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Procore Technologies: Pricing & Customer Pain Points

Last week, PCOR guided to lower revenue growth due to a sales reorg and slowing end market. The company is localising sales under a new General Manager structure to get closer to customers. The stock was down 25% on the day.

This interview with a Former PCOR customer at a larger general contractor, who is now a Procore implementation partner, explores how contractors and owners measure ROI of adopting the Procore platform.

The first year, we calculated ROI. It's really hard to calculate ROI on a time basis, but we did it with risk. We mitigated risk by capturing safety instances that happen. - Former Customer and Current PCOR Implementation Partner

One interesting comment surrounds PCOR pricing model which charges customers a % of gross construction volume. For a customer generating $1bn in construction revenue, the cost is $1m to use PCOR per year.

It's definitely sticker shock. The construction industry is so behind many other industries, especially in technology. Technology is expensive, and often it's the first time construction companies are hit with a technology cost, and they're like, "Whoa, that's a lot." It is shocking. - Former Customer and Current PCOR Implementation Partner

Over the next few months, we plan to speak to various other customers to understand the core growth runway and opportunity for Procore Pay.

Danaher & the Bioprocessing FDA Approval Process

This interview with a Former GE Healthcare Executive and FDA Inspector walks through the FDA Approval process for bioprocessing equipment and consumables focusing on customer switching costs.

One comment highlights the strength of Cytiva's process being 'industry standard': Asian customers will simply replicate US production facilities to receive FDA approval as quickly as possible:

I've been at Samsung in South Korea, Chinese companies, and Japanese companies. Samsung is a very interesting company because they moved very fast into this bioprocessing space. I tried to visit them and sell some new instruments, and they told us, "No, no, no, we are copying. We have Korean guys who have been working in the US and Europe, and we are using their instruments." They're using the ACT instrument, GE instruments, and MAL instruments because they just copy what others do. The FDA knows this. When they come into the lab, you can't tell whether you are in South Korea or Boston. They know the instruments and the documentation, which helps speed up the process. It's all about standardization. - Former GE Healthcare Executive

FTAI Aviation: CFM56 Repair & Module Swap Process

FTAI Aviation is a $10bn US-listed aicraft lessor and engine MRO service provider. Since January 2023, the stock is up 5x as the demand and FCF from its CFM56 MRO business has accelerated. The CFM56 is the largest commercial aero engine with a long-tail of aftermarket shop visits due over the next decade:

FTAI is the largest global owner of CFM56 with over 400 engines in inventory. Given the CFM56 is built between Safran and GE, the two companies manufacture separate modules that come together for assembly. GE builds the core and Safran the LPT and fan. This modular architecture enables FTAI to conduct the heavy MRO on its 500 engines upfront to ensure it has stock of repaired modules to immediately swap when an airline visits the shop. This cuts the repair turnaround time in half.

This interview goes on to explore how and why FTAIs Module Swap program compare to alternative MRO offerings:

after they put the 5K fan on instead of 10K, now their fan and LPT are equalized. The next time the engine goes for a shop visit, both their fans and LPTs would be repaired or replaced. The core would remain intact at that point. The core would follow the continued time maintenance. Now, what they're going to do is either exchange on the repair of that or even sell it. So, Fortress would, instead of repairing that 10K fan module, charge the customer absolutely nothing. They gave them the exchange. They gave them a 5K fan module by absorbing the cost of repairing a 10K fan module. That's how they're making a profit. - Former FTAI Engineer

TransDigm and HEICO: Threat of PMA

One of the potential risks to TransDigm's proprietary aftermarket parts is PMA competition. A former Wencor executive discusses this threat and shares examples of how TransDigm combats PMA competition:

" Next time you're on a plane and you pull the latch on the overhead, that latch is probably a Hartwell latch, very easy to PMA. So why did TransDigm do a distribution deal with Seal Dynamics on Hartwell? The same reason they did with me on Adams Rite, to basically stop Heico from attacking them. Now, it's not that easy. This was perhaps the toughest part of the negotiation, which was what they asked for. I assume they asked Heico for the same thing. They said, "We just want you to abandon your PMAs and stop selling them." - Former EVP, Wencor

Our TransDigm Company Profile and Heico: PMA vs OEM Power research cover this topic.

Kinsale: Underwriting Process & Unified System Advantage

When it comes to the underwriting process, Kinsale's unified system enables the company to answer requests more effectively and with more junior labour relative to competitors:

"Some of the newer companies will probably try to copy Kinsale's system. However, other factors make Kinsale an attractive company. They hire young people straight out of college. As I mentioned, a seven-year-old could do a GL quote. Their salary is lower than the average E&S competitor, and their commission is also lower than the average E&S competitor. These factors bring down their overall expense ratio. I think last year it was only 20%. Most other companies sometimes have ratios of 30% or 40%. That, combined with the speed of their ability to do these quotations, attracts business. - Senior Vice President at Kinsale

Given that speed is the most important factor for clients when it comes to small risks, Kinsale seems to have an advantage for lower premiums:

"The speed aspect of their system is crucial. As I mentioned earlier, if you're a wholesale broker with a general liability policy costing $10,000 no matter which company you send it to, they'll come back and say it's $10,000. But if you're the broker and you can get the quote the next day from Kinsale, you'll pass that on to the retailer, who will pass it on to the insured, and they'll bind it. This means the wholesaler, the broker, will only spend one day working on a $10,000 account with Kinsale versus two or three days waiting for other companies. So if you could do your job in 24 hours versus three days or a week, which option would you take?" - Senior Vice President at Kinsale

In this interview, a former Senior Vice President at Kinsale compares the company's systems and processes to those of other legacy insurance providers.

MongoDB, Snowflake vs Databricks and the GenAI Tech Stack

While it is still early stages in enterprise-adoption of AI, a Data Management consultant to major enterprise clients shares how MongoDB, Snowflake, and Databricks are positioned as AI workflows grow:

" AI hasn't been as explosive as we thought, but it's an essential part of most new workloads. We just haven't had many new workloads. But now, I'm starting to see activity pick up, and everything is about what we can do with GenAI. There was a lot of thinking in the first half of the year, and now we're turning that into pilots and occasionally into production. That's going to favor Databricks. It's really down to Snowflake and Databricks, with some BigQuery, some Synapse, and some Redshift. But Snowflake and Databricks are the two battling it out in most enterprises, and Databricks is mostly winning."

TerraVest: Risks, Growth Hurdles & Acquisition Multiples

In this interview, a former Salesperson at Propane Resources shares his views on the dynamics of the propane market and the runway for TerraVest to grow via acquisition:

"Where I'm seeing the big uptick and potential for propane is in auto gas. More and more school districts are switching to school buses that run on propane because it costs them about 85 cents a gallon, unlike $4 a gallon for diesel. It's cleaner, quieter, and the buses require less maintenance. There's not a lot of negatives to it. - Former Salesperson at Propane Resources

US HVAC OEMs: Competitive Landscape & Distributor Relationship

We have previously covered the US HVAC industry through the lens of Watsco. In this interview, an executive with experience across multiple major OEMs, explores the competitive landscape and the importance of OEM-distributor relationships:

" (...) the US market is really driven by distributors who support the contractor and installer networks. The distributor market is extremely robust and very traditional, with some distributors we've partnered with having been in place for 30, 40, 50, 60 years. To break into the US market, one must penetrate this distributor network. The biggest challenge is that the distributor network has strong ties and partnerships with the OEMs they work with. For example, Carrier distributors are known to be a tight-knit group and have been working with Carrier for a long time." - Former Sales Manager at Carrier and Trane

Such long-standing distributor relationships make it difficult for foreign brands to enter the US market. The executive even went as far as attributing Carrier's success to Watsco.

Yes, that's the $10 billion question. Being in the unique position to support Carrier as a business from various levels, and having the time to support the Watsco entity and organization, I would say that Carrier's strength has been more driven by their partnership with Watsco than anything else they've done. If you remove Watsco from the equation, or just alter it—perhaps Watsco not acquiring some of the companies they did, or not taking on all of the responsibilities from the joint venture with CE, including purchasing all of their capabilities—I think Carrier would not have been as successful as they have been. Carrier's success in the last 10 years is really attributed to the great decisions and performance of Watsco, and I don't think they would have done quite as well without the Watsco partnership in place. - Former Sales Manager at Carrier and Trane

Green Landscaping Group: Swedish Landscaping Competition

In this interview, a former Production Leader at Park och Trädgård i Bohuslän sheds light on how legislation affects competition in the Swedish landscaping market.

"Yes, we have a law called LOU. It requires us to give other competitors a chance. This law mandates that the lowest price wins the offer. However, people working in this line of business often find this law challenging because it doesn't make the business serious. If you can't charge adequately for your services, it becomes very unsafe and hard to run a business. - Former Production Leader at Park och Trädgård i Bohuslän

IP Podcast: Loar Group: Aerospace Parts Quality (Spotify / Apple)

This free IP Podcast shares context to how we approached our recent research on Loar Group, a ~$5bn listed aerospace supplier of mission critical parts. We explore:

  • Why there are few TransDigm replicas
  • Loar vs TransDigm proprietary intellectual property
  • TransDigm vs Loar operational excellence
  • How we evaluate the quality of aerospace suppliers