As discussed on the last earnings call, TMDX is going forward with the plan of acquiring a or partnering with a logistics partner to prepare for the increased volume.
„TransMedics intends to use a portion of the net proceeds from the offering to pay the cost of certain capped call transactions (described below). In addition, TransMedics intends to use the remaining net proceeds to expand its logistics network through potential partnerships or acquisitions and for general corporate purposes.“
The stock price at the time of this writing is down 5% in pre-market, although I see it as a good sign, that the management team is executing on their plan to reduce the bottleneck of aviations constraints.
„ We believe strongly that securing this dedicated national network of charter flights under TransMedics aviation, would act as an additional significant catalyst for the growth of NOP and TransMedics business in the United States.“
I agree completely with this… and it is EXACTLY WHY I HAVE REDUCED my TMDX holdings by over 80%.
Because growth… as lovely as growth is… is not always good. WHAT???
Currently, TMDX has a pretty asset light, high margin, high growth business with a terrific moat… which is why I bought it.
HOWEVER… TMDX is transitioning… with the addition of the TMDX Air Force… into a relatively asset heavy, much lower margin, lower growth business with the addition of all these stinkin’ planes. You think running an airline… which is what it is… is a great addition? Sure, I understand the REASONS for what they’re doing… but I also see the upcoming RESULTS. And yes, they’ll be good results. Higher sales, higher profits… with basically an anchor dragging the results down.
Is it a bad investment now?
I wouldn’t say so. I’d just say I can do better. I retain a small position to keep track of things and to sell monthly call options against for a modest profit. But my money is in other stuff, notably SMCI and ENPH and some car company and a few others.
He is no fool who gives what he cannot keep to gain what he cannot lose.
You think running an airline… which is what it is… is a great addition?
I don’t think that’s the right analogy. There’s a difference between running an airline as a stand-alone consumer-facing company and running an air-based transportation service where the only customer is your own business that has very specific and unique requirements.
that is what Shop found out , which they should have known, so they recently sold their Freight business.
I don’t see that as the right comparison, either. Shop’s fulfillment business isn’t any different than that Amazon, Walmart, or Target, etc. need. And the company Shop sold the fulfillment business to is run by the guy who successfully built up Amazon’s internal fulfillment business.
Note that Shop retains a 13% equity stake in Flexport, and now that company can more easily serve customers other than Shopify that have the same business requirements.
The issue for Transmedics isn’t whether the air shipping part of the business makes money, it’s whether Transmedics needs air shipping capabilities for its business to be able to grow. Getting organs from where they are to where they need to be on a timely basis remains key, and I thought that ability is unique to Transmedics’ process. Am I wrong on that?
Sure it is the same. Shop thought they needed the fulfillment business to compete with Amazon and it dragged down their margins. So they sold it. I am more excited about Shop now that they no longer run that business. It wasn’t core to their business anyway and they really didn’t need the lower margin business.
The conversation wasn’t on whether TMDX needed to do it but on whether it would drag down their margins and make them a less exciting business to own. They are going to have to maintain a fleet of airplanes, pay pilots to be on call, it is going to take a lot of money to build this out and maintain it. I would have much rather had them pay another company to have planes on call when they needed them. But hey it’s their business I just don’t have to give them my money.
Smorg it is really hard to have a discussion with someone that is always trying to twist people’s words around. It would be better if you listened and then discussed it from your viewpoint rather than telling me what I am saying.
Although I did not buy TMDX to own jets, I am neutral about this. I used to follow aviation very closely for over a decade. It has been a while, but I would not draw quick conclusions either way.
While it is certainly counterintuitive to go this route and SHOP just did a 180, I would not assume that we can easily guess the impact of a small fleet on a niche business. This is very different from AMZN or SHOP.
The devil will be in the execution and it will take time to know who was right on this, so it is understandable that the stock is under some pressure. I don’t think TMDX is suitable for more than a small allocation anyway, however, so this has little impact on me.
TMDX has been talking about this for at least the last 6 months - probably longer, I just don’t want to take the time to find out exactly when they first brought it up. Any major analyst or significant investor has known about this for a long time and factored it into their analysis. This is not a surprise.
This is not like any other type of delivery service or airline network. We are talking about small private jets - not large cargo planes.
I agree this adds a layer of complexity and risk that I wish were not necessary, but the reality is that this is what is needed to grow the main part of the business. I think it reflects well on management that they have been ahead of this and have been looking at it for months.
The CEO stated that the current transport system is very inefficient and ripe for disruption. It will certainly not be as profitable as the OCS disposables, but I am betting that TMDX can make money at it.
As mentioned in another thread, I personally think this helps widen their moat. See other thread for details.
If you see this as a swing trade or momentum trade (which is really what I think most on this board are doing), then it’s very possible that this news will hold the stock price down for a quarter or 2 and it might not be the best investment for the next few months. If you see this as a long term investment with the potential to compound for many years, then I don’t think the transportation thing changes the thesis much.
at 1K procedures last year, they were already at ~3 per day…
with their growth rate, they will hit 10 per day in a year or two…
at that rate, owning 3 or 4 small aircrafts to manage this (and getting paid for it) makes a lot more sense… ofcourse its about execution and if this doesn’t work out for them, they will sell it away…
There are ample examples, from Tesla to Amazon, of successful use of in-house logistics and operations that provide enough confidence in this move
I could be wrong, but I assume they will roll this out the same way they did the NOP. They started with 1 or 2 locations and worked out all the details and the insurance reimbursement plan. Once they nail it all down, then they expand to additional sites. Could be minimal investment to get started and prove the concept.
If I remember right, the CEO said they will have to buy existing operator to get going quickly rather than applying for permits etc. So I would assume an acquisition that will be repurposed for exclusive use by TMDX
nilvest - you are correct. I looked back at the ER transcript and this is what the CEO said:
“We evaluated all different options of how to build the TransMedics aviation business in TransMedics. We have completely eliminated the organic option of adding one plane at a time because it will take significantly long time for TransMedics to secure a Part 135 charter operating license is going to take at least 12 to 18 months. So our two most efficient paths are either acquiring a Part 135 operator that had significant assets of jets that we can leverage quickly or creating a joint venture with one operator that had, again, a license and a significant number of assets. These are the two options that we are actively pursuing across the United States.”