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Perimeter Solutions: Litigation & Potential New Entrants

Perimeter Solutions’ fire safety business includes two different products: retardants and suppressants. Each product has a different chemical formulation and use case. Retardants are ammonium phosphate and dropped from aircraft ahead of a fire to stop it spreading; suppressants are foams that help firefighters extinguish fires caused by flammable and combustible liquids. Different products, different use cases, and often different customers. 

One similarity between the two product types is that each has ongoing litigation that may impact Perimeter’s long-term earning power.

Foams are under pressure from multi-district AFFF litigation in which major defendants 3M and Tyco recently paid out billions whereas the litigation against aerial retardants is more nuanced. In the last FY 2024, Perimeter is named as a defendant in ~4,000 AFFF claims yet there is no balance sheet liability for the litigation. 

But this is fairly old news. A more interesting story surrounds PRMs PHOS-CHEK aerial retardant cash cow, also a known water pollutant. The FSEEE is alleging that the USFS’s use of fire retardant on water is a pollutant and a National Pollutant Discharge System (NPDES) permit is required to continue its use.

This research provides an overview of product litigation risks and how potential new EPA-approved entrants are looking to capitalise on this litigation against PRMs aerial retardant cash cow.

Airbnb: Org Structure, Culture, & Growth Challenges

A company’s org structure can often shed insight into its priorities and operating philosophy. Companies with similar business models can be organised very differently. Take early Amazon and Airbnb: two marketplace businesses. Amazon is heavily decentralised and built around ‘two pizza teams’ with P&L responsibility; Airbnb has a founder-dominated functional org structure modelled on Jobs and Apple. 

This interview with a Former Senior Executive at Airbnb explores the company’s org structure, Chesky’s leadership style, and the company’s culture.

This is particularly relevant given recent management changes. Last year, Catherine Powell, the Former Head of the Supply Side at Airbnb, left the company. This led Chesky to reorg the business, moving the CFO to a new ‘Head of Business’ role. We also explore the company’s bi-annual product launch cadence and the value of recent initiatives such as Icons. The screenshot below shows how Icons, ABNBs new, upcoming experiences, takes over the front page of Airbnb. 

Interestingly, all these Icons represent inventory that is unavailable. It cannot be booked. This interview goes on to explore how Chesky spends his time and how such products may influence ABNBs medium and long-term revenue growth rate. 

you see Icons and this one that you just showed, Kevin Hart, sold out. Icons is the top left category, right? And it's the new thing. It is, in some cases, a combination of a stay and experience. Many of them are experiences like "Go VIP with Kevin Hart." This is a session with so and so. This is stand-up. Some of them are Stays, where you are staying at the Barbie house or the Purple Rain house. The point of showing these experiences on the Airbnb homepage is to generate awareness and buzz for this category. But think about it for a second. Go back to the homepage. Every single thing is not bookable. None of these things are bookable. They're either coming, closed, or sold out. Just think about Amazon.com or Walmart or eBay or you name the company. If you could not buy anything on the Amazon.com homepage, that would never happen. Now, if Amazon's trying to promote something like the English Premier League or Thursday Night NFL Football, it will promote it in a place but then have the ability to go transact. This entire homepage is dedicated to something you cannot buy. - Former Senior Executive at Airbnb

Tesla Repair Network & Vertical Integration

This interview explores Tesla's repair network structure to better understand the cost and efficiency of repairing vehicles compared to traditional ICE repair networks. Unlike other OEMs, Tesla owns a portion of its repair shops and certifies third-party shops to carry out repairs.

One challenge in growing its network is that non-Tesla-owned body shops don't wish to adopt the company's repair estimation software because it provides less room to over-charge insurers for the repair.

On the third-party side, there isn't that feedback loop, and honestly, they probably don't care in most cases. They think, "Well, this is what you have to buy." In their eyes, they're selling another part and making more money. What's the benefit for them? They'll just sell another part and make another 30% on it. - Former Repair Manager at Tesla

Additionally, the operational complexity of fixing a Tesla vehicle drives higher repair costs. Each Tesla needs to be mounted on a Celette jig which is more time-consuming than the legacy two-post lift for other vehicles.

An experienced technician could set up the bench from scratch. Those eight hours are billed to the insurance company. It doesn't matter if you just did a Model 3 and are going to do another Model 3. Both cars are billed eight hours to the insurance company, even though you technically don't have to set up the bench again. You could just drop the next car on it. So, the revenue opportunities for a shop are significant. If you have your bench set up, you will eat the cost the first time. But if you do multiple Model 3s and Model Ys, the setups don't change much. You can drop each car on the bench and charge eight hours each time. You can charge frame time, which can be more than the regular body rate.- Former Repair Manager at Tesla

PMA Parts Competition and Threat to OEMs

This interview with a Former Leader at a large PMA Company explores how the likes of HEICO, Wencor, and Jet Parts compete between each other and with OEMs. The interview further explores strategies that OEMs use to combat PMA penetration and how different airlines approach PMAs:

Delta is number one by far. They typically wouldn't reach 20%, but it would be somewhere in that range. American is also a very good PMA customer. If they weren't number two, they were very close. Southwest should be the best PMA customer. But, unlike American and Delta, they outsource a lot of their maintenance. Ironically, I was almost late to this call because I was speaking to ATS's CEO. ATS, based in Seattle, handles most of the heavy maintenance for Southwest. I used to think Southwest was really good at negotiating contracts, extracting value from their supply chain. Based on their recent performance, I don't think you can make that argument anymore. United lags fairly far behind; they might be in the top 10. Lufthansa is always a top five customer, sometimes even top three. They also sometimes develop their own PMAs or something called an OOP (Owner Operator Part), which is basically a PMA but with fewer regulatory hurdles since they fly their own planes. - Former Senior Executive at leading PMA Company

Computer Modelling Group: Geographic Expansion & Sales

Over the last few weeks, we've published interviews on Computer Modelling Group, a small Canadian O&G modelling software company. A former CMG executive with over 25 years experience in reservoir modelling explains the key drivers for customers when choosing between Schlumberger ECLIPSE, tNavigator or CMG's STARS.

The drivers inside the oil companies, especially the bigger ones, tend to view reservoir simulation as part of the overall technical pie. In other words, it's not just about comparing simulator A to simulator B and making a decision. They ask, "What can we buy that will integrate into our IT-derived data workflow? - Former Executive at CMG

Croda: Life Sciences Specialty Chemicals

Croda is a $7 billion specialty chemicals company listed on the LSE. Life Sciences is one of Croda's largest end-markets, accounting for 36% of sales with higher sales growth. A Former Croda Executive explains how a specialty and commodity chemicals portfolio are required to compete.

 If you are a sales rep for Croda, you have your targets. You don't want to sell commodities; there is no target for commodities at all. However, it's good to have them because you can offer a full package to the customer. You can sell the active ingredient, the specialty, the fancy stuff that allows for great claims, and the fillers needed for formulation. If I can sell the whole package, it's a win-win. - Former Senior Executive at Croda

TerraVest & the Propane Tank Market: Unit Costs and Legacy Tanks Conversion

In this interview, a former VP of Business Development at TerraVest dives into the manufacturing cost breakdown for propane tanks and sheds light on the lifecycle of older and smaller tanks as they get replaced.

When we started in the eighties, you might have had one 30,000-gallon or one 60,000-gallon bullet. Now, these sites, because they are producing and making the propane, will put in 10 or 15 90,000-gallon bullets and get rid of the old 30,000 and 60,000-gallon ones. These old bullets are now being converted into what we call process equipment, treaters, and separators because they are an inch thick and have higher pressure than needed for that part of the business. So, you de-rate them and reuse them. Now, these 30,000-gallon bullets have somewhere to go, and I can replace them with a 90,000-gallon bullet. If I have a 30,000-gallon bullet on my site, the truck has to show up every week. With a 90,000-gallon bullet, I see them once a month, saving money on deliveries. This change in size has gone so far that there was a project where they tried to talk me into making a 250,000-gallon bullet. The only reason I couldn't do it was that we couldn't get it to the location due to too many turns and not enough straightaways. - Former VP of Business Development at TerraVest

TopBuild, Owens Corning, Installed Building Products & US Building Insulation Market: Supplier Relationships and Pricing Dynamics

In this interview, a former Executive VP of Strategic Accounts at Builders FirstSource discusses the pricing dynamics of the US building insulation market.

Typically, if you're an insulation company, you want all your customers and competitors to know that you're raising the price so they will follow suit. But when the market softens, it's the opposite. Everyone becomes secretive and only shares this information with key customers who can drive volume. - Former Executive VP of Strategic Accounts at Builders FirstSource

Zscaler: Sales Org & Competition in SASE

In another interview covering cybersecurity, a Former Zscaler executive discusses competition in SASE and how the sales organization has evolved. The executive describes the incentive structure and how it affected morale within the salesforce.

The morale issue I mentioned is that Zscaler has a bad habit, for better or worse, of forecasting a number. When you add up all the quotas handed out to the sales teams, the quotas are way higher than the number forecasted to the street. Internally, it would be like, "Hey, we beat our EPS, we hit our number to the street," and so on. But internally, everyone's like, "Nobody made the number on my team. Nobody made the number on any other team that we know." So there was a feeling of working really hard without getting paid, while Jay is - Former Sales Executive at Zscaler