TMDX · investment memo
THE SCREEN'S ASSUMPTION, retained for comparability and explicitly disowned by the memo: 'it is an industry p75 figure, not a TransMedics figure', and it sits ABOVE the best full year TransMedics has ever posted (17.9%, FY2025). TTM actual is 14.9%; Q1-2026 actual is 7.6%. Named as THE PARAMETER THAT ACTUALLY DECIDES: PASS at 19% (+9.5pp) and at the mix-honest 15% (+4.1pp), FAIL at 12% (-1.2pp), flip point ~12.6%. Why: the service segment is 38.3% of TTM revenue at a 28.5% gross margin against product at 61.7%/78.1%, pinning the blended gross-margin ceiling near 59.1%; converting that into a 19.0% operating margin requires opex to fall to 40.0% of revenue from a TTM 44.2%, and Q1-26 opex ran at 50.5%, up 8.1pp yoy. Both named growth initiatives (European NOP, PAD Aviation) are LOGISTICS expansions, which pushes the ceiling down further.
Four distinct questions, one field each. A price is not a thesis: the trigger below forces a re-underwrite and freezes further purchases — it is never an automatic sell.
A daily close below $66.20 triggers a mandatory re-underwrite and freezes further purchases. It is not an automatic sell unless a separate fundamental invalidation condition has been breached.
Not stated. This name has no falsifiable invalidation conditions on file, so it cannot be risk-monitored. That is a gap in the research, not a clean bill of health — recorded rather than hidden.
Scenario: the funding squeeze. TransMedics must find ~$895m over 24 months (Somerville $374.6m by 31 Dec 2027; converts $460m on 1 June 2028; term loan $60m amortising from July 2026) against $461.7m of cash and a business generating roughly $150m of annual free cash flow at its FY2025 run-rate — and *negative* free cash flow in Q1 2026. The converts refinance themselves only above $94.00; at $76.35 they do not. The trigger that makes it bite is a revenue miss. Guidance is 20–25%; Q1 delivered 21.2%; the deceleration is monotonic; the deceased-donor pool contracted 2.5% in 2025; heart is flat