee Stock Purchase Plan
Pursuant to the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP”), certain employees of the Company are eligible to purchase common stock of the Company at a reduced price during offering periods. The 2019 ESPP permits participants to purchase common stock using funds contributed through payroll deductions, subject to the limitations set forth in the Internal Revenue Code, at a purchase price of
Stock Option Activity
During the nine months ended September 30, 2026, the Company granted options with service-based vesting for the purchase of an aggregate of
Restricted Stock Unit Activity
During the nine months ended September 30, 2026, the Company granted
Stock-Based Compensation
The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Cost of revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research, development and clinical trials |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of September 30, 2026, total unrecognized compensation cost related to unvested share-based awards was $
The Company recognized income tax benefits related to stock-based compensation expense of $
16
10. Net Income per Share
Basic net income per common share is computed by dividing the net income by the weighted average number of shares of common stock outstanding for the period. Diluted net income per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock awards, using the treasury stock method, and outstanding convertible notes, using the if-converted method.
A reconciliation of the numerators and the denominators of the basic and diluted net income per common share computations is as follows (in thousands, except share and per share amounts):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Add: Interest expense, net of tax, attributable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income, diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average basic common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Convertible senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average dilutive common shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company excluded the following potential common shares, presented based on weighted average shares outstanding, from the computation of diluted net income per share because including them would have had an anti-dilutive effect:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Convertible senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options to purchase common stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted stock awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
17
11. Commitments and Contingencies
Finance Lease
Agreements
On January 8, 2026, the Company entered into a lease agreement (the “Lease”) with BioMed Realty (the “Landlord”) for the lease of a building with approximately
The Lease includes a one-time purchase option for the Company to buy the Premises and associated parking spaces, exercisable by the Company at any time prior to November 2028. The purchase price is $
The Company has delivered a security deposit to the Landlord in the form of a letter of credit for $
Additionally, on January 8, 2026, the Company acquired
Accounting
The Company accounted for the Lease and property purchases as one combined contract under ASC 842, Leases (Topic 842). Because the Lease grants the Company an option to purchase the underlying assets that the Company is reasonably certain to exercise, the Company classified the Lease as a finance lease. Accordingly, total consideration for the combined contract of $
The Company recorded a finance lease right-of-use asset of $
Because the interest rate implicit in the Lease was not readily determinable, the Company’s incremental borrowing rate of
The components of the Company’s finance lease cost under ASC 842 are as follows (in thousands):
|
|
Three Months Ended September 30, 2026 |
|
|
Nine Months Ended September 30, 2026 |
|
||
Finance lease cost |
|
|
|
|
|
|
||
Amortization of right-of-use assets |
|
$ |
|
|
$ |
|
||
Interest on lease liability |
|
|
|
|
|
|
||
Total finance lease cost |
|
$ |
|
|
$ |
|
||
Because the Lease contains a purchase option which the Company is reasonably certain to exercise, the building is being amortized on a straight-line basis over its estimated useful life of
18
Future payments under the Lease, inclusive of the Company’s assumed exercise of the purchase option, as of September 30, 2026 were as follows (in thousands):
Year Ending December 31, |
|
|
|
|
2026 (three months) |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: tenant improvement allowance |
|
|
( |
) |
Less: amount allocated to property purchases |
|
|
( |
) |
Less: imputed interest |
|
|
( |
) |
Total finance lease liability |
|
$ |
|
|
Operating Leases
There have been no material changes to the Company’s operating leases during the nine months ended September 30, 2026. For additional information, please read Note 11 Leases, to the consolidated financial statements in the Company’s Form 10-K for the year ended December 31, 2025.
401(k) Savings Plan
The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the board of directors. Effective January 1, 2023, the Company instituted an employer matching program for the plan pursuant to which the Company will match
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements, negligence or willful misconduct, or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services as directors or officers.
The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any material indemnification claims and has not accrued any liabilities related to such obligations in its condensed consolidated financial statements as of September 30, 2026 and December 31, 2025.
Unconditional Purchase Commitment
In January 2021, the Company entered into an unconditional $
Legal Proceedings
On February 14, 2025, a class action captioned Jewik v. TransMedics Group, Inc., et al., Case No. 1:25-cv-10385, was filed against the Company and certain of its current and former officers in the U.S. District Court for the District of Massachusetts. The complaint purported to assert claims pursuant to Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, and SEC Rule 10b-5 promulgated thereunder, seeking unspecified damages on
19
behalf of a putative class of investors who purchased or otherwise acquired the Company’s shares between February 28, 2023 and January 10, 2025 (the “Class Period”). On April 2, 2025, another purported stockholder filed a putative class action lawsuit against the Company and certain of its current and former officers, also in the U.S. District Court for the District of Massachusetts (Collins v. TransMedics Group, Inc., et al., Case No. 1:25-cv-10778). The Collins complaint alleged claims substantially similar to those alleged in the Jewik action and also sought unspecified damages. On May 22, 2025, the court consolidated the Jewik and Collins actions and appointed the Peace Officers’ Annuity and Benefit Fund of Georgia and Oguzhan Altun as lead plaintiffs (the “Lead Plaintiffs”).
On August 8, 2025, Lead Plaintiffs filed a consolidated amended complaint. Like the earlier-filed complaints, the consolidated amended complaint purports to assert claims pursuant to Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5, on behalf of a putative class of investors who purchased or otherwise acquired the Company’s shares during the Class Period. Lead Plaintiffs seek unspecified damages allegedly caused by purported misstatements and omissions contained in the Company’s 2022 Annual Report, certain earnings calls, and other public statements. The consolidated amended complaint claims these alleged statements and omissions operated to artificially inflate the price paid for the Company’s common stock during the Class Period. On October 7, 2025, defendants filed a motion to dismiss the consolidated amended complaint for failure to state a claim. Lead Plaintiffs filed their response to the motion on November 21, 2025, and defendants filed a reply in further support of their motion on December 22, 2025. The court heard oral argument on defendants’ motion on July 9, 2026, and on July 21, 2026 the court granted in part and denied in part the motion to dismiss. The defendants filed their answer to the consolidated amended complaint on August 18, 2026, and the case is now in discovery.
At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. At this time, the Company is unable to predict the outcome of the class action litigation or reasonably estimate a range of possible losses. The Company expenses as incurred the costs related to such legal proceedings.
12. Revenue and Segment Information
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers related to transplant procedures by organ type and geographical area as it believes this presentation best depicts how the nature, amount, timing and uncertainty of the Company’s revenue and cash flows are affected by economic factors, as shown below (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Transplant revenue by country |
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OCS Lung total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
OCS Heart total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OCS Liver total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other transplant-related revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total United States transplant |
|
|
|
|
|
|
|
|
|
|
|
|
||||
All other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OCS Lung revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OCS Heart revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OCS Liver revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total all other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total transplant revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
20
Payments to Customers
In connection with its clinical trials, the Company makes payments to customers to reimburse the cost of clinical trial materials and other costs incurred by customers in executing specified clinical trial protocols related to the Company’s OCS products. The Company evaluates the appropriate accounting treatment for these payments based on their nature, including whether the payments are in exchange for distinct goods or services.
Payments that do not represent consideration for a distinct good or service received from the customer at fair value are recorded as a reduction of revenue. The Company recognizes such reductions of revenue and the related accrual in the same period in which the associated revenue is recognized. The Company updates its estimates of these accruals as additional information becomes available, with a corresponding adjustment to revenue. For each of the three and nine months ended September 30, 2026 and 2025, the impact of adjustments to revenue related to these payments was not material.
Payments that represent consideration for distinct goods or services received from the customer, and for which the consideration reflects the fair value of those goods or services, are recorded as operating expenses. For the three and nine months ended September 30, 2026, the Company recorded $
Segment Information
As a single reportable segment entity, the Company’s segment performance measure is net income (loss).
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of net product revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of service revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research, development and clinical trials: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personnel related (including stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Laboratory supplies and research materials |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consulting and third-party services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Clinical trials costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Facility and IT related and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Personnel related (including stock-based |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional and consultant fees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NOP support |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tradeshows and conferences |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Facility and IT related and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Transaction-related costs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Headquarters relocation costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
ERP implementation costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items(1) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
21
Substantially all of the Company’s tangible long-lived assets are located in the United States.
13. Related Party Transactions
Employment of Dr. Amira Hassanein
Dr. Amira Hassanein, who serves as Product Director for the Company’s OCS Lung program, is the sister of Dr. Waleed Hassanein, the Company’s President and Chief Executive Officer and a member of the Company’s board of directors. The Company paid Dr. Amira Hassanein $
14. Income Taxes
For the three and nine months ended September 30, 2026, the Company recorded income tax expense of $
The Company’s effective tax rate of
The Company has
For the three months ended September 30, 2025, the Company recorded an income tax benefit of $
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on February 24, 2026 (the “2025 Form 10-K”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Item 1A. Risk Factors” section of this Quarterly Report on Form 10-Q and the “Item 1A. Risk Factors” section of our 2025 Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a medical technology company transforming organ transplant therapy for end-stage organ failure patients across multiple disease states. We developed the OCS to replace a decades-old standard of care that we believe is significantly limiting access to life-saving transplant therapy for hundreds of thousands of patients worldwide. Our innovative OCS technology replicates many aspects of the organ’s natural living and functioning environment outside of the human body. As such, the OCS represents a paradigm shift that transforms organ preservation for transplantation from a static state to a dynamic environment that enables new capabilities, including organ optimization and assessment. We have also developed our NOP, an innovative turnkey solution to provide outsourced organ procurement, OCS perfusion management and transplant logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS. Our transplant logistics services include aviation transportation, ground transportation, and other coordination activity. We believe the use of the OCS combined with the NOP has the potential to significantly increase the number of organ transplants and improve post-transplant outcomes.
We designed the OCS to be a platform that allows us to leverage core technologies across products for multiple organs. To date, we have developed three OCS products, one for each of heart, lung and liver transplantations, making the OCS the only FDA approved, portable, multi-organ, warm perfusion technology platform. All three of our products, OCS Heart, OCS Lung and OCS Liver, have received Pre-Market Approval from the FDA, for both organs donated after brain death, or DBD organs, and organs donated after circulatory death, or DCD organs.
Since our inception, we have focused substantially all of our resources on designing, developing and building our proprietary OCS technology platform and organ-specific OCS products; obtaining clinical evidence for the safety and effectiveness of our OCS products through clinical trials; securing regulatory approval; organizing and staffing our company; planning our business; raising capital; commercializing our products; developing and growing our NOP; developing and expanding our market and distribution chain and providing general and administrative support for these operations. To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the issuance of the Notes, proceeds from the sale of common stock in our public offerings, and revenue from commercial sales of our OCS products and NOP services and from sales of our OCS products for use in clinical trials.
Prior to 2024, we had incurred significant annual operating losses since inception and we have only recently achieved profitability. Our ability to generate revenue sufficient to achieve sustained profitability will depend on the continued commercial sales of our products and services. We generated total revenue of $203.0 million and $566.9 million, and net income of $17.1 million and $39.1 million, for the three and nine months ended September 30, 2026, respectively. As of September 30, 2026, we had an accumulated deficit of $238.9 million. We expect our operating and capital expenditures will continue to increase as we focus on growing commercial sales of our products in both the United States and select non-U.S. markets. Because of the numerous risks and uncertainties associated with product development, commercialization and regulations of our industry, we are unable to accurately predict the timing or amount of increased expenses or if we will be able to maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve sustained profitability, we may finance our operations through a combination of equity offerings, debt financings and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms or at all. If we are unable to raise capital or enter into such agreements as, and when, needed, we will have to delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to terminate our operations.
23
The United Network for Organ Sharing, or UNOS, operated the OPTN under a sole-vendor federal contract from 1986 until 2024. In March 2023, the U.S. Department of Health and Human Services’ Health Resources and Services Administration, or HRSA, announced initiatives designed to improve the OPTN, including its intent to solicit contract proposals to manage the OPTN under a multi-vendor model following the expiration of the sole-vendor contract between UNOS and HRSA on March 29, 2024. Additionally, in September 2023, the Securing the U.S. Organ Procurement and Transplantation Network Act was signed into law. This legislation expressly authorizes HRSA to award multiple grants, contracts or cooperative agreements to support the operation of the OPTN. It also specifies that the awards to operate the OPTN shall be distinct from awards to support the networks’ board of directors. In September 2024, HRSA began awarding contracts aimed at supporting the multi-vendor model.
HRSA has consistently exercised options to extend the contract for UNOS to operate OPTN, albeit in a more limited capacity, since March 2024. Most recently, in December 2025, HRSA and UNOS reached a new agreement that took effect on December 30, 2025. This contract allows HRSA to extend UNOS’ work for up to 12 months, until December 29, 2026, structured as four optional three-month periods. The new agreement reflects a shift of several former UNOS functions, including patient safety, reporting and tracking of donor-derived transmission events, and committee support, to HRSA or other contractors.
HRSA continues to implement efforts to improve and modernize the OPTN, including enhancements to patient data on organ procurement, expanded transparency through a publicly accessible data dashboard for allocation out of sequence (AOOS) events, expanded outreach and financial support for living organ donors, and a new OPTN fee collection process whereby HRSA directly collects and distributes patient registration fees under authorities originally granted by the 2025 Full-Year Continuing Appropriations and Extensions Act and extended by the 2026 Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act. The impact that HRSA’s initiatives and the Securing the U.S. Organ Procurement and Transplantation Network Act may have on our business, including on our NOP, is uncertain at this time.
Strategic Transaction
On July 1, 2026, we completed a strategic investment in PAD Aviation, a Germany-based private aviation operator, through which we acquired a minority interest in PAD Aviation. We expect the investment in PAD Aviation will enable us to expand our aviation transportation capabilities and support the future development of our organ retrieval and logistics services in Europe.
Economic Impacts
Inflation, changes in trade policies, and the imposition of or changes in the amount of duties and tariffs have and could continue to adversely impact the price or availability of raw materials, the components of our products as well as shipping and transportation costs. For example, tariffs related to a small portion of components that we import moderately increased our cost of revenue in 2025. The global economy has experienced extreme volatility and disruptions, including significant volatility in commodity, other material and labor costs, declines in consumer confidence, declines in economic growth, supply chain interruptions, uncertainty about economic stability and record inflation globally. Unfavorable economic conditions have and could continue to result in a variety of risks to our business, including impacts on demand and pricing for our products and pricing and availability of raw materials and components for our products, which could make it difficult to forecast our inventory needs and financial results.
Key Components of Our Results of Operations
Revenue
We generate net product revenue primarily from sales of our single-use, organ-specific disposable sets used on our organ-specific OCS Consoles. To a lesser extent, we also generate product revenue from the sale of OCS Consoles to customers and the implied rental of OCS Consoles loaned to customers at no charge. For each new transplant procedure, customers purchase an additional OCS disposable set for use on their existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ procurement, OCS perfusion management and transplant logistics services under our NOP in the United States. Following the investment in PAD Aviation, we anticipate expanding our transplant logistics services in Europe.
Prior to our investment in PAD Aviation, PAD Aviation derived its revenue primarily from charter services. We expect PAD Aviation to continue generating revenue from these operations, which will be recorded within service revenue. During the three and nine months ended September 30, 2026, service revenue of $9.4 million was generated from PAD Aviation’s charter services and was unrelated to transplant services.
24
All of our OCS transplant-related revenue has been generated by sales to transplant centers and Organ Procurement Organizations, not-for-profit organizations responsible for recovering organs from deceased donors for transplantation, in the United States, Europe and Asia-Pacific, or, in some cases, to distributors selling to transplant centers in select countries. Substantially all of our customer contracts have multiple-performance obligations that contain promises consisting of OCS Perfusion Sets and OCS Solutions and may also contain promises for organ procurement, OCS perfusion management or transplant logistics services under our NOP, and OCS Console, whether sold or loaned to the customer.
Our OCS sales outside of the United States have been commercial sales (unrelated to any clinical trials). Sales in the EU are dependent on obtaining and maintaining the Conformité Européene mark, or CE mark, certifications for each of our OCS products. As required by Regulation (EU) 2017/745, or the MDR, we received recertification of the CE mark in September 2022 for each of the OCS Heart and OCS Lung systems, which includes the OCS Console, the OCS disposables, and the OCS solution additives. We also received the recertification of the CE mark in September 2022 for the OCS Liver Console and disposables. We received the CE mark for the OCS Liver combined with our solution additives under the MDR in May 2023, with an effective date of April 2023. In addition, we received a Class II Medical Device License from Health Canada for our OCS Liver combined with our solution additives in October 2023 to complement our existing Health Canada licenses for OCS Heart and OCS Lung.
We expect that our revenue will increase over the long term as a result of the continued growth of the NOP in the United States. We also expect that our revenue will increase over the long term as a result of anticipated growth in non-U.S. sales if national healthcare systems begin to reimburse transplant centers for the use of the OCS, if transplant centers utilize the OCS in more transplant cases and if more transplant centers adopt the OCS in their programs. While we expect our revenue to increase over the long term, revenue from sales may fluctuate from quarter to quarter as the timing of organ transplant procedures is generally unpredictable, and we have observed periodic fluctuations in the availability of donor organs and transplant center surgeons, which impacts the volume of transplants.
Cost of Revenue, Gross Profit and Gross Margin
Cost of net product revenue consists of costs of components of our OCS Consoles and disposable sets, costs of direct materials, labor and the manufacturing overhead that directly supports production and depreciation of OCS Consoles. Included in the cost of OCS disposable sets are the costs of our OCS Lung, OCS Heart and OCS Liver Solutions. Cost of service revenue primarily consists of labor and overhead that directly support organ procurement and OCS perfusion management services and transportation and transplant logistics costs, including labor costs for pilots, aircraft depreciation, aircraft costs, fuel, crew travel, maintenance and third-party flight costs and ground transportation that support organ delivery.
Gross profit is the amount by which revenue exceeds cost of revenue in each reporting period and gross margin is gross profit divided by revenue. Our overall gross margin is impacted by the relative mix of product and service revenue, as product and service revenue have different margin profiles. Product and service gross margins are also affected by a variety of factors, primarily production volumes, the cost of components and direct materials, manufacturing overhead costs, direct labor, the cost of services provided under the NOP and the selling price of our OCS products and NOP services.
We expect that overall cost of revenue will increase or decrease in absolute dollars primarily as, and to the extent that, our revenue increases or decreases. We expect that the cost of net product revenue as a percentage of net product revenue will moderately decrease and gross margin and gross profit will moderately increase over the long term as our sales and production volumes increase and our cost per unit of our OCS disposable sets decreases due to economies of scale, our product enhancements and improved manufacturing efficiency. We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing processes, which we believe will reduce costs and increase our product gross margin. We also expect to see modest improvements in the future in our services gross margin as we provide more services and the efficiency in provisioning of these services improves due to scale and experience, including effectively managing fluctuating aircraft fuel prices. While we expect our gross margins to increase over the long term, they will likely fluctuate from quarter to quarter.
Operating Expenses
Research, Development and Clinical Trials Expenses
Research, development and clinical trials expenses consist of costs incurred for research activities, product development, hardware and software engineering and clinical trial activities, including salaries and related costs, including stock-based compensation, facility and IT related costs, laboratory supplies, depreciation, testing, regulatory, data management and consulting costs.
25
We expense research, development and clinical trials costs as incurred. In the future, we expect that research, development and clinical trials expenses will increase over the long term due to ongoing product development and approval efforts. We expect to continue to perform activities related to obtaining additional regulatory approvals for expanded indications in the United States and other served geographies, as well as developing the next generation of our OCS technology platform.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation, for personnel in our commercial team and personnel in executive, marketing, finance and administrative functions, and recruiting and temporary service fees for such personnel. Selling, general and administrative expenses also include direct and allocated facility and IT related costs, costs to support the NOP, promotional activities, marketing, conferences and trade show costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting and audit services and amortization of sales and marketing-related intangible assets. We expect that our selling, general and administrative expenses will increase over the long term as we increase our headcount and infrastructure to support the expected continued sales growth of our OCS products and our NOP.
Other Income (Expense)
Interest Expense
Interest expense consists of interest expense associated with outstanding borrowings under our loan agreement and our Notes as well as the amortization of debt discounts associated with such agreements. In July 2022, we entered into a credit agreement with Canadian Imperial Bank of Commerce, or CIBC, under which we borrowed $60.0 million. In May 2023, we issued and sold $460.0 million in aggregate principal amount of our Notes. Interest expense also includes imputed interest on our finance lease entered into in January 2026.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net includes interest income, realized and unrealized foreign currency transaction gains and losses and other non-operating income and expense items unrelated to our core operations. Interest income consists of interest earned on our cash balances. Foreign currency transaction gains and losses result from intercompany transactions as well as transactions with customers or vendors denominated in currencies other than the functional currency of the legal entity in which the transaction is recorded.
Income Taxes
Our (provision) benefit for income taxes is based on applying our forecasted annual effective tax rate to year-to-date income before income taxes, and adjusting for discrete items occurring in the quarter. Our forecasted annual effective tax rate may vary from period to period based on many factors including changes in management’s forecast, deductibility of certain expenses and changes to tax laws.
We expect our full year 2026 effective income tax rate to be between 25% and 27%. The change in the effective tax rate from 2025 relates primarily to the release of our valuation allowance in the fourth quarter of 2025. To the extent allowed, we intend to use our available net operating loss carryforwards and tax credits to reduce cash tax payment obligations.
26
Results of Operations
Comparison of the Three Months Ended September 30, 2026 and 2025
The following table summarizes our results of operations for the three months ended September 30, 2026 and 2025:
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Net product revenue |
|
$ |
113,419 |
|
|
$ |
87,677 |
|
|
$ |
25,742 |
|
Service revenue |
|
|
89,586 |
|
|
|
56,146 |
|
|
|
33,440 |
|
Total revenue |
|
|
203,005 |
|
|
|
143,823 |
|
|
|
59,182 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|||
Cost of net product revenue |
|
|
23,570 |
|
|
|
18,687 |
|
|
|
4,883 |
|
Cost of service revenue |
|
|
60,778 |
|
|
|
40,561 |
|
|
|
20,217 |
|
Total cost of revenue |
|
|
84,348 |
|
|
|
59,248 |
|
|
|
25,100 |
|
Gross profit |
|
|
118,657 |
|
|
|
84,575 |
|
|
|
34,082 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research, development and clinical trials |
|
|
29,182 |
|
|
|
15,260 |
|
|
|
13,922 |
|
Selling, general and administrative |
|
|
61,334 |
|
|
|
46,015 |
|
|
|
15,319 |
|
Total operating expenses |
|
|
90,516 |
|
|
|
61,275 |
|
|
|
29,241 |
|
Income from operations |
|
|
28,141 |
|
|
|
23,300 |
|
|
|
4,841 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
(7,271 |
) |
|
|
(3,491 |
) |
|
|
(3,780 |
) |
Interest income and other income (expense), net |
|
|
3,231 |
|
|
|
3,222 |
|
|
|
9 |
|
Total other expense, net |
|
|
(4,040 |
) |
|
|
(269 |
) |
|
|
(3,771 |
) |
Income before income taxes |
|
|
24,101 |
|
|
|
23,031 |
|
|
|
1,070 |
|
(Provision) benefit for income taxes |
|
|
(7,028 |
) |
|
|
1,288 |
|
|
|
(8,316 |
) |
Net income |
|
$ |
17,073 |
|
|
$ |
24,319 |
|
|
$ |
(7,246 |
) |
Revenue
Transplant revenue consisted of:
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Transplant revenue by country by organ: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
|
|
|
|
|
|
|
|
|||
OCS Lung total revenue |
|
$ |
1,956 |
|
|
$ |
3,725 |
|
|
$ |
(1,769 |
) |
OCS Heart total revenue |
|
|
33,349 |
|
|
|
27,401 |
|
|
|
5,948 |
|
OCS Liver total revenue |
|
|
150,220 |
|
|
|
107,883 |
|
|
|
42,337 |
|
Other transplant-related revenue |
|
|
437 |
|
|
|
— |
|
|
|
437 |
|
Total United States transplant revenue |
|
|
185,962 |
|
|
|
139,009 |
|
|
|
46,953 |
|
All other countries |
|
|
|
|
|
|
|
|
|
|||
OCS Lung total revenue |
|
|
1,124 |
|
|
|
385 |
|
|
|
739 |
|
OCS Heart total revenue |
|
|
5,250 |
|
|
|
3,187 |
|
|
|
2,063 |
|
OCS Liver total revenue |
|
|
218 |
|
|
|
58 |
|
|
|
160 |
|
Total all other countries transplant |
|
|
6,592 |
|
|
|
3,630 |
|
|
|
2,962 |
|
Total transplant revenue |
|
$ |
192,554 |
|
|
$ |
142,639 |
|
|
$ |
49,915 |
|
27
We also had service revenue unrelated to transplant of $10.5 million and $1.2 million for the three months ended September 30, 2026 and 2025, respectively. The increase was primarily attributable to $9.4 million of revenue generated from PAD Aviation charter services.
Transplant revenue from customers in the United States was $186.0 million in the three months ended September 30, 2026 and increased by $47.0 million compared to the three months ended September 30, 2025, due to higher sales volumes of our OCS Liver disposable sets and increased usage of the NOP. Revenue for each organ in the table above includes net product revenue from sales of disposable sets as well as service revenue for organ procurement, OCS perfusion management and transplant logistics services under the NOP in the United States.
Transplant revenue from customers outside the United States was $6.6 million and $3.6 million for the three months ended September 30, 2026 and 2025, respectively. The increase was due primarily to higher sales volumes of our OCS Heart disposable sets.
Cost of Revenue, Gross Profit and Gross Margin
Cost of net product revenue increased by $4.9 million in the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Cost of service revenue increased by $20.2 million in the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Gross profit increased by $34.1 million in the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
Overall gross margin was 58% and 59% for the three months ended September 30, 2026 and 2025, respectively. The decrease in gross margin from 2025 to 2026 was driven primarily by a higher mix of service revenue, which carries a lower gross margin than product revenue. Gross margin from net product revenue was 79% for each of the three months ended September 30, 2026 and 2025. Gross margin from service revenue was 32% and 28% for the three months ended September 30, 2026 and 2025, respectively, and consisted primarily of organ procurement, OCS perfusion management and transplant logistics services under our NOP. Gross margin from service revenue increased during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 primarily due to efficiencies in our NOP operating model.
Operating Expenses
Research, Development and Clinical Trials Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Personnel related (including stock-based |
|
$ |
8,445 |
|
|
$ |
6,444 |
|
|
$ |
2,001 |
|
Laboratory supplies and research materials |
|
|
4,207 |
|
|
|
2,992 |
|
|
|
1,215 |
|
Consulting and third-party services |
|
|
11,178 |
|
|
|
3,432 |
|
|
|
7,746 |
|
Clinical trials costs |
|
|
1,676 |
|
|
|
278 |
|
|
|
1,398 |
|
Facility and IT related and other |
|
|
3,676 |
|
|
|
2,114 |
|
|
|
1,562 |
|
Total research, development and clinical |
|
$ |
29,182 |
|
|
$ |
15,260 |
|
|
$ |
13,922 |
|
Total research, development and clinical trials expenses increased by $13.9 million from $15.3 million in the three months ended September 30, 2025 to $29.2 million in the three months ended September 30, 2026. Personnel related costs increased by $2.0 million primarily due to increased headcount to support development efforts for our next generation OCS program and overall compensation increases. Personnel related costs included stock-based compensation expense of $1.1 million and $0.9 million for the three months ended September 30, 2026 and 2025, respectively. Consulting and third-party services costs increased by $7.7 million due to development efforts by our external consultants for our next generation OCS program and other product development, including our OCS Kidney device. Clinical trials costs increased by $1.4 million due primarily to patient enrollment in our clinical trials. Facility and IT related and other costs increased by $1.6 million due primarily to the increased cost of supporting a larger group of research and development personnel.
28
Selling, General and Administrative Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Personnel related (including stock-based |
|
$ |
38,044 |
|
|
$ |
29,234 |
|
|
$ |
8,810 |
|
Professional and consultant fees |
|
|
9,588 |
|
|
|
6,395 |
|
|
|
3,193 |
|
NOP support |
|
|
1,412 |
|
|
|
1,173 |
|
|
|
239 |
|
Tradeshows and conferences |
|
|
210 |
|
|
|
1,076 |
|
|
|
(866 |
) |
Facility and IT related and other |
|
|
7,516 |
|
|
|
6,506 |
|
|
|
1,010 |
|
Depreciation and amortization expense |
|
|
4,564 |
|
|
|
1,631 |
|
|
|
2,933 |
|
Total selling, general and administrative |
|
$ |
61,334 |
|
|
$ |
46,015 |
|
|
$ |
15,319 |
|
Total selling, general and administrative expenses increased by $15.3 million from $46.0 million in the three months ended September 30, 2025 to $61.3 million in the three months ended September 30, 2026. Personnel related costs increased by $8.8 million primarily due to the continued expansion of our team to support the growth in our business and costs pursuant to the transition agreement with our former Chief Financial Officer, including the modification of certain stock awards. Personnel related costs included stock-based compensation expense of $11.0 million and $7.9 million for the three months ended September 30, 2026 and 2025, respectively. Professional and consultant fees increased by $3.2 million due primarily to strategic initiatives and corporate development activities. Depreciation and amortization expense increased by $2.9 million primarily due to $2.1 million of amortization of our finance lease for our new headquarters that commenced in January 2026.
Other Income (Expense)
Interest Expense
Interest expense was $7.3 million and $3.5 million for the three months ended September 30, 2026 and 2025, respectively. Interest expense of $2.5 million and $2.4 million for the three months ended September 30, 2026 and 2025, respectively, related to the $460.0 million principal amount of the Notes that carry a 1.5% interest rate. Interest expense of $0.9 million and $1.0 million for the three months ended September 30, 2026 and 2025, respectively, related to the outstanding principal amount of the CIBC loan that carries a variable interest rate, which was 5.3% as of September 30, 2026. Additionally, for the three months ended September 30, 2026, interest expense included $3.9 million of imputed interest on our finance lease entered into in January 2026.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net for the three months ended September 30, 2026 and 2025 included interest income of $3.4 million and $3.3 million, respectively, from interest earned on cash balances. Interest income and other income (expense), net for the three months ended September 30, 2026 and 2025 also included $0.2 million and $0.1 million of realized and unrealized foreign currency transactions losses, respectively.
Income Taxes
Our effective tax rate of 29.2% for the three months ended September 30, 2026 differed from the statutory federal corporate tax rate of 21% primarily due to state income taxes and a discrete tax item resulting from transaction-related costs, which increased the effective tax rate.
For the three months ended September 30, 2025, our income tax benefit of $1.3 million resulted from a reduction in state income taxes due to the passage of the One Big Beautiful Bill Act, specifically changes related to domestic research expensing and bonus depreciation. Until the fourth quarter of 2025, we maintained a valuation allowance on our overall net deferred tax assets.
29
Comparison of the Nine Months Ended September 30, 2026 and 2025
The following table summarizes our results of operations for the nine months ended September 30, 2026 and 2025:
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|||
Net product revenue |
|
$ |
332,549 |
|
|
$ |
272,011 |
|
|
$ |
60,538 |
|
Service revenue |
|
|
234,337 |
|
|
|
172,719 |
|
|
|
61,618 |
|
Total revenue |
|
|
566,886 |
|
|
|
444,730 |
|
|
|
122,156 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|||
Cost of net product revenue |
|
|
73,444 |
|
|
|
54,420 |
|
|
|
19,024 |
|
Cost of service revenue |
|
|
160,426 |
|
|
|
120,918 |
|
|
|
39,508 |
|
Total cost of revenue |
|
|
233,870 |
|
|
|
175,338 |
|
|
|
58,532 |
|
Gross profit |
|
|
333,016 |
|
|
|
269,392 |
|
|
|
63,624 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research, development and clinical trials |
|
|
85,693 |
|
|
|
48,354 |
|
|
|
37,339 |
|
Selling, general and administrative |
|
|
182,149 |
|
|
|
133,728 |
|
|
|
48,421 |
|
Total operating expenses |
|
|
267,842 |
|
|
|
182,082 |
|
|
|
85,760 |
|
Income from operations |
|
|
65,174 |
|
|
|
87,310 |
|
|
|
(22,136 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest expense |
|
|
(21,666 |
) |
|
|
(10,428 |
) |
|
|
(11,238 |
) |
Interest income and other income (expense), net |
|
|
8,483 |
|
|
|
9,007 |
|
|
|
(524 |
) |
Total other expense, net |
|
|
(13,183 |
) |
|
|
(1,421 |
) |
|
|
(11,762 |
) |
Income before income taxes |
|
|
51,991 |
|
|
|
85,889 |
|
|
|
(33,898 |
) |
Provision for income taxes |
|
|
(12,921 |
) |
|
|
(981 |
) |
|
|
(11,940 |
) |
Net income |
|
$ |
39,070 |
|
|
$ |
84,908 |
|
|
$ |
(45,838 |
) |
Revenue
Transplant revenue consisted of:
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Transplant revenue by country by organ: |
|
|
|
|
|
|
|
|
|
|||
United States |
|
|
|
|
|
|
|
|
|
|||
OCS Lung total revenue |
|
$ |
6,406 |
|
|
$ |
11,515 |
|
|
$ |
(5,109 |
) |
OCS Heart total revenue |
|
|
92,587 |
|
|
|
85,838 |
|
|
|
6,749 |
|
OCS Liver total revenue |
|
|
437,179 |
|
|
|
332,460 |
|
|
|
104,719 |
|
Other transplant-related revenue |
|
|
437 |
|
|
|
— |
|
|
|
437 |
|
Total United States transplant revenue |
|
|
536,609 |
|
|
|
429,813 |
|
|
|
106,796 |
|
All other countries |
|
|
|
|
|
|
|
|
|
|||
OCS Lung total revenue |
|
|
2,160 |
|
|
|
1,181 |
|
|
|
979 |
|
OCS Heart total revenue |
|
|
14,848 |
|
|
|
10,232 |
|
|
|
4,616 |
|
OCS Liver total revenue |
|
|
473 |
|
|
|
442 |
|
|
|
31 |
|
Total all other countries transplant |
|
|
17,481 |
|
|
|
11,855 |
|
|
|
5,626 |
|
Total transplant revenue |
|
$ |
554,090 |
|
|
$ |
441,668 |
|
|
$ |
112,422 |
|
30
We also had service revenue unrelated to transplant of $12.8 million and $3.1 million for the nine months ended September 30, 2026 and 2025, respectively. The increase was primarily attributable to $9.4 million of revenue generated from PAD Aviation charter services.
Transplant revenue from customers in the United States was $536.6 million in the nine months ended September 30, 2026 and increased by $106.8 million compared to the nine months ended September 30, 2025, due to higher sales volumes of our OCS Liver disposable sets and increased usage of the NOP. Revenue for each organ in the table above includes net product revenue from sales of disposable sets as well as service revenue for organ procurement, OCS perfusion management and transplant logistics services under the NOP in the United States.
Transplant revenue from customers outside the United States was $17.5 million and $11.9 million for the nine months ended September 30, 2026 and 2025, respectively. The increase was due primarily to higher sales volumes of our OCS Heart disposable sets.
Cost of Revenue, Gross Profit and Gross Margin
Cost of net product revenue increased by $19.0 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Cost of service revenue increased by $39.5 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Gross profit increased by $63.6 million in the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
Overall gross margin was 59% and 61% for the nine months ended September 30, 2026 and 2025, respectively. The decrease in gross margin from 2025 to 2026 was driven primarily by a higher mix of service revenue, which carries a lower gross margin than product revenue, as well as a decrease in gross margin from product revenue. Gross margin from net product revenue was 78% and 80% for the nine months ended September 30, 2026 and 2025, respectively. Gross margin from net product revenue decreased from the nine months ended September 30, 2025 to the nine months ended September 30, 2026 primarily due to product mix and higher freight costs. Gross margin from service revenue was 32% and 30% for the nine months ended September 30, 2026 and 2025, respectively, and consisted primarily of organ procurement, OCS perfusion management and transplant logistics services under our NOP. Gross margin from service revenue increased during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025 primarily due to efficiencies in our NOP operating model.
Operating Expenses
Research, Development and Clinical Trials Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Personnel related (including stock-based |
|
$ |
24,607 |
|
|
$ |
18,660 |
|
|
$ |
5,947 |
|
Laboratory supplies and research materials |
|
|
14,566 |
|
|
|
13,154 |
|
|
|
1,412 |
|
Consulting and third-party services |
|
|
32,453 |
|
|
|
9,907 |
|
|
|
22,546 |
|
Clinical trials costs |
|
|
3,996 |
|
|
|
626 |
|
|
|
3,370 |
|
Facility and IT related and other |
|
|
10,071 |
|
|
|
6,007 |
|
|
|
4,064 |
|
Total research, development and clinical |
|
$ |
85,693 |
|
|
$ |
48,354 |
|
|
$ |
37,339 |
|
Total research, development and clinical trials expenses increased by $37.3 million from $48.4 million in the nine months ended September 30, 2025 to $85.7 million in the nine months ended September 30, 2026. Personnel related costs increased by $5.9 million primarily due to increased headcount to support development efforts for our next generation OCS program and overall compensation increases. Personnel related costs included stock-based compensation expense of $3.6 million and $3.4 million for the nine months ended September 30, 2026 and 2025, respectively. Consulting and third-party services costs increased by $22.5 million due to development efforts by our external consultants for our next generation OCS program and other product development, including our OCS Kidney device. Clinical trials costs increased by $3.4 million due primarily to patient enrollment in our clinical trials. Facility and IT related and other costs increased by $4.1 million due primarily to the increased cost of supporting a larger group of research and development personnel.
31
Selling, General and Administrative Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
|
|
(in thousands) |
|
|||||||||
Personnel related (including stock-based |
|
$ |
103,081 |
|
|
$ |
84,212 |
|
|
$ |
18,869 |
|
Professional and consultant fees |
|
|
32,082 |
|
|
|
19,649 |
|
|
|
12,433 |
|
NOP support |
|
|
4,915 |
|
|
|
5,511 |
|
|
|
(596 |
) |
Tradeshows and conferences |
|
|
3,200 |
|
|
|
3,051 |
|
|
|
149 |
|
Facility and IT related and other |
|
|
23,956 |
|
|
|
16,788 |
|
|
|
7,168 |
|
Depreciation and amortization expense |
|
|
14,915 |
|
|
|
4,517 |
|
|
|
10,398 |
|
Total selling, general and administrative |
|
$ |
182,149 |
|
|
$ |
133,728 |
|
|
$ |
48,421 |
|
Total selling, general and administrative expenses increased by $48.4 million from $133.7 million in the nine months ended September 30, 2025 to $182.1 million in the nine months ended September 30, 2026. Personnel related costs increased by $18.9 million primarily due to the continued expansion of our team to support the growth in our business. Personnel related costs included stock-based compensation expense of $26.3 million and $23.1 million for the nine months ended September 30, 2026 and 2025, respectively. Professional and consultant fees increased by $12.4 million due primarily to transaction-related costs of $5.1 million related to strategic initiatives and corporate development activities, and to costs related to international expansion and process improvement initiatives. Facility and IT related and other costs increased by $7.2 million due primarily to increases in IT infrastructure, travel costs and expenses related to properties in Somerville, Massachusetts. Depreciation and amortization expense increased by $10.4 million primarily due to $6.2 million of amortization of our finance lease for our new headquarters that commenced in January 2026 and $1.9 million of incremental amortization due to a change in estimated useful life of acquired intangible assets.
Other Income (Expense)
Interest Expense
Interest expense was $21.7 million and $10.4 million for the nine months ended September 30, 2026 and 2025, respectively. Interest expense of $7.4 million and $7.3 million for the nine months ended September 30, 2026 and 2025, respectively, related to the $460.0 million principal amount of the Notes that carry a 1.5% interest rate. Interest expense of $2.8 million and $3.1 million for the nine months ended September 30, 2026 and 2025, respectively, related to the outstanding principal amount of the CIBC loan that carries a variable interest rate, which was 5.3% as of September 30, 2026. Additionally, for the nine months ended September 30, 2026, interest expense included $11.5 million of imputed interest on our finance lease entered into in January 2026.
Interest Income and Other Income (Expense), Net
Interest income and other income (expense), net for the nine months ended September 30, 2026 and 2025 included interest income of $9.1 million and $8.1 million, respectively, from interest earned on cash balances. Interest income and other income (expense), net for the nine months ended September 30, 2026 and 2025 also included $0.9 million of realized and unrealized foreign currency transactions losses and $1.0 million of realized and unrealized foreign currency transactions gains, respectively.
Income Taxes
Our effective tax rate of 24.9% for the nine months ended September 30, 2026 differed from the statutory federal corporate tax rate of 21% primarily due to state income taxes, which increased the effective tax rate.
For the nine months ended September 30, 2025, our income tax expense consisted primarily of state income taxes. Until the fourth quarter of 2025, we maintained a valuation allowance on our overall net deferred tax assets.
Liquidity and Capital Resources
Prior to 2024, we had incurred significant annual operating losses since inception and we may incur losses in the future. To date, we have funded our operations primarily with proceeds from borrowings under loan agreements, proceeds from the issuance of our Notes, proceeds from the sale of common stock in our public offerings and revenue from commercial sales of our OCS products and NOP services and from sales of our OCS products for use in clinical trials. At September 30, 2026, our principal source of liquidity was cash of $493.0 million.
32
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
|
|
(in thousands) |
|
|||||
Net cash provided by operating activities |
|
$ |
77,846 |
|
|
$ |
158,327 |
|
Net cash used in investing activities |
|
|
(57,459 |
) |
|
|
(43,737 |
) |
Net cash provided by financing activities |
|
|
2,817 |
|
|
|
13,758 |
|
Effect of exchange rate changes on cash and |
|
|
(670 |
) |
|
|
1,176 |
|
Net increase in cash and restricted cash |
|
$ |
22,534 |
|
|
$ |
129,524 |
|
Operating Activities
During the nine months ended September 30, 2026, operating activities provided $77.8 million of cash, primarily resulting from net income of $39.1 million and net non-cash charges of $91.6 million, partially offset by net cash used by changes in our operating assets and liabilities of $52.8 million. Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2026 consisted primarily of an increase in accounts receivable of $28.1 million, an increase in inventory of $19.4 million, an increase in prepaid expenses and other current assets of $6.9 million, and a decrease in operating lease liabilities of $2.5 million, partially offset by a net increase in accounts payable and accrued expenses and other current liabilities of $5.6 million.
During the nine months ended September 30, 2025, operating activities provided $158.3 million of cash, primarily resulting from net income of $84.9 million, net non-cash charges of $49.7 million, and net cash provided by changes in our operating assets and liabilities of $23.7 million. Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2025 consisted primarily of a decrease in accounts receivable of $17.5 million and an increase in accounts payable and accrued expenses and other current liabilities of $12.8 million, partially offset by an increase in prepaid expenses and other current assets of $4.8 million and a decrease in operating lease liabilities of $2.1 million.
Changes in accounts receivable, inventory, prepaid expenses and other current assets, accounts payable, and accrued expenses and other current liabilities in each reporting period are generally due to growth in our business and timing of invoices and payments.
Investing Activities
During the nine months ended September 30, 2026, net cash used in investing activities of $57.5 million consisted primarily of purchases of property, plant and equipment of $52.1 million, primarily related to the purchase of two parcels of land and building in Somerville, Massachusetts and the buildout of our new headquarters.
During the nine months ended September 30, 2025, net cash used in investing activities of $43.7 million consisted of purchases of property, plant and equipment, primarily related to the purchase of transplant aircraft.
Financing Activities
During the nine months ended September 30, 2026, net cash provided by financing activities of $2.8 million consisted primarily of proceeds from the issuance of common stock upon exercise of stock options of $4.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $3.9 million, partially offset by repayments of long-term debt of $5.0 million.
During the nine months ended September 30, 2025, net cash provided by financing activities of $13.8 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $10.6 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $3.2 million.
Convertible Senior Notes
On May 11, 2023, we issued $460.0 million aggregate principal amount of the Notes, in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, pursuant to an indenture dated May 11, 2023, by and between us and U.S. Bank Trust Company, National Association, or the Indenture.
33
The initial conversion price of the Notes is approximately $94.00 per share of common stock, which represents a premium of approximately 32.5% over the closing price of our common stock on May 8, 2023. The Notes will mature on June 1, 2028, unless earlier repurchased, redeemed or converted. We used $52.1 million of the proceeds from the sale of the Notes to fund the cost of entering into capped call transactions, described below. The proceeds from the issuance of the Notes were approximately $393.3 million, net of capped call transaction costs of $52.1 million and initial purchaser discounts and other debt issuance costs totaling $14.6 million. The Notes bear interest at a rate of 1.50% per year and interest is payable semiannually in arrears on June 1 and December 1 of each year. The initial conversion rate is 10.6388 shares of common stock per $1,000 principal amount of the Notes, which represents an initial conversion price of approximately $94.00 per share of common stock. The conversion rate and conversion price are subject to customary adjustments upon the occurrence of certain events as described in the Indenture.
Before March 1, 2028, noteholders have the right to convert their Notes only upon the occurrence of certain events, including certain corporate events, and during the five business days immediately after any ten consecutive trading days in which the trading price per $1,000 principal amount of Notes is less than ninety-eight percent (98%) of the as converted value. Additionally, noteholders can convert their Notes during any calendar quarter (and only during such calendar quarter), commencing after the calendar quarter ending on September 30, 2023 but before March 1, 2028, provided the last reported sale price of the common stock for at least 20 trading days is greater than or equal to 130% of the conversion price during the 30 consecutive trading days ending on the last trading day of a calendar quarter. From and after March 1, 2028, noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. We have the right to elect to settle conversions either in cash, shares or in a combination of cash and shares of our common stock.
We may redeem for cash all or any portion of the Notes (subject to the partial redemption limitation set forth in the Indenture), at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. In addition, calling any Note for redemption will constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.
Long-Term Debt
In July 2022, we entered into a credit agreement with CIBC, pursuant to which we have borrowed $60.0 million (as amended, referred to herein as the CIBC Credit Agreement).
Borrowings under the CIBC Credit Agreement bear interest at an annual rate equal to either, at our option, (i) the secured overnight financing rate for an interest period selected by us, subject to a minimum of 1.50%, plus 2.0% or (ii) 1.0% plus the higher of (a) the prime rate, subject to a minimum of 4.0% or (b) the Federal Funds Effective Rate, plus 0.5%. Commencing in July 2026, we began repaying the outstanding principal amount in equal monthly installments with the remaining balance due on the maturity date in July 2027. At our option, we may prepay the outstanding principal amount under the CIBC Credit Agreement, without a prepayment fee. All obligations under the CIBC Credit Agreement are guaranteed by us and each of our material subsidiaries.
All obligations of us and each guarantor are secured by substantially all of our and each guarantor’s assets, including their intellectual property, subject to certain exceptions. Under the CIBC Credit Agreement, we have agreed to customary representations and warranties, events of default and certain affirmative and negative covenants to which we will remain subject until maturity. The financial covenants include, among other covenants, (x) a requirement to maintain a minimum liquidity amount of the greater of either (i) the consolidated adjusted EBITDA loss (or gain), as defined, for the trailing four month period (only if EBITDA is negative) and (ii) $10.0 million, and (y) a requirement to maintain total net revenue of at least 75% of the level set forth in the total revenue plan presented to CIBC. The obligations under the CIBC Credit Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, change in control, bankruptcy, insolvency, certain defaults under other material debt, certain events with respect to governmental approvals (if such events could cause a material adverse change in our business), failure to comply with certain covenants and a material adverse change in our business, operations or financial condition. As of September 30, 2026, we were in compliance with all financial covenants of the CIBC Credit Agreement. During the continuance of an event of default, the interest rate per annum will be equal to the rate that would have otherwise been applicable at the time of the event of default plus 2.0%. If an event of default (other than certain events of bankruptcy or insolvency) occurs and is continuing, CIBC may declare all or any portion of the outstanding principal amount of the borrowings plus accrued and unpaid interest to be due and payable. Upon the occurrence of certain events of bankruptcy or insolvency, all of the outstanding principal amount of the borrowings plus accrued and unpaid interest will automatically become due and payable. In addition, we may be required to prepay the outstanding principal amount, subject to certain exceptions, with portions of net cash proceeds of certain asset sales and certain casualty and condemnation events.
34
Funding Requirements
As we continue to pursue and increase commercial sales of our OCS products, we expect our costs and expenses to increase in the future, particularly as we expand our commercial team, grow our NOP, scale our manufacturing and sterilization operations, continue research, development and clinical trial efforts, including expanding our research and development and manufacturing capabilities in Italy, seek regulatory approval for the next generation OCS, new products and product enhancements, including new indications, both in the United States and in select non-U.S. markets, establish and relocate to a new long-term global headquarters, and seek greater control of air and ground transport for our NOP. If the demand for our products exceeds our existing manufacturing and sterilization capacity, our ability to fulfill orders would be limited until we have sufficiently expanded such operations. The timing and amount of our operating and capital expenditures will depend on many factors, including:
We believe that our existing cash will enable us to fund our operating expenses, capital expenditure requirements, and debt service payments for at least 12 months following the filing of this Quarterly Report on Form 10-Q.
We may need to raise additional funding, which might not be available on favorable terms, or at all. See “Item 1A. Risk Factors—Risks Related to Our Financial Position and Need for Additional Capital” in our 2025 Form 10-K.
35
Material Contractual Obligations
We are in the process of contracting for engineering and construction services for the buildout of our new headquarters facility in Somerville, Massachusetts. We currently estimate total capital expenditures related to the new headquarters facility to be in a range of approximately $200 million and $240 million, to be incurred over a multi-year period through 2030. As of September 30, 2026, we have entered into contractual commitments of approximately $57.5 million related to construction, design and project management services, of which $13.8 million has been incurred.
There have been no other material changes to our cash requirements from those disclosed in our 2025 Form 10-K.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. We evaluate our estimates on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies and estimates from those disclosed in our consolidated financial statements and the related notes and other financial information included in our 2025 Form 10-K.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to changes in interest rates and foreign currency exchange rates because we finance certain operations through variable rate debt instruments and denominate our transactions in a variety of foreign currencies. Changes in these rates may have an impact on future cash flow and earnings. We manage these risks through normal operating and financing activities. There has been no material change in the foreign currency exchange risk or interest rate risk discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Form 10-K.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial and accounting officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
36
Based on the evaluation of our disclosure controls and procedures as of September 30, 2026, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting. Specifically, the Company has not designed and maintained effective controls over inventory movement within its manufacturing network. While effective controls are in place to verify the existence and accuracy of inventory as of year-end, effective controls have not been designed and maintained to verify that inventory movements are appropriately recorded in the interim financial statements. Notwithstanding the material weakness, and based on the additional analyses and other procedures management performed, we have concluded that our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position and results of operations and cash flows as of each of the dates, and for each of the periods, presented therein in accordance with generally accepted accounting principles in the United States of America.
Remediation Plan
In response to the material weakness, management has designed and implemented new control activities, including enhanced interim inventory counting, system-based, and monitoring controls, to ensure the movement of inventory is timely and accurately recorded throughout the course of the year, as well as strengthened review and approval procedures. The newly designed control activities described above were implemented during the quarter ended June 30, 2026. Management is in the process of performing its evaluation of the operating effectiveness of the newly designed and implemented controls, which is expected to be completed during the fourth quarter. Management is targeting successful completion of the testing of operating effectiveness of controls and remediation of the material weakness by the end of the fiscal year ending December 31, 2026.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Information with respect to legal proceedings and this item is included in Note 11 of the Notes to the Unaudited Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. For a detailed discussion of the risks that affect our business, please refer to the section titled “Item 1A. Risk Factors” in our 2025 Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 5. Other Information.
During our fiscal quarter ended September 30, 2026, no director or “officer” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
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Item 6. Exhibits.
Exhibit Number |
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Description |
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3.1 |
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Restated Articles of Organization (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K (File No. 001-38891) filed with the SEC on March 17, 2020) |
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3.2 |
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Second Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38891) filed with the SEC on November 4, 2022) |
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10.1*# |
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Executive Retention Agreement, dated as of September 10, 2026, by and between the Registrant and Fernando Araujo |
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10.2*# |
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Offer Letter, dated as of September 10, 2026, by and between the Registrant and Fernando Araujo |
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10.3*# |
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Transition Agreement, dated as of September 10, 2026, by and between the Registrant and Gerardo Hernandez |
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31.1* |
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Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1† |
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Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2† |
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Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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101.INS |
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
# Indicated a management or compensatory plan, contract or arrangement
† This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 5, 2026 |
TRANSMEDICS GROUP, INC. |
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By: |
/s/ Waleed H. Hassanein, M.D. |
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Waleed H. Hassanein, M.D. |
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President and Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 5, 2026 |
By: |
/s/ Fernando Araujo |
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Fernando Araujo |
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Chief Financial Officer and Treasurer |
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(Principal Financial and Accounting Officer) |
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