TransMedics opened 2026 with Q1 total revenue of approximately $174 million, up approximately 21% year-over-year and approximately 8% sequentially, led by strong liver performance, continued heart progress, and growing integrated logistics revenue (approximately $32 million), and achieved without any ENHANCE or DENOVO clinical program contribution. The company framed 2026 as a critical, transformational investment year, with adjusted operating expenses up approximately 42% year-over-year, adjusted operating margin compressed to approximately 10%, and gross margin down approximately 331 basis points to approximately 58% as it positioned inventory for clinical programs and invested in the NOP network. Management reiterated full-year revenue guidance of $727M-$757M (20%-25% growth) and a long-term gross margin around 60%, while expecting adjusted operating margin up to approximately 250 basis points below 2025. Strategic highlights included the unveiling of CHOPS to serve as the ENHANCE/DENOVO control arm (IDE supplement to be filed within weeks, implementation expected early Q3 2026) and to expand the product portfolio into cold static storage, engagement on U.S. Transplant Modernization and intent to bid for decommissioned OPO regions, and European NOP expansion in Italy including an investment in PAD Aviation, all funded from approximately $462 million in cash, even as transient Modernization Act-driven donor softness weighed on the quarter.
Thank you so much, Hannah. Good afternoon, everyone, and welcome to TransMedics' Q1 2026 Earnings Call. As always, joining me today is Gerardo Hernandez, our Chief Financial Officer. Our vision has always been bold and growth-oriented. Since inception, TransMedics has been relentless in our pursuit to transform organ transplant therapy by increasing utilization of donor organs and improving the clinical outcomes of transplant patients through technology and service innovation and by disrupting the status quo. To accomplish this, we've been deliberate, yet aggressive in our strategic investment in growth initiatives. We believe that 2026 is a critical and transformational year that stands to cement TransMedics' near, mid, and long-term growth trajectories and global market position.
In the U.S., we're actively engaged in growing our heart and lung franchises by advancing our ENHANCE Heart and DENOVO Lung programs to expand our clinical evidence to support broader adoption. In parallel, we are also completing the development of the OCS Kidney platform using our Gen 3.0 platform. Our OCS Kidney platform will enable us to access the largest segment of the global transplant market, which is kidney transplantation. This will happen for the first time in the history of TransMedics. We strongly believe that once regulatory approvals are in hand, OCS Kidney will derive significant growth for our abdominal franchise. We're not stopping here.
We're also actively engaged in upgrading our heart, lung, and liver devices to Gen 3.0 platform, which will enable us to gain significant future operating leverage and increase clinical adoption of the OCS platform in these critical organ transplant segments. Our growth initiatives also now go beyond warm perfusion. We recently unveiled the TransMedics Controlled Hypothermic Organ Preservation System or CHOPS. CHOPS is designed to expand our product offering to cover new segments of the transplant market best served with cold static storage. Finally, our growth initiatives now extend beyond the U.S. to important International markets. In Europe, we are undertaking a bold initiative to replicate the NOP clinical service and transplant logistics model to catalyze European OCS adoption and potentially expand our total addressable market. I will provide details on each of these exciting initiatives on today's call.
As you can see from our ongoing growth initiatives, our focus remains on long-term value creation with continued investment across each pillar of our growth strategy. Specifically, I wanna highlight that this is a strategic and proactive decision. We fully expect that our financial performance over the next several quarters will reflect these necessary investments in people, infrastructure, and technology development as we capitalize on the opportunities in front of us. Based on everything we know today, we are highly encouraged and inspired by what's ahead for TransMedics. We are committed to executing our plan to drive significant growth for TransMedics and for the global transplant markets broadly. As I've stated repeatedly, I truly believe that TransMedics remain in the early innings of our long-term growth opportunity. I'm excited to report that our Q1 performance that reflects a strong start for 2026.
Despite the broader volatility and the transient negative impact of the U.S. Transplant Modernization Act on OPO performance and the overall donor numbers in the U.S., we managed to deliver a solid quarter to start the year. Here are the key operational highlights for 1Q 2026. Total revenue for 1Q 2026 was $174 million, representing approximately 21% growth year-over-year and approximately 8% sequential growth from 4Q 2025. U.S. transplant product revenue grew by 22% year-over-year and approximately 7% sequentially to $102 million, while OUS transplant revenue grew approximately 39% year-over-year and approximately 17% sequentially to $6 million.
We delivered adjusted operating profit of approximately $18.1 million in Q1, representing approximately 10.4% of total revenue in 1Q, while continuing to make significant investment to fuel our growth. Importantly, we ended 1Q with $462 million of cash and cash equivalents while making substantial investments in the growth initiatives above. TransMedics transplant logistics services revenue for 1Q 2026 was approximately $32 million, up from $26.1 million in 1Q 2025, representing approximately 22% year-over-year growth and up from $28.6 million in 4Q 2025, representing approximately 12% sequential growth. In Q1, we maintained coverage of approximately 82% of our NOP mission requiring air transport. We expect to maintain 22 operational aircraft in the U.S. fleet throughout 2026.
As we discussed, we are now focused on maximizing the utilization of our U.S. fleet and improving efficiency and capacity by double-shifting a portion of the fleet to meet the growing clinical demand. We will detail key findings from this initiative at year-end. Overall, we are pleased by our strong performance that was fueled by growing OCS case volume, increased clinical adoption. Importantly, we're also encouraged that we achieved these results without any contribution of ENHANCE and DENOVO clinical programs due to the enrollment timing of these important programs. Speaking of ENHANCE and DENOVO, let me shift to provide a detailed update on our strategic initiative to unlock these two important clinical programs to help us grow our cardiothoracic franchise in the U.S. At the recent ISHLT conference in April, we unveiled our TransMedics Controlled Hypothermic Organ Preservation System or CHOPS.
CHOPS is a true active cooling device designed to provide a variety of temperature condition ranging from four to 12 degrees Celsius to meet the user's need. This represents a unique optimized, unique and optimized approach that we believe is superior to the styrofoam boxes that are used for cold static storage of organs today. These boxes use phase-changing material or cold packs that are extremely variable and are nearly impossible to control or adjust preservation temperatures with. CHOPS will be an FDA-registered and regulated organ preservation device made by TransMedics and will serve as the control arm of the ENHANCE and DENOVO programs once the IDE supplement is approved. This would be a huge strategic win for TransMedics as it stands to help avoid any reliance on competitive products as we conduct our important clinical programs for heart and lungs.
We plan to file the IDE supplement within the next few weeks, and we expect this to be approved and implemented in early Q3 2026. Importantly, in parallel to these clinical programs, we fully intend to file a 510 application to clear this device for commercial use in the U.S. Once cleared by FDA, CHOPS would expand TransMedics platform of organ preservation technologies and enable us to address shorter preservation times for organs that may be best suited for cold storage. As we highlighted on our last call, the panic and confusion caused by the competitive reaction to our clinical programs somewhat delayed our ENHANCE Part B and DENOVO enrollment. We not only addressed this challenge by introducing CHOPS, but we are now going after the niche market with superior, more validated cooling technology and our best-in-class NOP infrastructure.
Said differently, beyond facilitating our trial enrollment, we are expanding our product portfolio to ensure that TransMedics is well-positioned to provide transplant programs around the world with the widest range of products to meet their clinical needs across the full spectrum of organ transplantation. We plan to accomplish this goal based on best-in-class technologies, best-in-class clinical services, and with the most cost-efficient and reliable logistical network in the market. Let me move to share update on our strategic initiatives that we see as an important catalyst for our business. First is the National Transplant Modernization Act. In March 2026, TransMedics submitted our detailed comments on CMS proposed rulemaking language for the new U.S. transplant system to advance U.S. transplant modernization initiatives. Our public comments focused on several key topics.
On the system-wide benefits of allowing new entities with proper national infrastructure that are not current OPOs to participate in the new transplant ecosystem by becoming either a multi-regional or even national OPOs. This is to help maximize U.S. donor organ utilization for transplants. It would provide a mechanism for fair competition and maximize transparency while driving cost efficiency to the U.S. transplant ecosystem. On the benefit of using FDA-approved portable perfusion technologies to maximize donor organ utilization in the U.S. while limiting the use of unproven, fairly expensive, and potentially detrimental techniques that were organically introduced into the market over the last several years. On the benefits of enabling for-profit entities to participate so long as they are strictly adhering to all performance metrics proposed by CMS and complying with all the financial disclosure requirements.
Fourth, on the benefits of allowing new entities to bid to replace as many of the decommissioned OPO regions as they can support. Finally, we highlighted the potential benefits of requiring these new participating entities to provide technology and clinical support services to existing OPOs. Again, it was intended to maximize the benefits to the U.S. transplant ecosystem in general and not just to one entity. If CMS agrees with this direction, TransMedics fully intend to submit bids for donor service areas or DSAs associated with decommissioned OPOs later this year or early next. Again, our goal is to drive efficiency, transparency, maximize patient access, and organ utilization for transplant in the U.S. The second growth initiative is NOP Europe. As we've discussed, we are actively building infrastructure and staffing in Italy across four hubs to cover Northern and Southern Italy.
Thank you, Waleed. Good afternoon, everybody. I am pleased to share TransMedics' Q1 2026 results. Please note that a supplemental slide presentation with additional details is available in the investor section of our website. As Waleed highlighted, we started 2026 with solid execution and continued momentum across our platform. Importantly, consistent with the priorities we highlighted on our previous earnings call and throughout 2025, Q1 also marked the beginning of an accelerated phase of investment and execution for TransMedics. We are advancing multiple initiatives designed to support future growth, strengthen our operating capabilities, and position us to capture the opportunities ahead. This includes continuous progress across our different programs, international expansion efforts, CHOPS, and as announced last week, our agreement to invest in PAD Aviation to support the development of a dedicated organ transplant logistics network in Europe that Waleed mentioned before.
Together, these initiatives and these actions demonstrate our ability to move quickly and boldly in allocating capital to execute on strategic opportunities that we believe can further fuel long-term profitable growth. As Waleed said, let me repeat, these actions are designed to further fuel long-term profitable growth. Beginning Q1, we are introducing certain non-GAAP financial measures, including adjusted R&D expense, adjusted SG&A expense, adjusted operating expenses, adjusted income from operations, adjusted net income, adjusted diluted earnings per share, and adjusted operating margin. We use these non-GAAP financial measures to support financial and operational decision-making and to evaluate period-to-period performance. We believe these measures are useful to both management and investors because they provide meaningful supplemental information regarding our core operating performance, particularly as we begin to incur certain discrete expenses and because they offer greater transparency into the key metrics management uses in running the business.
Examples of these discrete expenses include costs related to strategic initiatives, corporate development activities, headquarter relocation, and implementation of our new ERP. A reconciliation between GAAP and non-GAAP results is included in the supplemental materials available in our website. Turning to our Q1 financial performance. Total revenue for the quarter was approximately $174 million, representing 21% growth year-over-year and 8% growth sequentially. Growth was led by strong liver performance, continued progress in heart, and increasing contribution from our integrated logistics platform. U.S. transplant revenue was approximately $167 million, up 20% year-over-year and 8% sequentially. By organ, liver contribute with approximately $139 million, heart with approximately $26 million, and lung with approximately $2 million. International revenue was approximately $5.6 million, up 39% year-over-year and 17% sequentially.
International revenue growth was primarily driven by heart, with smaller contribution from lung. We are encouraged by the progress we are seeing internationally as we continue to build our presence and advance our expansion plans. At the same time, the business remains at an early stage, and quarterly variability is expected due to reimbursement and market dynamics. Total product revenue for the quarter was approximately $108 million, up 22% year-over-year and 8% sequentially, reflecting continued strong liver performance and modest growth in heart. Service revenue for the Q1 was approximately $66 million, up 19% year-over-year and 9% sequentially. Growth was driven primarily by logistics revenue, supported by increased utilization of the TransMedics aviation fleet. Together, these results reflect continued demand for the OCS platform and the value of our integrated NOP model.
Total gross margin for the Q1 was approximately 58%, broadly consistent with recent quarters and down approximately 331 basis points year-over-year. The year-over-year decline was driven primarily by increased internal supply chain activity to replenish inventory across our hubs and position inventory in support of the DENOVO and ENHANCE programs, as well as continued investment in NOP network, which together with certain one-time items impacted the margin. We would expect this to normalize in the coming quarters. Sequentially, as mentioned before, gross margin remained broadly stable at approximately 58%. Underlying performance in the quarter was encouraging, with operational improvement largely offset by ongoing internal supply chain costs to support the DENOVO and ENHANCE programs, continued investment in NOP capabilities, and certain one-time items that we will expect to normalize in the coming quarters, as mentioned before.
Adjusted operating expenses for the Q1 were approximately $83 million, up approximately 42% year-over-year and 17% sequentially. Adjusted R&D increased approximately 45% versus the Q1 of 2025, primarily driven by the continued development of our OCS Kidney program and our next-generation OCS platform. The increase also reflects ongoing product development activities in Mirandola, Italy, and headcount growth as we continue to strengthen our development capability across U.S. and the Mirandola site. Sequentially, the increase in adjusted R&D was primarily driven by continued investment in OCS Kidney and our next-generation OCS platform, with a smaller contribution from increased product development activity in Mirandola.
Adjusted SG&A increased approximately 41%, primarily reflecting the continued investment to strengthen NOP network and IT capabilities, the initial impact of our new headquarter in Somerville, and consulting and market research in support of international expansion plans. Some of these factors also drove the sequential increase, particularly continued investment in NOP network and international expansion initiatives. Adjusted income from operations for the quarter was approximately $18 million, representing an adjusted operating margin of approximately 10%. The year-over-year decrease in operating margin primarily reflect the timing and scale of our planned investment in 2026 as well as the gross margin dynamics discussed earlier. Adjusted net income was approximately $11 million or $0.30 per diluted share. As Waleed mentioned before, we ended the quarter with approximately $462 million in cash.
Cash generation from operations remained solid during the quarter. Our balance sheet remains strong and continues to provide us with the flexibility to invest in the business, support our clinical and international expansion plans, and evaluate strategic opportunities that can strengthen our platform. Turning to our 2026 financial outlook. We are reiterating our full year 2026 revenue guidance of $727 million-$757 million, representing a 20%-25% growth over full year of 2025. We continue to expect growth to be driven primarily by increased transplant volume supported by OCS and NOP platforms, expansion of service revenue, and progress across our clinical and international initiatives. In terms of gross margin, we continue to expect our long-term gross margin profile to remain around the 60%.
As I shared before, as we continue to invest ahead of growth and expand geographically, we do expect some near-term pressure. We feel confident in our long-term profitability goals. As we continue to scale the business, we expect to capture additional operating leverage while also benefiting from initiatives that are planned to be margin accretive over time, including our kidney program and our next generation OCS. Taken together, these factors reinforce our confidence in the long-term profitability of the business. Again, as Waleed say, let me repeat, taken together, these factors reinforce our confidence in the long-term profitability potential of the business. In terms of capital allocation, our focus remain on driving long-term value. We are concentrating our investment in three key areas. First, fueling growth through continued R&D investment, strengthening our NOP network and targeting expansion into selected international markets.
Second, building a stronger foundation through enhanced systems, processes, talent and organizational capabilities to improve efficiency, scalability and execution. Third, enhance our infrastructure and strategic optionality, including our new global headquarters, manufacturing and product development upgrades, and selected strategic opportunities that can further strengthen our platform. Overall, our Q1 performance reflects continued execution, disciplined investment and progress across several strategic initiatives. Several strategic initiatives that aim to expand our TAM and materially strengthen TransMedics's long-term position. We are moving with conviction and investing strategically in capabilities required to support future growth, improve scalability and drive long-term value creation. With that, I'll turn the call over to Waleed for closing remarks.
Thank you, Gerardo. Overall, we're proud of our success to date. We're not stopping here. 2026 represents another critical period for TransMedics as we invest to deliver on several transformational growth catalysts. The strong financial position we've built over recent years have enabled us to pursue this multi-pronged approach, and we are more excited than ever for what lies ahead. In conclusion, we're humbled and proud of the significant life-saving impact of our OCS technology, NOP services and dedicated team, and remain committed to our mission of expanding cases and improving clinical outcomes to patients in need for organ transplant worldwide. With that, I will now turn the call to the operator for Q&A. Operator?