Content Published Last Week

1. Tesla, Cruise, Waymo: The Race Towards Autonomous Vehicles

2. IDEXX Laboratories: UK Vet Practices, Diagnostics & Practice Management Software

3. Herc Rentals, Sunbelt, & United Rentals Competition

4. Alpha Group, Fund Service Providers & AlphaPay

Sponsor

Visible Alpha Logo_cmyk.jpg
Visible Alpha Logo_cmyk.jpg

Visible Alpha built a platform to analyze consensus data for financial and operating metrics on over 6,400 publicly traded companies. Rather than digging through models one by one, Visible Alpha creates consensus data for every line item included in sell-side models so institutional investors can better understand expectations on metrics beyond just revenue and earnings. Try Visible Alpha for free here.

Tesla vs Cruise vs Waymo: The Race Towards Autonomous Vehicles

Tesla, Cruise, and Waymo are three companies leading the race to autonomous vehicles. Each has a different strategy and business model. The underlying business model of each player defines the model in which it collects training data. This interview with a Former Tesla and Cruise executive explores the different approaches to sensors, hardware, and proprietary data collection and quality to train its AV models.

Cruise constantly changes modules and components, upgrading software, which can only take you as far as the hardware's capacity. Tesla has an aging fleet with older sensors, while Cruise, with a smaller fleet, can change components more easily. You can't just recall customers' sensors and cameras. For example, when I was at Tesla, we had to recall around 900,000 Model 3s to upgrade computers, which was costly. - Former TSLA and Cruise Executive

IDEXX and Practice Management Software

IDEXX Laboratories' software offerings comprise only 7.5% of total revenue. However, an independent vet explains how IDEXX’s Practice Management Software drives the purchasing decision for diagnostics instruments:

We felt very comfortable with IDEXX, and a significant factor for us was choosing the Animana software. The integration with our practice management software was great because we wanted to streamline the efficiency of the entire practice. I've worked in places where there wasn't a direct interface between the practice management software and lab results, and it seemed like a massive waste of time. They would, essentially, be employing people to sit there and scan your attached documents into the note of various patients. A receptionist could spend hours a day, doing that. To view those in the notes, you would have to download a separate attachment from the software. It seemed really inefficient. - Director of Vet Practice and IDEXX Customer

Herc Rentals, Sunbelt, & United Rentals Competition

We've long wondered why smaller equipment rental players have ~10% lower dollar utilization than Ashtead / United Rentals and whether this gap may close?

Is the higher utilization and margins of AHT / URI driven by equipment mix? Not only the mix between general and specialty but also within general tools? Or maybe the fact AHT and URI have denser clusters and greater scale economics?

This interview with a 40-year rental veteran explores the potential scale advantages of the top 3 and how smaller players could close the gap in returns:

Sunbelt and United were the first players in the market. United was probably the first to really focus on specialty segments like trench shoring, where they are now the dominant player in the United States with close to 100 locations. They have also expanded their pump and fluid solutions sector and power sector through acquisitions, which is for generators, coolers and air conditioning systems, all the way up to big tractor-trailer size with rigs that will power a multi-plant or a city, for that matter. They do have other specialty operations, but those are the main drivers for their division. - Former VP at Herc and URI

The mix of specialty seems to drive higher ROI:

Sunbelt, on the other hand, has divisions for flooring, walls, trench shoring, and pump power. They are playing catch-up in the trench flooring side. Both companies have tool divisions that are thriving in the Gulf Coast. About 25% of their [Sunbelt, Herc, United Rentals] business is within specialty, which produces an annual ROI between 70% and 100%+. The general rental business, which includes aerial equipment, compaction equipment, and others, produces an annual ROI between 30% and 40%. This is where they get the additional dollar utilization or annual ROI. - Former VP at Herc and URI

Alpha Group, Fund Service Providers & AlphaPay

Alpha Group is a owner-operated £1 billion London-listed financial services company that is planning to uplist from the AIM to the main market in London. The company’s roots lie in FX Risk Management services to corporates and investment funds and has recently expanded its offering to Alternative Banking services to the funds. This Director of a fund services provider explain how regulatory pressure hse pushed traditional European banks out of the market:

From the banking perspective, the past 10 years have been quite interesting. After 2007, various regulatory regimes were implemented, such as Basel II and Basel III, which required banks to take a risk-weighted approach to capitalization. This, combined with regulations like AIFMD, aimed to manage systemic risk on a European, if not global, scale and mitigate the impact of future market events. This has led to numerous regulatory fines for many institutions, causing banks to tighten their risk appetite. As banks are punished for engaging in potentially risky work, they become less likely to take on such tasks, narrowing their focus. - Director of Fund Services Administrator

Such reduced risk appetite has made it difficult for funds to open accounts at traditional banks. Alpha Group is positioned to solve such a problem, particularly in Luxembourg:

For background and context, Luxembourg is the largest fund jurisdiction in Europe and the second largest globally, with an AUM of over €5.2 trillion. It is a juggernaut, from a growth perspective. The main selling point that led to us doing business with [Alpha Group] was their work with Luxembourg funds and illiquid alternative funds. When setting up these funds, you need a GP, which is a corporate entity, and a partnership, typically an SCSP in Luxembourg. To establish a GP in Luxembourg, you need a notary and a bank account in existence before notarization. This requirement is unique to Luxembourg, as it is not needed in places like Jersey or the UK. - Director of Fund Services Administrator

Alpha Group can open bank accounts much faster than traditional institutions. It works with fund services providers to acquire customers with the speed of opening a bank account as a key selling point and uses this wedge as an entry to capture profitable FX transactions on the back-end.

Although they might not make much money from bank accounts, it's a foot in the door to sell FX services, launch their credit line book, and explore other opportunities. They've realized that by doing this job better than banks and having a slightly different risk profile, there's a huge market to tap into. - Director of Fund Services Administrator

With competitors like Argentex and Ebury increasingly offering similar services, it remains to be seen if Alpha Group can maintain this advantage in customer acquisition.