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Perimeter vs Fortress: Aerial Fire Retardant Competition

The pitch was that Perimeter Solutions has 100% of the market because they are the only ones who have successfully gotten on the QPL, the Qualified Products List. They have defended that position well. We understood federal acquisition regulations well enough to know that if we could get through the process, which would take a couple of years, and have a product on the QPL, the United States government is structured in such a way that they can't support a monopoly if someone gives them a reason not to. - Former Strategy and Finance at FortressFire

This was the founding pitch for FortressFire to enter the aerial fire retardant business against Perimeter Solutions, the business chaired by TransDigm's Nick Howley. The founding premise was built around the fact that FAR 6.202 of the Federal Acquisition Regulation implies government agencies should establish and maintain alternative sources of supply to critical products. 

And it worked. In December 2022, Fortress was the first company in over 20 years to be approved in the U.S. Forest Service’s (USFS) Qualified Product List (QPL). This broke Perimeter’s monopoly. But, it worked only until it didn’t. Thirteen months later, the USFS removed Fortress’ product from the QPL after finding corrosion in the air tankers used to drop the retardant. As the 2024 QPL shows, Perimeter (PRM) has regained its monopoly. 

But how deep really is Perimeter’s moat? 

We have been speaking with multiple executives across the industry. This piece of research curates our recent work on the history of Fortress vs Perimeter and whether PRMs moat is widening or narrowing. Next week, we will be exploring further competitive dynamics and potential pressure on Perimeter. 

IP Company Learning Journey: FTAI Aviation

This IP Company Learning Journey curates all our work on FTAI Aviation and MRO for CFM56 engines. The global MRO materials market is dominated by engine parts:

In this FTAI Learning Journey, we cover various topics including a handful of further research questions to pose to management:

Intuitive Surgical: ASC's, Hugo Comparison & Efficiency Gains

Last week, we published an interview with a General Surgeon who performs 95% of his procedures with the Da Vinci. In this interview with a veteran Robotic Surgeon with over 8000 robotic procedures under his belt, we discuss how surgeons are using the robot in ASC's:

Now that I'm in private practice, I can go anywhere. I can go to any hospital or an ASC. I try to schedule as many surgeries as possible at the ASC because we own it, and it is part of our practice. We benefit from doing surgeries there because if it is profitable, we get dividends. Whenever a patient has insurance that we have a contract with at the ASC, I perform the robotic surgery there, with few exceptions. - Current Robotic Surgeon

This surgeon also reiterates the importance of efficiency and clinical outcomes for the profitability of his ASC.

A prostatectomy, however, requires a lot of expertise and training to perform efficiently in a surgery center. Doing it in two hours rather than six hours takes a lot of skill and experience. The insurance companies pay for a prostatectomy based on the average procedure, which is not typically a two-hour surgery or outpatient with same-day discharge. The average prostatectomy usually involves one or two nights in the hospital and has about a 10% complication rate. Insurance companies pay based on that average, but if you can do it faster, more efficiently, and with better outcomes, you can benefit and make a profit from it. - Current Robotic Surgeon

Capital One Auto Navigator: Defining Credit Policies

In this interview, a Former Business Director at Capital One sheds light on Auto Navigator's credit policy process, the challenges of integrating with dealer management systems, and the difficulties of operating in the subprime auto lending space.

"For instance, Capital One is a credit card company. The credit card business is at the forefront of pre-qualification. I think everyone is familiar with receiving direct mail saying, "You're pre-qualified, apply for this and get this credit card that you're entitled to." Many people at Capital One come from the credit card business. So, they thought, can we do the same thing for auto? It sounds simple, but the challenge lies in the technology. Unlike credit cards, which are non-collateral and only about the person, the auto business involves both the person and the vehicle. Each vehicle is different, depending on factors like the down payment, the age of the vehicle, the type of vehicle, and so on. - Former Business Director at Capital One

TerraVest: Domestic vs Storage Tanks, Replacement Cycles & Market Share

A Sales & Operational Project Lead at TRIARC TANK explains how a handful of players ended up consolidating the propane tank market and shares his views regarding the industry's prospects.

"There are not a lot of mom-and-pop operations that make tanks. Actually, there are no mom-and-pop operations that make tanks. You may have some when you get into your refurbishers or people that take old tanks, recondition the shells, put new valves, and apply a coat of paint. Then you get some smaller operations, but there's just a handful of those. There's not even a whole lot of those. The reason why is all of those have been sold already. Everybody's already grabbed those. So you don't have the availability of used shells to recondition. - Sales & Operational Project Lead at TRIARC TANK

TransDigm: Culture & Pricing

This interview with a Former TDG President, with over 40 years aerospace experience and 7 years at TransDigm, compares the company culture and differences in pricing and customer relationships to other OEMs like RTX. We also explore how TDG runs due diligence before buying an asset:

We'd open our books and show them. They would prioritize or pareto the aftermarket and OE and see what the biggest programs were. They'd say, "Show me your contract with FedEx on your 767 conversion so I can understand if there is a pricing opportunity or if you are locked in as the supplier." They would get a pretty good understanding of the business, particularly in those three areas. They didn't really care about your HR systems. IT was a bit of an issue because they tried to get everybody reporting in the same format. We would do quarterly reviews with EVPs and the CEO, and everyone would do it in exactly the same format. We'd roll all our numbers up to corporate in exactly the same format so they could analyze them easily. They had that part of it down pretty well too. - Former President at TransDigm

Bonesupport: CERAMENT, Bone Infections & Use Cases

Bonesupport is a Swedish Medtech company with a EUR 1.6B market cap. The company has been a 10-bagger since listing in 2017 thanks to the growth and success of their CERAMENT bone void filler product. In this interview with a former Sales Manager, we try to understand how the product works and how it is used by orthopedic surgeons.

However, literature indicates that only 10% of the total antibiotic administered reached the bone infection, making it very ineffective. This meant that after four to six months, patients often returned with recurring bone infections. Even a small piece of infected bone left untreated could lead to bacterial colonization and reinfection. It was a nightmare for surgeons to deal with patients with bone infections, which often worsened over time, sometimes leading to amputations. It was a very complex problem with very complex patients. - Former Sales Manager at Bonesupport

CERAMENT G, the antibiotic eluding version of CERAMENT addresses these issues and significantly reduces the chances of reinfection and amputation.  CERAMENT G was approved by the FDA in 2022 and currently has no FDA approved equivalent.

"We try to explain this with solid data. One of the biggest added values of CERAMENT is the extensive clinical data, references, and studies available about its behavior. You don't have to talk about it; just show and Google or give it to the surgeon. There are more than 1,000 articles and clinical reports about the success rates of CERAMENT. On average, CERAMENT eliminates 96% of bone infections worldwide. It is a fantastic product - Former Sales Manager at Bonesupport

In the next interviews, we will explore the technology risk, barriers to entry and sales process.

Ryerson, Reliance Steel & Metal Service Centers: M&A, Customer Mix and ERP Conversion

In this interview, a former VP & General Manager at Ryerson sheds light on the cultural challenges the company faces as it rolls out its M&A playbook. 

"What Ryerson learned the hard way was they bought a company, a good-sized $500 million revenue company that was really strong, a transactional service center, and lost a lot of its revenue very quickly. The lesson learned was culture. It was a mismatch in culture. So our mantra from the top became that it's most important to get culture right when we do an acquisition - Former VP & General Manager at Ryerson

Dynatrace: Cybersecurity & Observability Customer Perspective

We have published a number of interviews on the Cybersecurity and Observability software vendors over the past few months. In this interview with a VP of IT customer, the relative strength and weaknesses by use case are compared for various vendors. The executive describes why they are considering moving off Splunk.

One reason is that Splunk does a good job at application performance monitoring. It has all the tools necessary for the level of APM we want. Unfortunately, with the cloud instance of Splunk, you pay by the amount of data ingested. When you talk about ingesting application performance logs, that's a significant amount of data beyond what is necessary for just using it as a security tool - Vice President of Dynatrace Customer