TransMedics Group Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our 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, 2023, as filed with the SEC on February 27, 2024 (the “2023 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 2023 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.

Current wording

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, 2024, as filed with the SEC on February 27, 2025 (the “2024 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 2024 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.

Previous wording

We are a commercial-stage 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 retrieval, OCS organ management and logistics services, to provide transplant programs in the United States with a more efficient process to procure donor organs with the OCS. In 2023, we enhanced our NOP offering with the addition of a logistics team to expand our transportation logistics capabilities. Our 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.

Current wording

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.

Previous wording

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 our 1.50% convertible senior notes due 2028, or 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 clinical trials.

Current wording

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.

Previous wording

From our inception through December 31, 2023, we incurred significant operating losses. Our ability to generate revenue sufficient to achieve sustained profitability will depend on the continued growth in customer utilization of our products and services. We generated total revenue of $108.8 million and $319.9 million, and net income of $4.2 million and $28.6 million, for the three and nine months ended September 30, 2024, respectively. We generated total revenue of $241.6 million and incurred a net loss of $25.0 million for the year ended December 31, 2023. As of September 30, 2024, we had an accumulated deficit of $475.1 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, including growing our commercial team, which will pursue increasing commercial sales of our OCS products; growing our NOP, including by maintaining and growing our logistics capabilities, including hiring training and retaining pilots to scale our aviation transportation, to support our NOP and reduce dependence on third party transportation, including by means of the acquisition, maintenance or replacement of fixed-wing aircraft or other acquisitions, joint ventures or strategic investments; scaling our manufacturing and sterilization operations; developing the next generation OCS; continuing research, development and clinical trial efforts; seeking regulatory clearance for new products and product enhancements, including additional indications or other organs, in both the United States and select non-U.S. markets; and operating as a public company.

Current wording

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 $143.5 million and $96.9 million, and net income of $25.7 million and $12.2 million, for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had an accumulated deficit of $442.6 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, including growing our commercial team, which will pursue increasing commercial sales of our OCS products; growing our NOP, including by maintaining and growing our transplant logistics capabilities, including hiring training and retaining pilots to scale our aviation transportation operations, to support our NOP and reduce dependence on third party transportation, including by means of the acquisition, maintenance or replacement of fixed-wing aircraft or other acquisitions, joint ventures or strategic investments; scaling our manufacturing and sterilization operations; developing the next generation OCS; continuing research, development and clinical trial efforts; seeking regulatory clearance for new products and product enhancements, including additional indications or other organs, in both the United States and select non-U.S. markets; and operating as a public company.

Previous wording

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 when, or if, we will be able to achieve or maintain profitability on an annual basis. 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.

Current wording

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.

Previous wording

Inflation, changes in trade policies, and the imposition 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, 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.

Current wording

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, we currently expect that tariffs related to a small portion of components that we import will moderately increase 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.

Previous wording

Components of Our Results of Operations

Current wording

Key Components of Our Results of Operations

Previous wording

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 the customer’s existing organ-specific OCS Console. We also generate service revenue by providing outsourced organ retrieval, OCS organ management and logistics services under our NOP in the United States. With the acquisition of Summit, the purchase of fixed-wing transplant aircraft and the addition of a logistics team, we anticipate increased service revenue from our logistics services.

Current wording

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. With the acquisition of Summit Aviation, Inc. and Northside Property Group, LLC, or together, Summit, in August 2023, the purchase of fixed-wing transplant aircraft and the addition of a logistics team, we have increased service revenue from our transplant logistics services.

Previous wording

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 retrieval, OCS organ management or logistics services under our NOP, and an OCS Console, whether sold or loaned to the customer.

Current wording

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.

Previous wording

All of our sales outside of the United States have been commercial sales (unrelated to any clinical trials). Our 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.

Current wording

Our 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.

Previous wording

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.

Current wording

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.

Previous wording

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 retrieval and OCS organ management services and transportation and 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. Cost of service revenue for the three and nine months ended September 30, 2024 also includes $0.7 million and $2.4 million, respectively, of costs from Summit's legacy operations unrelated to the NOP and organ transplant. Cost of service revenue for the three and nine months ended September 30, 2023 also includes $2.3 million of costs from Summit's legacy operations unrelated to the NOP and organ transplant.

Current wording

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 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. Cost of service revenue for the three months ended March 31, 2025 and 2024 also includes $0.6 million and $0.8 million, respectively, of costs from Summit's legacy operations unrelated to the NOP and organ transplant.

Previous wording

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 will be impacted by the relative mix of product and service revenue, as product and service revenue have different margin profiles, and we expect our overall gross margin will decrease as service revenue increases as a proportion of overall revenue in 2024 as compared to 2023. 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.

Current wording

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.

Previous wording

Selling, general and administrative expenses also include direct and allocated facility-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.

Current wording

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-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 to support the expected continued sales growth of our OCS products and our NOP.

Previous wording

Interest income and other income (expense) 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.

Current wording

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.

Previous wording

We also had service revenue unrelated to OCS transplant of $1.3 million for the three months ended September 30, 2024, which consisted primarily of flight school training revenue from Summit's legacy operations, and service revenue unrelated to OCS transplant of $2.4 million for the three months ended September 30, 2023, including $1.6 million of charter flight and aircraft management services and $0.8 million of flight school training revenue, from Summit's legacy operations.

Current wording

We also had service revenue unrelated to OCS transplant of $0.9 million for each of the three months ended March 31, 2025 and 2024.

Previous wording

Revenue from customers in the United States related to OCS transplant was $104.9 million in the three months ended September 30, 2024 and increased by $45.2 million compared to the three months ended September 30, 2023, due to higher sales volumes of our OCS Liver, OCS Heart and OCS Lung 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 retrieval, OCS organ management and logistics services under the NOP in the United States. Establishing the NOP, which launched in late 2021, has allowed us to broaden our customer base and increase utilization of the OCS in organ transplantation. Substantially all of our customers in the United States now participate in the NOP. By adding logistics to our NOP offering in late 2023, we have been able to further increase product and service revenue.

Current wording

Revenue from customers in the United States related to OCS transplant was $138.6 million in the three months ended March 31, 2025 and increased by $46.8 million compared to the three months ended March 31, 2024, due to higher sales volumes of our OCS Liver and OCS Heart 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.

Previous wording

Revenue from customers outside the United States was $2.6 million and $4.3 million for the three months ended September 30, 2024 and 2023, respectively.

Current wording

Revenue from customers outside the United States was $4.1 million for each of the three months ended March 31, 2025 and 2024.

Previous wording

Cost of net product revenue increased by $2.2 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Cost of service revenue increased by $20.0 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023 as we increased utilization of the NOP. Gross profit increased by $20.2 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

Current wording

Cost of net product revenue increased by $2.2 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Cost of service revenue increased by $16.2 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024. Gross profit increased by $28.3 million in the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

Previous wording

Overall gross margin was 56% and 61% for the three months ended September 30, 2024 and 2023, respectively. The decrease in gross margin from 2023 to 2024 was driven primarily by the relative increase in service revenue, which has a lower gross margin than product revenue. Gross margin from net product revenue was 80% and 77% for the three months ended September 30, 2024 and 2023, respectively. Gross margin from net product revenue increased from the three months ended September 30, 2023 to the three months ended September 30, 2024 primarily due to higher volume of product sales. Gross margin from service revenue was 19% and 21% for the three months ended September 30, 2024 and 2023, respectively, and consisted primarily of organ retrieval, OCS organ management and logistics services under our NOP. Gross margin from service revenue decreased during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 primarily due to investments in our NOP network, including aviation-related expenditures, to prepare for future growth.

Current wording

Overall gross margin was 61% and 62% for the three months ended March 31, 2025 and 2024, respectively. The decrease in gross margin from 2024 to 2025 was driven primarily by the relative increase in service revenue, which has a lower gross margin than product revenue. Gross margin from net product revenue was 82% and 77% for the three months ended March 31, 2025 and 2024, respectively. Gross margin from net product revenue increased from the three months ended March 31, 2024 to the three months ended March 31, 2025 primarily due to higher volume of product sales. Gross margin from service revenue was 29% and 36% for the three months ended March 31, 2025 and 2024, respectively, and consisted primarily of organ procurement, OCS perfusion management and transplant logistics services under our NOP. Gross margin from service revenue decreased during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 primarily due to investments in our NOP network, including aviation-related expenditures, to prepare for future growth.

Previous wording

Total research, development and clinical trials expenses increased by $14.2 million from $25.3 million in the nine months ended September 30, 2023 to $39.5 million in the nine months ended September 30, 2024. Personnel related costs increased by $5.1 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 $3.1 million and $2.0 million for the nine months ended September 30, 2024 and 2023, respectively. Laboratory supplies and research materials costs increased by $4.1 million from the nine months ended September 30, 2023 to the nine months ended September 30, 2024, primarily due to our increased need for supplies and materials used for development of our next generation OCS and other product development. Consulting and third-party services costs increased by $4.5 million due to development efforts by our external development consultants for our next generation OCS program, other product development and digital tools. Facility related and other costs increased by $1.0 million from the nine months ended September 30, 2023 to the nine months ended September 30, 2024 due primarily to the increased costs of supporting a larger group of research and development personnel and their development efforts.

Current wording

Total research, development and clinical trials expenses increased by $5.8 million from $11.4 million in the three months ended March 31, 2024 to $17.2 million in the three months ended March 31, 2025. Personnel related costs increased by $1.0 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 $1.3 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively. Laboratory supplies and research materials costs increased by $2.6 million from the three months ended March 31, 2024 to the three months ended March 31, 2025, primarily due to our increased need for supplies and materials used for development of our next generation OCS. Consulting and third-party services costs increased by $2.2 million due to development efforts by our external development consultants for our next generation OCS program and other product development.

Previous wording

Total selling, general and administrative expenses increased by $36.7 million from $85.0 million in the nine months ended September 30, 2023 to $121.7 million in the nine months ended September 30, 2024 due primarily to increases in personnel related costs and facility related and other costs. Personnel related costs increased by $28.4 million primarily due to the continued expansion of our team to support the growth in our business, as well as an increase in stock-based compensation expense of $6.4 million, due primarily to additional grants to new and existing employees. Facility related and other costs increased by $8.4 million due primarily to increased costs associated with post-approval studies and information technology infrastructure costs, and depreciation and amortization expense due to the growth in our business. Professional and consultant fees decreased due primarily to transaction costs incurred in the nine months ended September 30, 2023 of $2.0 million related to our Summit acquisition and decreased legal fees, partially offset by increased fees in the nine months ended September 30, 2024 related to information technology and other enterprise solutions costs to support the growth in our business.

Current wording

Total selling, general and administrative expenses increased by $7.5 million from $36.2 million in the three months ended March 31, 2024 to $43.6 million in the three months ended March 31, 2025 due primarily to increases in personnel related costs and professional and consultant fees. Personnel related costs increased by $3.3 million primarily due to the continued expansion of our team to support the growth in our business, as well as an increase in stock-based compensation expense of $1.7 million and overall compensation increases. Personnel related costs included stock-based compensation expense of $7.3 million and $5.6 million for the three months ended March 31, 2025 and 2024, respectively. Professional and consultant fees increased by $3.8 million due primarily to increased professional and legal fees related to an independent review of business practices following allegations raised in a short seller report released in January 2025.

Previous wording

Interest expense was $3.6 million for each of the three months ended September 30, 2024 and 2023 and consisted of interest expense on the $460.0 million principal amount of the Notes that carry a 1.5% interest rate and interest expense on the $60.0 million principal amount of the CIBC loan that carries a variable interest rate, which was 7.2% as of September 30, 2024.

Current wording

Interest expense was $3.5 million and $3.6 million for the three months ended March 31, 2025 and 2024, respectively, and consisted of interest expense on the $460.0 million principal amount of the Notes that carry a 1.5% interest rate and interest expense on the $60.0 million principal amount of the CIBC loan that carries a variable interest rate, which was 6.3% as of March 31, 2025.

Previous wording

Interest income and other income (expense) for the three months ended September 30, 2024 and 2023 included interest income of $3.3 million and $5.2 million, respectively, from interest earned on cash balances. Other income (expense) for the three months ended September 30, 2024 and 2023 also included $0.7 million of realized and unrealized foreign currency transactions gains and $0.2 million of realized and unrealized foreign currency transactions losses, respectively.

Current wording

Interest income and other income (expense), net for the three months ended March 31, 2025 and 2024 included interest income of $2.3 million and $3.8 million, respectively, from interest earned on cash balances. The decrease in interest income was primarily due to lower yields and lower cash balances. Interest income and other income (expense), net for the three months ended March 31, 2025 and 2024 also included $0.5 million of realized and unrealized foreign currency transactions gains and $0.2 million of realized and unrealized foreign currency transactions losses, respectively.

Previous wording

From our inception through December 31, 2023, we incurred significant operating losses. 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 clinical trials. 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. The total net proceeds from the sale of the Notes, after deducting debt issuance costs of $14.6 million, and purchases of Capped Calls of $52.1 million, were $393.3 million. At September 30, 2024, our principal source of liquidity was cash of $330.1 million.

Current wording

Prior to 2024, we had incurred significant annual operating losses since inception and we may continue to 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 March 31, 2025, our principal source of liquidity was cash of $310.1 million.

Previous wording

During the nine months ended September 30, 2023, operating activities used $21.3 million of cash, primarily resulting from our net loss of $29.1 million and net cash used by changes in our operating assets and liabilities of $38.8 million, partially offset by net non-cash charges of $46.5 million, which included an IPR&D charge of $27.2 million. Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2023 consisted primarily of an increase in accounts receivable of $31.0 million, an increase in inventory of $21.0 million and an increase in prepaid expenses and other current assets of $2.2 million, partially offset by an increase in accounts payable and accrued expenses and other current liabilities of $15.8 million.

Current wording

During the three months ended March 31, 2025, operating activities used $2.9 million of cash, primarily resulting from net cash used by changes in our operating assets and liabilities of $44.4 million, partially offset by net income of $25.7 million and net non-cash charges of $15.9 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2025 consisted primarily of an increase in accounts receivable of $44.1 million and a decrease in accounts payable and accrued expenses and other current liabilities of $3.9 million, partially offset by decreases in inventory of $2.0 million and prepaid expenses and other current assets of $1.9 million.

Previous wording

During the nine months ended September 30, 2024, operating activities provided $29.1 million of cash, primarily resulting from net income of $28.6 and net non-cash charges of $39.7 million, partially offset by net cash used by changes in our operating assets and liabilities of $39.2 million. Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2024 consisted primarily of an increase in accounts receivable of $26.5 million, an increase in inventory of $12.5 million and an increase in prepaid expenses and other current assets of $6.1 million, partially offset by an increase in accounts payable and accrued expenses and other current liabilities of $7.4 million.

Current wording

During the three months ended March 31, 2024, operating activities used $3.4 million of cash, primarily resulting from net cash used by changes in our operating assets and liabilities of $28.1 million, partially offset by our net income of $12.2 million and net non-cash charges of $12.5 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2024 consisted primarily of an increase in accounts receivable of $18.4 million, an increase in inventory of $5.6 million, a decrease in accounts payable and accrued expenses and other current liabilities of $2.1 million and an increase in prepaid expenses and other current assets of $1.6 million.

Previous wording

During the nine months ended September 30, 2024, net cash used in investing activities of $115.7 million consisted primarily of purchases of property, plant and equipment, including an increase of $96.2 million in transplant aircraft. We also received $0.4 million for the final settlement of the Summit purchase price working capital adjustments.

Current wording

During the three months ended March 31, 2025, net cash used in investing activities of $27.0 million consisted of purchases of property, plant and equipment, primarily related to the purchase of transplant aircraft.

Previous wording

During the nine months ended September 30, 2023, net cash used in investing activities of $152.1 million consisted of purchases of property, plant and equipment of $110.0 million, including $103.0 million of transplant-related aircraft purchases, the purchase of IPR&D assets from BTL for $27.2 million and the purchase of Summit for $14.9 million, net of cash received.

Current wording

During the three months ended March 31, 2024, net cash used in investing activities of $44.2 million consisted of purchases of property, plant and equipment, primarily related to the purchase of transplant aircraft.

Previous wording

During the nine months ended September 30, 2024, net cash provided by financing activities of $21.7 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $19.6 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $2.1 million.

Current wording

During the three months ended March 31, 2025, net cash provided by financing activities of $3.0 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $1.7 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.3 million.

Previous wording

During the nine months ended September 30, 2023, net cash provided by financing activities of $399.5 million consisted of net proceeds from the issuance of our Notes of $445.4 million, partially offset by payments of $52.1 million for associated capped calls, proceeds from the issuance of common stock upon exercise of stock options of $5.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.0 million.

Current wording

During the three months ended March 31, 2024, net cash provided by financing activities of $3.2 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $2.5 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $0.6 million.

Previous wording

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%. At our option, we may prepay borrowings outstanding under the CIBC Credit Agreement, subject to a prepayment fee of 1.0% if paid after 12 months but prior to 24 months after the closing date. All obligations under the CIBC Credit Agreement are guaranteed by us and each of our material subsidiaries.

Current wording

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%. At our option, we may prepay borrowings outstanding 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.

Previous wording

the costs associated with maintaining and growing our logistics capabilities, including by means of attracting, training and retaining pilots, and the acquisition, maintenance, or replacement of fixed-wing aircraft for our aviation transportation services or other acquisitions, joint ventures or strategic investments;

Current wording

the costs associated with maintaining and growing our transplant logistics capabilities, including by means of attracting, training and retaining pilots, and the acquisition, maintenance, or replacement of fixed-wing aircraft for our aviation transportation services or other acquisitions, joint ventures or strategic investments;

Previous wording

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our 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.

Current wording

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.

Previous wording

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 consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Current wording

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.