Congrats on another awesome year Stock Novice! Do you happen to know if TMDX's acquired R&D expenses of ~$27.2M (Bridge to Life) in Q3 was mostly a one time cost? I've been trying to forecast their expenses and I don't know how to think about it. It's obviously a huge number compared to the pre-acquisition R&D quarterly expenses.
Thanks for sharing your portfolio and decision making over the past years. I've learned so much from you. I can't thank you enough. Happy New Year
I'm not sure but am working off the assumption the bulk is a one-time adjustment that should smooth into TMDX's results going forward. Here's the quote from the CFO on the effects to operating expenses and operating income this quarter (both of which I noted on my tracking info):
"Total operating expenses for the third quarter of 2023 were $69 million. However, operating expenses include 2 acquisition transition -- excuse me, 2 acquisition transaction specific impacts.First, we have $27.2 million of acquired in-process research and development expenses related to our acquisition of the Bridge to Life Technologies. And secondly, included in SG&A is approximately $2.2 million of other acquisition-related expenses.Now if we normalize for these 2 items, our underlying operating expense was $39.8 million. This is 68% above the third quarter of 2022 and 6% sequential growth from Q2 of '23. We have continued to make critical investments in the company to ensure scalability for growth and to support future growth while still growing expenses at a much lower rate than revenue.Our operating loss was $28.3 million in the quarter of 2023 compared to $5.5 million in the third quarter of 2022. Taking into consideration the 2 transaction specific expense items I mentioned earlier, our operating income would have been just above breakeven for the quarter, about $900,000.Our net loss for the third quarter of 2023 was $25.4 million compared to $7.4 million in the third quarter of '22. Total cash was $427.1 million as of September 30, 2023. In the quarter, we spent $42.1 million on the 2 business acquisitions as well as approximately $103 million on 8 jets that were added to our transplant logistics fleet."
Being TMDX spent only $42M total on Summit Aviation and Bridge to Life, it's hard to think that level of expense burn will continue. The main thing for me is seeing if revenue continues to grow faster than operating expenses going forward (since future acquisitions or plane purchases should be capital expenses).
I know that is not a direct answer, but it is at least how I am considering the numbers. Hope that helps.
Thank you for the very detailed response. It helps a lot. I was mostly fearful due to the fact it was something I didn’t understand. It’s very difficult to google such a question (I’ve tried 😅).
“Being TMDX spent only $42M total on Summit Aviation and Bridge to Life, it's hard to think that level of expense burn will continue”
That makes a lot of sense. I was shocked when I saw that number in their report. That level of expense vs the acquisition cost is something I don’t think I’ve ever seen. The report and guide was fantastic, but all I could think about was “what is going on here?” and wondering if my 0 investing background was leaving me exposed.
“The main thing for me is seeing if revenue continues to grow faster than operating expenses going forward (since future acquisitions or plane purchases should be capital expenses).”
Thanks for this. Viewing it this way makes the op expense number from this quarter irrelevant until we get more information. How much was one time? We will find out soon. And if the expense number is larger than we would “want”, well let’s compare that to how fast they are growing revenue. If revenue growth is fast enough (faster than expenses), then the added expense is obviously well worth it. You have replaced my fear with excitement!
Part of the excitement comes again, thanks to you. I’ve been watching it since you bought shares last year. After studying it in some detail, which didn’t occur until it already doubled for you, I started buying it in the 60’s and continued all the way to the 30’s during the recent no reason sell-off, so my cost basis is rather low all things considered.
Thanks again for the excellent response. I feel like Jordan responded to my question 😃. Best of luck next year. I look forward to following along!
or your watchlist....SNOW had a good year, but they are still trading 20% below their IPO price. Their multiple always has them priced beyond perfection. I had to let them go. Please share your research on that one.
Same feeling. Great business with what is in hindsight terrible timing after IPO'ing at just about the absolute peak of multiples. As you said, down 20% from IPO despite revenue being up something like 5X. I remember everyone saying they'd be willing to play like $125 or even $150 for it before it debuted around $240. It's been playing a brutal game of catch up ever since.
Even today it's priced higher than many other names with similar growth. The sheer excellence of the business keeps it on my watchlist, but the disconnected multiple has kept us from owning it other than a brief stretch from June 2022 to March 2023. I just can't put it in our top 10 at present.
Funny. I answered the very same SNOW question above though the reason probably doesn't matter to you anyway.
By the way, the offer to hear more of your thoughts and learnings from our past chatter still stands: https://thestocknovice.substack.com/p/june-2023-portfolio-review/comments. At some point though, I have to wonder what keeps you reading since you obviously get so little out of the forum. I'm beginning to think you might not be totally sincere. 😉
In the bigger picture, I'd rather honor my 100% transparent rule than delete your (so far) empty comments. That being said, there's a first time for everything...
I look forward to seeing if you have anything at all to learn from.
to be honest, as with all subscriptions, I was a bit lazy and never set a deabo. so I kept coming across your posts and then I was interested to see how the parallels to the others are and who is copying from whom (as if there were only ever the 10 companies, in the Nordic countries alone there are numerous monsters that would meet your criteria). All the best!
PS: To be clear, I also hold a greater portion in SaaS stocks but the names are the same for years now: CRWD, ZS, NET, DDOG, MDB and some more mature or less SaaS orientied ones (NOW, TTD, AXON, PGNY, ANET, GLBE MELI, SHOP, SE, FTNX, CER, EPSIL)
Interesting. So, maybe our styles aren't as different as you make them out to be (even after acknowledging my extreme lack of familiarity with the Nordic markets). I've owned:
* CRWD since its IPO on June 12, 2019
* DDOG since December 2019
* TTD from June 2018-Apr 2020 (the COVID advertising crash) and again since Aug 2022
* ZS from Jan 2018-Dec 2019 (the CRO gaffe) and again since Jan 2021
Including AXON, that means we somehow own five of the same names constituting half my current holdings. I have to ask: did you make those decisions entirely on your own or just copy someone?
Congrats Stock Novice. I must say that this was the most thought provoking year end post I have read over the past 48 hours. I like your thoughts on S curve investing. I am not sure we will get back to zero interest rates any time soon. This will make it harder to find those juicy small caps in hyper growth mode early and often.
True, but we don't need zero rates for new companies to form and flourish. We only need capital markets to find their new equilibrium and cadence. In the meantime, we'll just have to play the hand we're dealt.
I hope you and your family are enjoying the holidays.
Just subscribed! Looking forward to your updates!
Thank you! I appreciate the support.
Congrats on another awesome year Stock Novice! Do you happen to know if TMDX's acquired R&D expenses of ~$27.2M (Bridge to Life) in Q3 was mostly a one time cost? I've been trying to forecast their expenses and I don't know how to think about it. It's obviously a huge number compared to the pre-acquisition R&D quarterly expenses.
Thanks for sharing your portfolio and decision making over the past years. I've learned so much from you. I can't thank you enough. Happy New Year
Hi Chris -
Thanks for the kind words and good question.
I'm not sure but am working off the assumption the bulk is a one-time adjustment that should smooth into TMDX's results going forward. Here's the quote from the CFO on the effects to operating expenses and operating income this quarter (both of which I noted on my tracking info):
"Total operating expenses for the third quarter of 2023 were $69 million. However, operating expenses include 2 acquisition transition -- excuse me, 2 acquisition transaction specific impacts.First, we have $27.2 million of acquired in-process research and development expenses related to our acquisition of the Bridge to Life Technologies. And secondly, included in SG&A is approximately $2.2 million of other acquisition-related expenses.Now if we normalize for these 2 items, our underlying operating expense was $39.8 million. This is 68% above the third quarter of 2022 and 6% sequential growth from Q2 of '23. We have continued to make critical investments in the company to ensure scalability for growth and to support future growth while still growing expenses at a much lower rate than revenue.Our operating loss was $28.3 million in the quarter of 2023 compared to $5.5 million in the third quarter of 2022. Taking into consideration the 2 transaction specific expense items I mentioned earlier, our operating income would have been just above breakeven for the quarter, about $900,000.Our net loss for the third quarter of 2023 was $25.4 million compared to $7.4 million in the third quarter of '22. Total cash was $427.1 million as of September 30, 2023. In the quarter, we spent $42.1 million on the 2 business acquisitions as well as approximately $103 million on 8 jets that were added to our transplant logistics fleet."
Being TMDX spent only $42M total on Summit Aviation and Bridge to Life, it's hard to think that level of expense burn will continue. The main thing for me is seeing if revenue continues to grow faster than operating expenses going forward (since future acquisitions or plane purchases should be capital expenses).
I know that is not a direct answer, but it is at least how I am considering the numbers. Hope that helps.
Stock Novice –
Thank you for the very detailed response. It helps a lot. I was mostly fearful due to the fact it was something I didn’t understand. It’s very difficult to google such a question (I’ve tried 😅).
“Being TMDX spent only $42M total on Summit Aviation and Bridge to Life, it's hard to think that level of expense burn will continue”
That makes a lot of sense. I was shocked when I saw that number in their report. That level of expense vs the acquisition cost is something I don’t think I’ve ever seen. The report and guide was fantastic, but all I could think about was “what is going on here?” and wondering if my 0 investing background was leaving me exposed.
“The main thing for me is seeing if revenue continues to grow faster than operating expenses going forward (since future acquisitions or plane purchases should be capital expenses).”
Thanks for this. Viewing it this way makes the op expense number from this quarter irrelevant until we get more information. How much was one time? We will find out soon. And if the expense number is larger than we would “want”, well let’s compare that to how fast they are growing revenue. If revenue growth is fast enough (faster than expenses), then the added expense is obviously well worth it. You have replaced my fear with excitement!
Part of the excitement comes again, thanks to you. I’ve been watching it since you bought shares last year. After studying it in some detail, which didn’t occur until it already doubled for you, I started buying it in the 60’s and continued all the way to the 30’s during the recent no reason sell-off, so my cost basis is rather low all things considered.
Thanks again for the excellent response. I feel like Jordan responded to my question 😃. Best of luck next year. I look forward to following along!
or your watchlist....SNOW had a good year, but they are still trading 20% below their IPO price. Their multiple always has them priced beyond perfection. I had to let them go. Please share your research on that one.
Best to you and your family!
Same feeling. Great business with what is in hindsight terrible timing after IPO'ing at just about the absolute peak of multiples. As you said, down 20% from IPO despite revenue being up something like 5X. I remember everyone saying they'd be willing to play like $125 or even $150 for it before it debuted around $240. It's been playing a brutal game of catch up ever since.
Even today it's priced higher than many other names with similar growth. The sheer excellence of the business keeps it on my watchlist, but the disconnected multiple has kept us from owning it other than a brief stretch from June 2022 to March 2023. I just can't put it in our top 10 at present.
funny how you copy trade each other. If you know what you own, why are you selling SNOW and having it again on your watchlist? Boy...
Funny. I answered the very same SNOW question above though the reason probably doesn't matter to you anyway.
By the way, the offer to hear more of your thoughts and learnings from our past chatter still stands: https://thestocknovice.substack.com/p/june-2023-portfolio-review/comments. At some point though, I have to wonder what keeps you reading since you obviously get so little out of the forum. I'm beginning to think you might not be totally sincere. 😉
In the bigger picture, I'd rather honor my 100% transparent rule than delete your (so far) empty comments. That being said, there's a first time for everything...
I look forward to seeing if you have anything at all to learn from.
to be honest, as with all subscriptions, I was a bit lazy and never set a deabo. so I kept coming across your posts and then I was interested to see how the parallels to the others are and who is copying from whom (as if there were only ever the 10 companies, in the Nordic countries alone there are numerous monsters that would meet your criteria). All the best!
PS: To be clear, I also hold a greater portion in SaaS stocks but the names are the same for years now: CRWD, ZS, NET, DDOG, MDB and some more mature or less SaaS orientied ones (NOW, TTD, AXON, PGNY, ANET, GLBE MELI, SHOP, SE, FTNX, CER, EPSIL)
Interesting. So, maybe our styles aren't as different as you make them out to be (even after acknowledging my extreme lack of familiarity with the Nordic markets). I've owned:
* CRWD since its IPO on June 12, 2019
* DDOG since December 2019
* TTD from June 2018-Apr 2020 (the COVID advertising crash) and again since Aug 2022
* ZS from Jan 2018-Dec 2019 (the CRO gaffe) and again since Jan 2021
Including AXON, that means we somehow own five of the same names constituting half my current holdings. I have to ask: did you make those decisions entirely on your own or just copy someone?
(See what I did there?)
Happy New Year to you and your loved ones. 🎉🥃
Congrats Stock Novice. I must say that this was the most thought provoking year end post I have read over the past 48 hours. I like your thoughts on S curve investing. I am not sure we will get back to zero interest rates any time soon. This will make it harder to find those juicy small caps in hyper growth mode early and often.
Thanks, Beachman.
True, but we don't need zero rates for new companies to form and flourish. We only need capital markets to find their new equilibrium and cadence. In the meantime, we'll just have to play the hand we're dealt.
I hope you and your family are enjoying the holidays.