Speedwell Research's Weekly Recap
Philz Coffee, Contingent Competitive Advantages, the Love Metric, Copart's Multi-decade focus, and 3 Business Updates
Welcome to Speedwell Research’s Newsletter. We write about business and investing. Our paid research product can be found at SpeedwellResearch.com. You can learn more about us here.
This is a weekly recap, where we summarize recent content you may have missed.
Table of Contents:
Speedwell Releases & Upcoming
Spotlight
Coverage Updates
Sharing Links
1. Speedwell Releases & Upcoming.
Research.
This week we released three 4Q24 Business Updates on Copart, Dream Finders Homes, and Coupang.
This is in addition to the five other 4Q24 business updates we have already released on Airbnb, CoStar Group, Evolution, Floor & Decor, and Perimeter Solutions.
The Synopsis Podcast.
We dropped Two Podcast Episodes this week!
The first was a dialogue episode where we: 1) debriefed on our Todd Haushalter interview, 2) provided an Evolution Business update, and 3) gave an update on Airbnb and their SuperApp ambitions.
Our second episode was a interview with Philz Coffee co-founder Jacob Jaber! He gives his insights on building Philz Coffee from a single counter in a bodega to chain of 75 stores!
Upcoming.
Podcast
A Company podcast episode on Axon will be released in two weeks!
We also have several Dialogue business update podcasts in the works. Episodes covering Copart, Coupang, CoStar, Dream Finders Homes, Floor & Decor, and Perimeter Solutions all to come. Stay tuned!
Research
We will release our report on APi Global after earnings finish up.
Coverage
Constellation Software reports 4Q earnings next Friday.
Meta and Etsy will both be at the Morgan Stanley TMT conference next Wednesday.
Become a Speedwell Member today to get access to all of our research updates and our in-depth research reports!
2. Spotlight.
Below are select quotes from our various writings and podcast.
Some Top Quotes from our Jacob Jaber Interview.
Get The Big Things Right: “There’s two things that mattered to this business, people and real estate. So we had to get the people right. We had to get the real estate right... Nothing ever messed the business up because we got the most important things right.”
Competition Tunnel Vision: “If you can’t beat the competition, you don’t deserve to exist.”
Obsessive Hospitality: “I didn't wake up one morning and say I'm going to have 1,000 stores. I literally woke up every day to do a great job for the customers.”
The Love Metric: “How do you measure love? One of the best ways that I’ve come up with to measure love is discretionary usage intensity… You know things are working when the first timer comes back and wants to keep coming back and they start telling their friends.”
Dream Finders Homes 4Q24 Update.
Founder Patrick Zalupski on Capital Allocation: “Everything at DFH is directed towards driving the highest and best returns on each dollar of capital we invest. We are largely agnostic as to whether these returns are generated organically, via acquisition, or through a strategic asset sale.”
Contingent Competitive Advantages: “The acquisition of Liberty Communities in Atlanta is interesting because they have a manufacturing component to the business too…NVR is vertically integrated with their own manufacturing facilities to create material like prefabricated wall panels to reduce cost and increase building speed. NVR’s turnover ratio is about ~3x vs DFH at ~2x. Dream Finders Homes driving more cost efficiency could not only help gross margins, but also help improve turnover.”
Tariffs and Margin Pressure: “In the near term, tariffs can weigh on gross profits as raw material costs increase. They have already experienced 4Q gross margin compression of 17.6% versus 19.2% last Q and 20.5% last year. For now, the gross margin pressure is primarily a result of construction loan financing costs increasing and not building cost increases.”
The DFH Piton: “Their capital-light model, which circumvents the risk of holding and developing land in favor of land options and land banks, greatly reduces the risk that an economic calamity would be terminal for DFH.”
Perimeter Solutions 4Q24 Update.
Dispersed Manufacturing Advantage: "While many things broke during the Los Angeles wildfires, Perimeter’s operations didn’t… The importance of a geographically dispersed manufacturing base, the closest of which was just East of Los Angeles, helped ensure the critical fire retardant solution was fully stocked for firefighting operations."
Capacity Tailwind: "Given the visibility and damage the Los Angeles fire caused, it is likely that more will be invested in aerial assets, which could help perimeter (and firefighting efforts) longer term."
Revenue Quality Boost: "We see below that Fire Safety is now 78% of their total revenues, up about 800 bps y/y. This is generally a positive as the Fire Safety segment (specially the fire retardant business) is a higher quality business than their oil additives business that is the crux of the Speciality Product Segment."
Copart Update.
CEO Jeff Liaw on Thinking in Decades: “We want to invest in the business to grow it. I wouldn’t read into any given quarter. And that goes for CapEx and G&A and so forth. We’re not managing for the smoothness of our earnings, we manage to grow the enterprise profitably for the benefit of our customers and our shareholders long term.”
Secular Trends: "Copart continues to benefit from several trends: 1) rising total loss frequency, 2) a slight shift towards higher quality cars, and 3) international markets moving to a consignment model, shaped by Copart’s entrance."
Key Friction Point: "Initial tow usually happens without the insurance company’s knowledge. This tow and the storage is costly. Quicker alert of accidents can help them assess total loss quicker and properly direct the vehicle with less touch points… The sooner Copart can interject themselves after an accident, the less money an insurance company will waste.”
3. Coverage Updates.
4Q Earnings.
This week we released business updates on Copart, Dream Finders Homes, and Coupang.
We decide to call these “business updates” and not “earnings updates”, because we focus on the long-term perspective and not just how a bunch of P&L items moved around relatively to last quarter. There are many analysts that do a great job of summarizing the quarter in terms of numbers, and rather than give you another update like that, we want to lean more on analysis and our own thoughts.
About half of our updates are fully free, but become a Speedwell Member today to get access to the full updates and all of our research reports. While our updates vary in length, check out our Floor & Decor post for a good example of a free business update.
APi Group.
Reported 4Q earnings. We will be releasing our report on them soon.
Axon.
Reported 4Q and revenues grew +33% y/y, representing the 3rd consecutive quarter of 30%+ growth.
Announced over 1mn software users.
They updated their TAM (again) for the 5th (?) time in ~5 years to $129bn.
2024 revenues were $2.1bn and they are guiding to 25% growth and 25% adj. EBITDA margins at the midpoint for 2025.
(We are probably going to skip a business update for them this quarter, but their results are strong and they continue to execute superbly).
Evolution.
Evolution bought back 359k shares under its repurchase program. Since February 11th, Evolution has acquired a total of 570k shares, or about 0.25% of the company.
Meta.
Meta AI App. Meta plans on releasing a standalone Meta AI app in 2Q25. The company also plans on testing a paid subscription service for Meta AI that will charge users for access to more powerful versions. This is likely an experiment to see whether they will be able to monetizing AI more directly.
CoStar Group.
CoStar completes acquisition of Matterport. Matterport will be used to create 3D virtual tours. This content doesn’t just help the building owner’s advertisements work better, but also ties them to Apartments.com because CoStar retains rights to the content as their intellectual property.
4. Sharing Links.
Lessons from Netflix, Valve, Facebook, Duolingo, and Peter Kaufman (Link)
Michael Mauboussin's new report on probabilities and payoffs (Link)
Howard Marks's memo on the indispensibilty of risk (Link)
Matthew Higgins on war and finance (Link)
Quartr’s interview with Gautum Baid on mastering simplicity and compounding (Link)
Christopher Bloomstran 2024 SAI annual letter (Link)
And a special thank you to Matthew Harbaugh for helping put this weekly recap together!
The Synopsis Podcast.
Follow our Podcast below. We have four episode formats: “company” episodes that breakdown in-depth each business we write a report on, “dialogue” episodes that cover various business and investing topics, “article” episodes where we read our weekly memos, and “interviews”.
Speedwell Research Reports.
Become a Speedwell Research Member to receive all of our in-depth research reports, shorter exploratory reports, updates, and Members Plus also receive Excels.
(Many members have gotten their memberships expensed. If you need us to talk with your compliance department to become an approved vendor, please reach out at info@speedwellresearch.com).
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Lessons from Netflix, Valve, Facebook, Duolingo, and Peter Kaufman (Link)
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