TransMedics Group, Inc.

Previous 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 $173.9 million and $143.5 million, and net income of $7.3 million and $25.7 million, for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $270.6 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. 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.

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 $189.9 million and $363.9 million, and net income of $14.7 million and $22.0 million, for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, we had an accumulated deficit of $256.0 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.

Previous wording

As a result of the release of our valuation allowance in the fourth quarter of 2025, we expect an increase to our income tax rate in 2026. To the extent allowed, we intend to use our available net operating loss carryforwards and tax credits to reduce cash tax payment obligations.

Current wording

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.

Previous wording

Revenue from customers in the United States related to OCS transplant was $167.0 million in the three months ended March 31, 2026 and increased by $28.4 million compared to the three months ended March 31, 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.

Current wording

Revenue from customers in the United States related to OCS transplant was $183.6 million in the three months ended June 30, 2026 and increased by $31.4 million compared to the three months ended June 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.

Previous wording

Revenue from customers outside the United States was $5.6 million and $4.1 million for the three months ended March 31, 2026 and 2025, respectively. The increase was due primarily to higher sales volumes of our OCS Heart disposable sets.

Current wording

Revenue from customers outside the United States was $5.2 million and $4.2 million for the three months ended June 30, 2026 and 2025, respectively. The increase was due primarily to higher sales volumes of our OCS Heart disposable sets.

Previous wording

Cost of net product revenue increased by $8.0 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Cost of service revenue increased by $9.5 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Gross profit increased by $12.9 million in the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Current wording

Cost of net product revenue increased by $6.1 million in the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Cost of service revenue increased by $9.8 million in the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Gross profit increased by $16.6 million in the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Previous wording

Overall gross margin was 58% and 61% for the three months ended March 31, 2026 and 2025, respectively. The decrease in gross margin from 2025 to 2026 was driven primarily by the decrease in gross margin from product revenue. Gross margin from net product revenue was 77% and 82% for the three months ended March 31, 2026 and 2025, respectively. Gross margin from net product revenue decreased from the three months ended March 31, 2025 to the three months ended March 31, 2026 primarily due to product mix and higher freight costs. Gross margin from service revenue was 27% and 29% for the three months ended March 31, 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 decreased during the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 primarily due to increased labor expenses.

Current wording

Overall gross margin was 60% and 61% for the three months ended June 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 77% and 80% for the three months ended June 30, 2026 and 2025, respectively. Gross margin from net product revenue decreased from the three months ended June 30, 2025 to the three months ended June 30, 2026 primarily due to higher freight costs and certain inventory-related costs that we believe are temporary, including strategic stocking costs at hub locations and incremental product costs related to our clinical trials. Gross margin from service revenue was 35% and 32% for the three months ended June 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 June 30, 2026 as compared to the three months ended June 30, 2025 primarily due to efficiencies in our NOP operating model.

Previous wording

Total research, development and clinical trials expenses increased by $7.7 million from $17.2 million in the three months ended March 31, 2025 to $24.9 million in the three months ended March 31, 2026. Personnel related costs increased by $2.2 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 $1.5 million and $1.3 million for the three months ended March 31, 2026 and 2025, respectively. Consulting and third-party services costs increased by $4.2 million due to development efforts by our external development consultants for our next generation OCS program and other product development, including our kidney transport system. Facility and IT related and other costs increased by $1.5 million from the three months ended March 31, 2025 to the three months ended March 31, 2026 due primarily to the increased cost of supporting a larger group of research and development personnel.

Current wording

Total research, development and clinical trials expenses increased by $15.7 million from $15.9 million in the three months ended June 30, 2025 to $31.6 million in the three months ended June 30, 2026. Personnel related costs increased by $1.8 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 $1.2 million for the three months ended June 30, 2026 and 2025, respectively. Consulting and third-party services costs increased by $10.6 million due to development efforts by our external development consultants for our next generation OCS program and other product development, including our OCS Kidney device. Clinical trials costs increased by $1.3 million due primarily to patient enrollment in our clinical trials. Facility and IT related and other costs increased by $1.0 million from the three months ended June 30, 2025 to the three months ended June 30, 2026 due primarily to the increased cost of supporting a larger group of research and development personnel.

Previous wording

Interest expense was $7.2 million and $3.5 million for the three months ended March 31, 2026 and 2025, respectively. Interest expense of $2.5 million and $2.4 million for the three months ended March 31, 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 March 31, 2026 and 2025, respectively, related to the $60.0 million principal amount of the CIBC loan that carries a variable interest rate, which was 5.7% as of March 31, 2026. Additionally, for the three months ended March 31, 2026, interest expense included $3.8 million of imputed interest on our finance lease entered into in January 2026.

Current wording

Interest expense was $7.2 million and $3.5 million for the three months ended June 30, 2026 and 2025, respectively. Interest expense of $2.4 million for each of the three months ended June 30, 2026 and 2025 related to the $460.0 million principal amount of the Notes that carry a 1.5% interest rate. Interest expense of $1.0 million for each of the three months ended June 30, 2026 and 2025 related to the $60.0 million principal amount of the CIBC loan that carries a variable interest rate, which was 6.2% as of June 30, 2026. Additionally, for the three months ended June 30, 2026, interest expense included $3.8 million of imputed interest on our finance lease entered into in January 2026.

Previous wording

Interest income and other income (expense), net for the three months ended March 31, 2026 and 2025 included interest income of $2.7 million and $2.3 million, respectively, from interest earned on cash balances. Interest income and other income (expense), net for the three months ended March 31, 2026 and 2025 also included $0.6 million of realized and unrealized foreign currency transactions losses and $0.5 million of realized and unrealized foreign currency transactions gains, respectively.

Current wording

Interest income and other income (expense), net for the three months ended June 30, 2026 and 2025 included interest income of $3.0 million and $2.5 million, respectively, from interest earned on cash balances. Interest income and other income (expense), net for the three months ended June 30, 2026 and 2025 also included $0.1 million of realized and unrealized foreign currency transactions losses and $0.6 million of realized and unrealized foreign currency transactions gains, respectively.

Previous wording

We also had service revenue unrelated to OCS transplant of $1.3 million and $0.9 million for the three months ended March 31, 2026 and 2025, respectively.

Current wording

We also had service revenue unrelated to OCS transplant of $2.3 million and $1.9 million for the six months ended June 30, 2026 and 2025, respectively.

Previous wording

Total selling, general and administrative expenses increased by $19.4 million from $43.6 million in the three months ended March 31, 2025 to $63.0 million in the three months ended March 31, 2026 due primarily to increases in personnel related costs and professional and consultant fees, as well as increases in facility related and other and depreciation and amortization expense. Personnel related costs increased by $6.4 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 $8.1 million and $7.3 million for the three months ended March 31, 2026 and 2025, respectively. Professional and consultant fees increased by $4.6 million due primarily to increased transaction-related costs of $2.7 million related to strategic initiatives and corporate development activities, and to process improvement initiatives and market research costs related to international expansion. Professional and consultant fees also included $0.2 million related to headquarters relocation. Facility and IT related and other costs increased by $3.5 million due primarily to increases in IT infrastructure and travel costs. Depreciation and amortization expense increased by $4.8 million primarily due to $2.1 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.

Current wording

Total selling, general and administrative expenses increased by $33.1 million from $87.7 million in the six months ended June 30, 2025 to $120.8 million in the six months ended June 30, 2026. Personnel related costs increased by $10.1 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 $15.3 million and $15.2 million for the six months ended June 30, 2026 and 2025, respectively. Professional and consultant fees increased by $9.2 million due primarily to transaction-related costs of $4.5 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 $6.2 million due primarily to increases in IT infrastructure, travel costs and property tax expenses for properties in Somerville, Massachusetts. Depreciation and amortization expense increased by $7.5 million primarily due to $4.1 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.

Previous wording

Our effective tax rate of 14% for the three months ended March 31, 2026 differed from the statutory federal corporate tax rate of 21% primarily due to discrete items occurring during the quarter, primarily excess tax benefits from stock-based compensation, which decreased the effective tax rate, partially offset by state taxes and the effect of non-deductible expenses, which increased the effective tax rate.

Current wording

Our effective tax rate of 21.1% for the six months ended June 30, 2026 differed from the statutory federal corporate tax rate of 21% primarily due to state income taxes, which increased the effective tax rate, offset by discrete items occurring during the period.

Previous wording

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 March 31, 2026, our principal source of liquidity was cash of $461.7 million.

Current wording

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 June 30, 2026, our principal source of liquidity was cash of $472.7 million.

Previous wording

During the three months ended March 31, 2026, operating activities provided $24.5 million of cash, primarily resulting from net income of $7.3 million and net non-cash charges of $28.6 million, partially offset by net cash used by changes in our operating assets and liabilities of $11.4 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2026 consisted primarily of an increase in accounts receivable of $6.5 million, an increase in inventory of $3.9 million, and a net decrease in accounts payable and accrued expenses and other current liabilities of $2.0 million, partially offset by a decrease in prepaid expenses and other current assets of $2.0 million.

Current wording

During the six months ended June 30, 2026, operating activities provided $41.8 million of cash, primarily resulting from net income of $22.0 million and net non-cash charges of $56.6 million, partially offset by net cash used by changes in our operating assets and liabilities of $36.8 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2026 consisted primarily of an increase in accounts receivable of $19.9 million, an increase in inventory of $10.2 million, a net decrease in accounts payable and accrued expenses and other current liabilities of $2.6 million, an increase in prepaid expenses and other current assets of $2.4 million and a decrease in operating lease liabilities of $1.6 million.

Previous 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 net 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.

Current wording

During the six months ended June 30, 2025, operating activities provided $88.8 million of cash, primarily resulting from net income of $60.6 million and net non-cash charges of $32.4 million, partially offset by net cash used by changes in our operating assets and liabilities of $4.2 million. Net cash used by changes in our operating assets and liabilities for the six months ended June 30, 2025 consisted primarily of an increase in accounts receivable of $6.6 million, a decrease in accounts payable and accrued expenses and other current liabilities of $2.8 million, and a decrease in operating lease liabilities of $1.4 million, partially offset by a decrease in inventory of $5.7 million and a decrease in prepaid expenses and other current assets of $1.1 million.

Previous wording

During the three months ended March 31, 2026, net cash used in investing activities of $36.7 million consisted of purchases of property, plant and equipment, primarily related to the purchase of two parcels of land and building in Somerville, Massachusetts.

Current wording

During the six months ended June 30, 2026, net cash used in investing activities of $43.7 million consisted of purchases of property, plant and equipment, primarily related to the purchase of two parcels of land and building in Somerville, Massachusetts.

Previous 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.

Current wording

During the six months ended June 30, 2025, net cash used in investing activities of $36.1 million consisted of purchases of property, plant and equipment, primarily related to the purchase of transplant aircraft.

Previous wording

During the three months ended March 31, 2026, net cash provided by financing activities of $3.8 million consisted primarily of proceeds from the issuance of common stock upon exercise of stock options of $2.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.7 million.

Current wording

During the six months ended June 30, 2026, net cash provided by financing activities of $4.7 million consisted primarily of proceeds from the issuance of common stock upon exercise of stock options of $3.2 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.7 million.

Previous 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.

Current wording

During the six months ended June 30, 2025, net cash provided by financing activities of $10.1 million consisted of proceeds from the issuance of common stock upon exercise of stock options of $8.8 million and proceeds from the issuance of common stock in connection with the 2019 Employee Stock Purchase Plan of $1.3 million.

Previous wording

Prior to June 8, 2026, the Notes will not be redeemable. On or after June 8, 2026, 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.

Current wording

Prior to June 8, 2026, the Notes were not redeemable. After June 8, 2026, 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.

Previous wording

In July 2022, we entered into a credit agreement with CIBC as amended by the First Amendment to Credit Agreement, dated as of May 8, 2023, by and among the Company and CIBC, or the First Amendment, the Second Amendment to Credit Agreement, dated as of June 23, 2023, by and among the Company and CIBC, or the Second Amendment, and the Third Amendment to Credit Agreement, dated as of November 9, 2023, by and among the Company and CIBC, or the Third Amendment, pursuant to which we borrowed $60.0 million, referred to herein as the CIBC Credit Agreement.

Current wording

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).

Previous wording

the degree of success we experience in commercializing our OCS products for additional indications;

Current wording

the degree of success we experience in commercializing our OCS products for additional indications, including OCS Kidney;

Previous wording

the costs, timing and outcomes of pre- and post-approval studies or any future clinical studies and regulatory reviews, including to seek and obtain approvals for new indications for our OCS products, or other product candidates, including CHOPS;

Current wording

the costs, timing and outcomes of pre- and post-approval studies or any future clinical studies and regulatory reviews, including to seek and obtain approvals for new indications for our OCS products, including OCS Kidney, or other product candidates, including CHOPS;

Previous wording

There have been no material changes to our cash requirements from those disclosed in our 2025 Form 10-K.

Current wording

There have been no other material changes to our cash requirements from those disclosed in our 2025 Form 10-K.