TransMedics posted a record Q2 2025 with total revenue of $157.4 million, up approximately 38% year-over-year and approximately 10% sequentially, a new high watermark for both clinical cases and revenue with sequential growth across all three organ segments including approximately 14% sequential OCS Lung growth. The quarter demonstrated significant operating leverage, with operating profit of approximately $36.6 million (more than 23% of revenue, up from 19% in Q1) and operating margin expanding to 23% from 11% a year earlier, while gross margin held steady at approximately 61.4% and cash grew approximately $90 million to over $401 million. Management raised full-year 2025 revenue guidance to $585M-$605M (approximately 35% growth) and committed to at least 650 basis points of operating margin expansion, maintaining an approximately 60% long-term gross margin target and reiterating a path to at or approaching 30% operating margin by 2028. Strategically, the lung trial IDE was approved with design untouched and both ENHANCE Heart and DENOVO Lung trials expected to start before year-end (additive, not cannibalizing, and using NOP for both arms), while management pushed back on outside noise around the New York Times DCD expose (no donation pullback, utilization steady at 50%-55%) and Organox's in-flight approval (device deemed unsuitable to fly). The company cautioned that gross margin gains would moderate in the second half on ramping scheduled aviation maintenance, but emphasized strong organic growth, the 10,000 transplant 2028 target, and OCS Kidney positioning it for over 20,000 annual U.S. transplants.
Thank you. Earlier today, TransMedics released financial results for the quarter ended 06/30/2025. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call, including during the question and answer portion of the call, that include forward looking statements within the meanings of federal securities laws. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward looking statements.
These include statements about future events, results or performance, including commentary on potential market and business conditions, our examination of operating trends, the potential commercial opportunity of our products and services, the potential timing, outcome and value of new clinical programs, the potential impact of tariffs on our business, our expectations for growth and opportunities in our operations and financial guidance and or projected expectations, including revenue, gross margins and operating expenses in 2025 and beyond. These statements involve risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by the forward looking statements. Accordingly, you should not place undue reliance on these statements. Additional information regarding these risks and uncertainties appears under the heading Risk Factors of our Form 10 Q filed with the Securities and Exchange Commission on 05/08/2025, and our subsequent SEC filings, which are available at www.sec.gov and on our website at www.transmedix.com. You can find the company's slide presentation with information on second quarter twenty twenty five results on the Investor Relations section of the TransMedix website.
TransMedics disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward looking statements. This conference call contains time sensitive information and is accurate only as of the live broadcast today, 07/30/2025. And with that, I will now turn the call over to Laleh Paffenhuis, President and Executive Officer.
Thank you very much, Lane. Good afternoon, everyone, and welcome to the TransMedics second quarter twenty twenty five call. Joining me today is Gerardo Hernandez, our Chief Financial Officer. Organ transplant therapy is experiencing a renaissance globally due to the growing recognition of the life saving and cost effective outcomes when treating end stage organ failure. In The U.
S, federal agencies and Congress are driving a national initiative to modernize The U. S. Transplant system to enable greater utilization of donor organs to meet the growing demand for more and better organ transplantation. More recently, this July, the European Society of Organ Transplantation or ESOT published a call for action paper in The Lancet, the premier medical journal, highlighting the global importance of organ transplantation. Specifically, the paper reinforced the urgent need for healthcare systems to prioritize investments in organ transplantation as a critical healthcare strategy given the significant impact on health and cost efficiency of organ transplants.
Against this backdrop, we at TransMedics have been relentless in driving significant positive transformation of the transplant therapy globally through our OCS technology, our unique NOP program in The U. S. This is what drives our mission oriented TransMedics team and has enabled us to consistently execute and deliver on our plans. On today's call, as we look into the future beyond our exceptional 2Q performance, I will be sharing our near and long term vision of key strategic initiatives designed to grow our OCS NOP volumes beyond the 10,000 planned for 2028. Importantly, I will also provide our perspectives in response to some recent market confusion and noise following comments made by a certain player in the organ preservation ecosystem.
But first, let me highlight our 2Q performance, which represents a new high watermark for both clinical cases and revenue. Our performance has also demonstrated a significant operating leverage potential of the TransMedics business, even as we continue to invest across several growth initiatives. We strongly believe that this quarter represents just one key milestone of many to come as we work towards achieving our strategic vision to drive TransMedics to become the global standard of care for organ transplantation. We are not stopping here. We are already ramping up our investments to drive the next several waves of growth that would deliver substantially more top and bottom line growth for TransMedics.
Our success has been and will remain fueled by the unique TransMedics Trident. That is to say our disruptive and technically unparalleled OCS technology platform, our revolutionary NOP service model and our unique dedicated transplant logistics network. Now let me turn to a more detailed outline of our 2Q performance. The results speak for themselves. Total revenue for 2Q twenty twenty five was $157,400,000 representing approximately 38% growth year over year and approximately 10% sequential growth from 1Q twenty twenty five.
We experienced sequential growth across all three organ segments driven by higher overall utilization and center penetration of OCS NOP in The U. S. As I mentioned, this enabled us to achieve a new high watermark for overall case volume. In fact, to dispel any confusion about some of the outside commentary on lung transplantation in The U. S, OCS Lung experienced approximately 14% sequential growth in 2Q.
Our overall gross margin for 2Q was steady at 61.4% similar to Q1. Meanwhile, we delivered operating profit of approximately $36,600,000 in 2Q, representing more than 23% of total revenue and up from $27,400,000 or 19% of total revenue in 1Q twenty twenty five. Finally, we have driven strong cash generation. We have significantly improved our billing cycle and maintained healthy AR collections, which collectively resulted in the addition of approximately $90,000,000 to our balance sheet as we ended 2Q with over $400,000,000 in cash. We hope these results cement our commitment to profitable growth and cash generation.
We are humbled by these results, but we have our sights laser focused on achieving and surpassing the target of 10,000 transplants, U. S. NOP transplants in 2028. Importantly, we're planning to go well above that target in subsequent years. In fact, our pipeline strategy of adding the OCS kidney platform is designed to position us to achieve at least over 20,000 annual U.
S. NOP transplant, as we will outline later in this call. We are also actively exploring options of expanding our NOP model internationally. This will enable TransMedics to potentially nearly double our total addressable market as Europe represents 45% of the global transplant numbers. Stay tuned.
We still have significant growth ahead of TransMedics and we won't rest until we deliver it. Shifting now to TransMedics' transplant logistics infrastructure and performance. Transplant logistics service revenue for 2Q was $29,800,000 representing 56% year over year and 14% sequential Throughout 2Q, we owned and operated 21 aircraft. In Q2, we covered 79% of our NOP emission requiring air transport compared to 78% in Q1, So we're nearly at our target of covering 80% to 85% of our NOP missions requiring air transport. Meanwhile, we're continuing to add to our pilot crew to enable us to experiment with double shifting a portion of our fleet to run even a much more efficient operation by year end.
Moving now to update you on our next gen OCS heart and lung clinical programs and the status of the FDA IDEs. We are pleased to report that we have received FDA conditional approval for the OCS Lung IDE in July. We're continuing to collaboratively engage with FDA's leadership to address their final questions and are planning to begin the trial initiation activities after the summer vacation season. On the OCS Heart IDE, we feel we are very close to reaching similar agreement with the FDA leadership to enable the near term launch of our clinical program. Based on the progress achieved with FDA, we feel we remain on track to launch both programs before year end.
As discussed at our last call, we see these clinical programs as potential major growth catalyst for 2026, but we are not counting on them contributing to our financial results in 2025. Now, please allow me to directly and hopefully comprehensively address several misunderstood competitive commentary and the potential impact of U. S. National transplant modernization initiative that has become an unwarranted source of confusion and concerns recently. While we hold all companies operating in the field of organ preservation in very high regards, I want to be crystal clear that our expectation is that as TransMedics continue to execute and gain more market share, the results of our peers with smaller footprints in the market could be negatively impacted.
Thank you, Walid. Good afternoon, everybody. I am pleased to be here to discuss TransMedics' strong second quarter results. Please note that a supplemental slide presentation detailing our second quarter twenty twenty five results is available in the Investors section of our website. As Wallace highlighted, we sustained momentum through Q2 with disciplined execution across the entire TransMedics team.
Strong transplant volume growth combined with the positive impact of our ongoing strategic investments drove solid performance across both product and service lines, along with continued margin expansion and improved profitability. U. S. Transplant revenue was approximately $152,000,000 up 40% year over year and 10% sequentially. By organ, liver contributed with 116,000,000 heart $32,000,000 and lung $4,000,000 OUS revenue was $4,000,000 down 12% from 2024 and up 2% sequentially.
OUS revenue by organ was $3,500,000 in heart, 400,000.0 in lung and $200,000 in liver. Product revenue for the second quarter reached $96,000,000 up 34% year over year and 9% sequentially. Growth was driven by increasing organ utilization in liver and OCS adoption across both liver and heart. Service revenue for the second quarter reached 61,000,000 up 44% increase year over year and 11% sequentially. The primary driver was logistics revenue, which grew 56% year over year and 14% sequentially, fueled by the continued expansion and utilization of our aviation fleet.
Total gross margin for the quarter was approximately 61%, representing an increase of 78 basis points compared to 2024 and broadly aligned to 2025. The year over year increase was primarily driven by four thirty one basis point improvement in service margin, reflecting higher TransMedics fleet utilization and cost efficiencies in logistics operations. Product margin was flat compared to 2024 and declined 172 basis points sequentially, largely due to higher freight expenses. The increase in freight was a deliberate action to accelerate inventory replenishment to our hubs. Overall, we are seeing the expected progress in gross margin improvement, driven by operational efficiencies and the benefit of scale.
That said, we expect this improvement to moderate in the second half of the year as scheduled aviation fleet maintenance ramps up in Q3 and becomes more pronounced in Q4, as previously discussed in our Q1 call. Total operating expenses for the 2025 were $60,000,000 up 6% year over year and the increase was primarily driven by a 15% increase in R and D expenses, reflecting continued investment in our innovation pipeline and a ramping support to our product development capabilities. SG and A expenses grew 3% year over year, driven by ongoing expansion of our IT infrastructure investment in strategic growth initiatives and the impact of inflation. Sequentially, total operating expenses were broadly in line as a modest increase was mostly offset by the absence of non recurring legal expenses incurred in 2025. Operating income for the quarter was $37,000,000 up 192% year over year and 33% sequentially.
Operating margin expanded to 23% compared to 11% in the prior year and 19% in 2025. Net income for the second quarter was $35,000,000 representing a 186% year over year increase and 36% sequentially. Earnings per share were $1.03 and diluted earnings per share were $0.92 for the 2025. We ended the quarter with $4.00 $1,000,000 in cash, up $90,000,000 from 03/31/2025. This increase was driven by strong operating cash generation supported by meaningful improvement in our billing cycle, which together with the continued healthy collections reduce our accounts receivable balance on the scoring or commitment to process efficiency and our focus on efficient working capital management.
Our first half results reflect disciplined execution, continued gains in operating efficiency and meaningful progress in our clinical and innovation programs. Together with the scalability of our business model, these results continue to validate our ability to drive meaningful financial improvement and position the company for sustained momentum through the rest of 2025 and beyond. Looking ahead, given the strength of the business, as Walid mentioned before, we are raising our full year revenue guidance to a range of $585,000,000 to $6.00 $5,000,000 up from our prior range of $565,000,000 to $585,000,000 This reflects approximately 35% growth over 2024 at the midpoint. Growth is expected to continue to be fueled by the expansion of total transplant volumes, increased OCS adoption and the continued momentum across our service platform. Our updated guidance reflects the strength of our first half results and sets a proven baseline for the second half with clear room for upside as momentum continues.
In terms of gross margin, we continue to expect overall gross margin to remain approximately at 60% over the coming years. This accounts for the various factors influencing both product and service margins beyond just mix. In terms of capital allocation, we are focused on initiatives that drive long term value, balancing strategic growth with financial discipline to deliver sustainable profitable growth. Our investments will continue to prioritize R and D to advance our pipeline, implement systems that simplify and automate core processes and improve efficiency across our logistics operations. One example of this approach is our double shifting pilot program designed to optimize fleet utilization.
We know additional jets will be needed to support continued growth, and this program will help determine the right fleet size to drive operational efficiency and maximize the return of our capital investments. We expect to see early outcomes of the program in the 2026. While our target remains to own 22 jets by the 2025, we will continue to be opportunistic moving forward only when the right conditions are in place. That may mean holding off on additional purchases this year or accelerating acquisitions if favorable opportunities arise. At the same time, we will make targeted investments to support growth well beyond 2028, including the development of our NOP network in selected international geographies, our plan moves to a new global headquarters to accommodate the growing scale and complexity of our business and continue with ongoing enhancements to our manufacturing and product development infrastructure.
These initiatives are at different stages of implementation and will be rolled out over time. Together, they represent critical steps to position TransMedics for its next phase of growth as we work to surpass 10,000 transplant milestone and expand our global leadership in organ transplantation. Finally, with stronger top line performance, continued efficiency gains and spend discipline, we expect to deliver at least six fifty basis points of operating margin expansion for the full year of 2025 compared to 2024. While quarterly variability is expected as well as highlighted, we are confident in the full year step up driven largely by greater leverage across our operating expense base. Over the long term, we are targeting an operating margin at or approaching 30% by 2028.
The path may not be linear year over year as we continue investing in the capabilities and infrastructure outlined earlier. Our differentiated OCS technology combined with our NOP and vertically integrated logistic capabilities give us a unique advantage to broaden access globally. Based on these strengths and addressing the significant unmet need in organ transplantation, we believe TransMedics is well positioned to deliver sustainable growth, expand margins and create substantial long term shareholder value. And with that, I'll turn the call over to Walid for closing remarks.
Thank you so much Gerardo. Overall, we're very pleased with our 2Q performance, which once again underscore the unique attributes of TransMedics business. TransMedics is not only a top line grower, but also an increasingly profitable business capable of generating significant bottom line leverage. We remain confident that this is just the beginning and we believe we are well positioned to deliver sustainable long term financial results while also investing significantly in our business as we gain more efficiency of scale and continue to deliver leverage throughout the operation. TransMedics is a very unique business providing unparalleled life saving solution in a huge untapped market.
We look forward to continuing our upward trajectory while saving more lives and delivering significant value to every transplant stakeholders, not just in The U. S, but globally. With that, I will now turn the call to the operator for Q and A. Operator?