TransMedics (TMDX) Delivers in Q1
Shares of TransMedics (TMDX) are indicated to open nicely higher this morning (+10% to 15%) after the company smashed Q1 expectations.
Revenue grew 133% to $97 million, beating by $13.1 million (15.7%) while EPS improved to $0.35 from a loss of -$0.08 in Q1 2023 and destroyed expectations by $0.37.
An EPS beat of that magnitude begs the question: What does the profit forecast look like from here? On that front management opted to punt, saying they’re not ready to give guidance but “hope we’re on the path to having sustainable profit going forward ...”.
Turning back to the results, the beat was driven by strong performance (roughly $7 million beat) in the Organ Care System (OCS) across all three organs (heart, liver and lung) as well as in the aviation (i.e. TransMedics logistics services) business (roughly $6 million beat). Those beats flowed straight to the bottom line (hence the big EPS number).
Importantly, gross margin in the aviation business also expanded, helping to push total company margin higher (to 35.8%). We should see more margin improvement from here.
There was a lot of talk on the conference call about new clinical programs (planned for 2024 – 2025) in Heart and Lung. I won’t go into details, but just one talking point is that heart trials are designed to cover more organs (like hearts with longer perfusion times) so that TransMedics tech is approved to preserve every heart transplanted in the country.
In other words, the company is not sitting on success.
Full-year guidance was increased by more than the Q1 beat with revenue guidance range moving from $360 - $370 million up to $390 - $400 million. It seems from the call that analysts believe management is being conservative. I agree. However, given the magnitude of the growth here it’s clear that things are happening quickly behind the scenes (like more planes being added) and in that environment things can go wrong. I expect management wants to leave wiggle room, just in case.
Analysts are raising price targets and TMDX stock should trade up nicely on this report. Continue to hold. HOLD
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