ADSK vs Procore, FTAI & CFM56 MRO, Belron, Topicus, Eurofins, Cogent, UnitedHealth, Ametek, Pets at Home
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1. Autodesk Construction vs Procore: Project Management Software
2. FTAI Aviation: CFM56 Lease Contract, Module Swaps, & PMA
3. Topicus Healthcare: Organic Growth Case Study
4. Belron: Safelite & US Auto Glass Repair Market Dynamics
5. Eurofins Scientific: Clinical Diagnostics Lab Network
6. Cogent, Lumen, Level 3: Internet Service Provider - Hyperscaler Relationship Dynamics
8. AMETEK: Post-Acquisition Operations & Kaizen
9. Pets At Home: Vet Practice Operations, Medication & Diagnostics
Autodesk Construction vs Procore: Project Management Software
In 2018, Autodesk acquired Plangrid, a leading construction project management SaaS platform, for $850m or 10x revenue. Over the last few years it has also acquired BuildingConnected and merged BIM360 into Autodesk Construction, its integrated end-to-end solution from its CAD design tools to planning and building.
Autodesk’s offering seems to be converging towards Procore’s integrated solution that also offers owners, general contractors, and subcontractors a platform to manage construction projects.
The construction software TAM is ~16bn and both companies have ~120% NRR. We’re conducting a series of interviews to understand how GCs, owners, and subcontractors use each platform.
This interview with a Former ADSK Sales Director walks through why and how Autodesk acquired and integrated Plangrid and how ADSKs integrated solution competes with Procore’s project management tool. One question we plan to explore further is the differences in pricing. Autodesk pricing is seat-based:
Whereas Procore sells separate instances to GCs priced on construction volume. GCs can add subcontractors for free under its 'unlimited user' model:
Although GCs on Procore can invite subcontractors for free to their instance, they pay per $ of volume that flows through the platform. It’s also not clear if subcontractors get the full access as they would on Autodesk. If subcontractors are paying for Plangrid or Autodesk Build, subcontractors would get full access to all projects on Autodesk for the same price. PCORs pricing model seems to be a barrier to adoption for some GCs:
Whereas Procore had a revenue-based model, typically they were looking at the total value of the construction project and it was, if I recall correctly, their pricing was $1,000 per million. So, deploy a $25 million project. It's going to cost me $25k to use Procore typically. And so what that got into was a model where the more successful you were, the more Procore cost you. Whereas with us, it was like you buy what you need. And so we really exploited that a lot. And I even had a couple of CIOs say to us at different times we would say, "Are you familiar with their financial model?" And I remember one CIO saying, "Yes, they're coming from our revenue," which I thought was exactly what you want to hear in a sales situation about your competitor, that he's very negative frame of mind. - Former Director of Sales at Autodesk Construction Cloud
Next quarter, we plan to work through a side-by-side comparison of a $100m project that runs through PCOR and Autodesk to compare the cost and customer experience.
FTAI Aviation: CFM56 Lease Contract, Module Swaps, & PMA
FTAI Aviation is a ~$10bn aircraft and engine leasing and MRO company that was spun from Fortress Transportation and Infrastructure assets. The company focuses on the CFM56 engine which represents 37% of commercial jet engines, 3x larger than the 2nd largest engine.
Commercial engines typically have a 10-year warranty with the engine OEM such as GE or Pratt. Once the warranty expires, 3P MRO shops such as FTAI step in to service the engines. The number of CFM56s rolling off warranty over the next decade provides a tailwind for FTAI and indie MRO shops that is set to peak in 2028:
FTAI claims to have the ability to service a CMF56 cheaper and faster than competitors through its Module Exchange program. This interview with a 30-year aerospace veteran at Willis, who currently structures and negotiates CFM56 lease and maintenance contracts, explores how engine leasing works, the value of module swaps, and FTAIs opportunity for engine PMAs.
It’s unclear just how unique FTAIs module swaps are for the CFM56. FTAI are not the first to conduct module swaps and many of the larger airlines have inhoused module exchanges for years. Also, module exchanges are not sufficient for all engine repairs:
For example, we've had engines pulled by operators for soft time thresholds and HPT blades, which is fine. But if you're into that and you want to do a module swap and you're looking at your HPT blades that have maybe run 16,000 cycles since new, you're not doing a module swap, because you're going to have to change all those HPT blades. That's a million dollars in materials before you do anything else. Say we put another LPT module on the back, but maybe you've only got a thousand cycles on an HPT blade. That's the core. You have to replace those blades. Which means if you're going to replace those blades, then you're going to look at the combustor because you kind of have to. And now you're into overhauling the combustor. So this thing all just gets completely out of control then - VP, Willis Lease Corporation
It also seems engine OEMs have no interest in allowing module swaps to grow. GE and Pratt encourage shops to follow their engine service manual to drive greater LLP sales which is a core driver of OEM aftermarket profitability:
Under the old system, if you had an LLP that was damaged, you could just take that LLP out and put in a new one. What OEMs have done now is they've changed it. So if you remove that LLP and that LLP, it doesn't matter whether that LLP is a high time or a low time LLP in the engine, you can never use it again. What they're doing is driving you into an ESM level inspection of all the other parts that are connected to that LLP or in the same module. - VP, Willis Lease Corporation
This interview also explores FTAIs JV with Chromalloy to PMA engine parts and discusses why Willis' lease contracts forbids any PMAs on its aircraft or engines:
Because remember what I told you? I was on a panel, and I was the only lessor there, so naturally, I was the bad guy. I was the Jack Palance. And a couple of the airlines were complaining, "You guys are stopping us from using PMAs in our engines, right?" And I said, "No, you're stopping us from using PMAs." As I pointed out to them, "You're okay with PMA? What about the guy sitting next to you? What if he's not okay with PMA? If he's not okay with PMA and I put PMA in my engine, I've just reduced my market by half. Now, let's say it's not even half. Let's say it's 20%. What business strategy would ever suggest that you can reduce your customer base by 20% by doing something? - VP, Willis Lease Corporation
Next quarter, we plan to further explore the cost and TAT advantage of FTAIs module swaps in more detail as well as the opportunity for its engine PMAs.
Topicus: Organic Growth Case Study
This interview is the second in our series to understand how and why Topicus is the leader for driving organic growth within the Constellation Software family. We through a case study from TOI Healthcare division and explore how its ambulatory service drove organic growth pre and post-merger with TSS.
One potential challenge for TOI is that it doesn’t seem to pay engineers competitively. This may impact the quality of new modules produced over time:
It was challenging to attract the best IT talents in the market when I worked at Topicus because they didn't pay much. It became more difficult to secure top talent, but Topicus would accept a lower margin in the first two years, allowing me to invest in the quality of the platform and new modules. That was the main difference. Before merging with topicus.com, we had a reporting structure at Topicus that wasn't very intense. After the merger with TSS, and becoming topicus.com, under the Mark Leonard reporting structure, things changed significantly. - Former Managing Director at Topicus
Next week, we plan to summarise our learnings on how Topicus drives organic growth and the differences pre and post-TSS merger.
Belron: Safelite & US Auto Glass Repair Market Dynamics
Belron, majority owned by the 10 bn EUR D’leteren Group, is a global leader in the auto glass replacement and repair market. We are currently exploring how advances in ADAS technologies may impact Belron's volume growth and repair economics. Just as increased technology within vehicles is driving higher severity and total loss frequencies, the complexity of glass windshields impacts Belron's unit growth and gross profit per repair.
This first interview was with a Former Director of Warehouse Operations at Safelite, Belron's US brand that was acquired in 2007. The interview sheds light on Belron's acquisitive growth strategy, major causes of windshield damage, and the potential impact of ADAS technologies.
Rock from the road accounts for 85% of glass damage. It's very high. Rock from the road varies, especially in places like Colorado where you have natural rock coming down off the mountains onto the roadways. You have the snow climates, where gravel is used on the roads in the winter for salt and ice, and during spring gravel construction areas. Rock from the road is always the number one cause. Secondary to that are probably all small percentages of everything else, like baseball bats, trees, and other incidents - Former Director of Warehouse Operations at Safelite
Eurofins Scientific: Clinical Diagnostics Lab Network
In this interview with a Former Eurofins Scientific COO, we explore the structure of clinical diagnostics lab networks in Europe. A key driver of network profitability is how providers balance routine and specialty testing:
For example, 10 years ago, most vitamins were actually considered specialty. Today, they are commodity. Routine testing includes full blood counts, vitamins, minerals, and such, which are straightforward, high volume, and unfortunately, have very low margins. Currently, specialty areas include molecular diagnostics and everything related to IVD, women's health, reproductive health, rare diseases, cancer, and tumor diagnostics. But, as I mentioned, by around 2027 or 2028, most of these tests will likely convert into routine - Former COO of Eurofins Scientific
According to the executive, specialty tests have about 4 years of ~30% EBITDA margin before the test starts to be considered routine as it picks up adoption. Cerba Healthcare seems to outspend ERF on R&D to drive new testing methods:
For instance, Cerba Healthcare is known to be the number one spender on R&D within the European diagnostic market. No other private player in the market spends as much. I believe they allocate about 11% of their annual budget to R&D and method development. They introduced tumor diagnostics about four years ago. Once regulatory bodies approve and accreditation bodies give their best practices, they start selling and cross-selling to Eurofins, Sonic Healthcare, Synlab, Biogroup, and others. After some time, Biogroup, Eurofins, and others also start adopting these practices. - Former COO of Eurofins Scientific
Cogent, Lumen, Level 3: Internet Service Provider - Hyperscaler Relationship Dynamics
In this interview, a Former Strategic Capture at Lumen Technologies sheds light on the dynamics between internet service providers and hyperscalers.
Lumen has indeed performed better, as evidenced not only by the quarterly and annual business reviews conducted by most large hyperscalers with all their vendors. We consistently score higher in all aspects except for commercial. We are rarely the cheapest or most aggressive in pricing. However, my role has always been to position our services as worth a 10% premium because we deliver on time, a sentiment echoed by my customer base. Should we be two times or even 50% more? No, because you're willing to wait longer, right? You're willing to do a 180-day install instead of 90. Cogent has traditionally fit in as the low-cost Internet provider, not with the new T-Mobile assets. - Former Strategic Capture - Hyperscaler Division - at Lumen Technologies
Also, in order to improve its GTM sales process, Cogent added a tool that enables sales reps to show customers the physical path in real-time. It displays engineering latency, route capacity in real-time, and quotes prices algorithmically, depending on the route miles. It automatically generates a quote, so there's no subjective judgment from the salesperson on what to charge. While this can improve productivity, it can potentially lead to longer lead times:
Tech-savvy customers will likely appreciate it, saying, "Great, just give it to me. I don't need to talk to the salesperson." This is both good and bad. It's good because it empowers them, but it's bad because they might not negotiate if they think your price is 30% too high. In such cases, a salesperson could escalate the issue, perhaps getting a better price from a senior VP. So, while the tool enables quick responses, it also means that every discount request has to be escalated, which can delay the process. Even with a 24-hour turnaround, it might take two weeks to get to the pricing that will close the deal. - Former Strategic Capture - Hyperscaler Division - at Lumen Technologies
UnitedHealth, Elevance, Cigna & Value-Based Care: Acquiring vs Partnerships with Healthcare Providers
Within the US healthcare ecosystem, patients seem to place more trust in the healthcare provider rather than the insurer. In this interview, a Former VP - New Ventures - Value-Based Care at UnitedHealth explains how the group empowers the physician to focus on driving value-based care:
To give you some data points, Optum's programs, which I call point solutions, such as diabetes management or transitions of care, typically see a 7% to 10% engagement rate with their patients. For every 10 patients they call, maybe one out of those 10 picks up the phone and engages with them. These programs operated independently of the primary care office. The last pilot I did, now branded as Optum Practice Extend, was highlighted at United's investor conference last year with strong results. This model, as I mentioned earlier, involves calling on behalf of Doctor Smith's office, informing the patient that Doctor Smith asked us to call because they are not taking their medications, for example. We always disclose that we are calling from United and explain the program. This approach has seen an engagement rate north of 55% to 60%, with one out of two people engaged in the conversation. - Former VP - New Ventures - Value-Based Care at UnitedHealth Group
AMETEK: Post-Acquisition Operations & Kaizen
AMETEK is a $40 billion industrial conglomerate whose value creation engine relies on accretive M&A. In this interview, a Former Operating Unit leader describes how AMETEK approaches solving problems and integrating businesses into this fairly decentralized organization. The description is eerily similar to what Danaher has done over the years:
"They organize Kaizen events, and we've had a few at my operating unit as well. We take some of our employees from the operating site to be part of the team, along with a small team of facilitators and experts who come on site. It's usually about a week-long commitment by the operating unit and the organization. During this week, the team will delve deep into the operations, focusing on key issues such as on-time deliveries (OTD) and similar challenges. - Former VP at AMETEK
Pets At Home: Vet Practice Operations, Medication & Diagnostics
This interview with a Former Executive responsible for M&A and Integration at IVC Evidensia and Medivet discusses the profile of target vet acquisitions and how to integrate units. There is also an interesting data point on pet insurance attachment rates in the UK:
I think when I graduated, it was probably about 30%, back in 2012. When I left clinical practice, it was pushing into the late thirties. When I was at Medivet, our assumption was around 50% to 60%, depending on the geographical area as well. More affluent areas tended to have higher rates. Going back to your comment on spending, it isn't necessarily linked to insurance in terms of spending more because it's insured. The reality is, if it's insured, people are more able to afford high-value treatments, though there are still people who pay cash. For the record, that's where I think people now realize these one-off bills are really hard to cover, leading to increasing insurance penetration. - Former M&A Executive at IVC Evidensia
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