Shareholder letters: Cognex, RH, Intuitive Surgical, Edwards Lifesciences
Cognex (CGNX)
Cognex publishes entertaining and informative letters styled as a magazine.
Here is the title page of the latest letter for example:
Some excerpts from the letter to lick your interest in this machine vision business:
https://s2.q4cdn.com/773500753/files/doc_financials/2020/interactive/2020CognexAnnReport/index.html
RH
RH CEO Gary Friedman writes absolutely mind-blowing letters. The latest one is no exception. Below is just an excerpt, I strongly encourage you to read the full letter.
Since we the people of Team RH generally move in the opposite direction of the herd, are allergic to hunkering down, and surely don’t believe we belong in the pandemic pile, we’ve taken a shot at four simple headlines that require neither a microscope nor a telescope. The four P’s that can give you an insight into what you might expect us to do next, because while most of the world spent this past year sheltering-in-place, we spent the time reimagining and reinventing ourselves at a never before seen pace.
OUR PRODUCT. We are building the most comprehensive and compelling collection of luxury home furnishings in the world. The desirability and exclusivity of our product amplified in our inspiring spaces has enabled us to gain significant market share with RH Core demand up 36% in the fourth quarter. Our demand has accelerated sharply with February up 73%, and the first two weeks of March up 96%, prior to cycling the closing of our Galleries, Restaurants and Outlets a year ago…
OUR PERFORMANCE. We continue to build the most productive operating platform and business model in our industry with adjusted operating margins increasing 750 basis points to 21.8% versus 14.3% last year on only 8% revenue growth. Let me say that again, 750 basis points on only 8% revenue growth. It’s an operating margin never seen before in the furniture/home furnishings market, and more than 50% better than the closest competitor. Our ROIC of 53% in 2020 also puts us in a class of our own…
OUR PROSPECTS. We ended 2020 with just less than $3 billion in net revenues and believe the data supports the RH brand reaching $5 to $6 billion in North America and $20 to $25 billion globally. We believe that number will continue to grow when you consider our opportunities in Hospitality and Homebuilding as we continue to expand the RH Ecosystem with the introduction of RH Guesthouses and RH Residences…
OUR PEOPLE. I believe we have the most resourceful team in our industry, and again, not by a little. Tony Robbins talks about resourcefulness being the ultimate resource. It’s not about time, money, or technology. It’s about passion, persistence, vision and values. Starting with no resources, we transformed a nearly bankrupt business selling nostalgic discovery items with a $20 million market cap into the leading luxury home brand in the world with a market value in excess of $10 billion…
https://ir.restorationhardware.com/static-files/82d0f0a0-ef55-4009-8eb2-4e9fb2e04480
Intuitive Surgical (ISRG)
ISRG CEO Gary Guthart is one of my favourite CEOs in medtech space.
On business outlook:
Intuitive has created an effective ecosystem of products and services using design, robotics, computing, imaging, human factors and, more recently, machine learning to advance the quadruple aim. I believe we are in the early stages of a decades-long opportunity to improve healthcare using these techniques. We estimate that with our products in the market today, with our current global regulatory clearances, the opportunity for targeted procedures and geographies is roughly 6 million procedures per year. This compares to the roughly 20 million soft tissue surgical procedures per year in these markets overall. With continued innovation, new architectures, and scale, I believe many of these 20 million procedures will be performed using advanced technologies like ours in the future. As a result, we continue to invest in highly capable, mission-oriented staff, in deepening our ability to serve health systems interested in these techniques, and in developing and acquiring technologies and teams that can truly make a difference.
On capital allocation:
Given the significant future opportunity for Intuitive, we will pursue the following investment philosophy. Our top priority is investment in organic opportunities to improve outcomes, patient experiences, care team experiences, and lower the total cost to treat per patient episode, leveraging all aspects of our technology-enabled ecosystems. Our second priority is to invest in operational and scale efficiencies that drive a virtuous cycle with our customers – better product quality, lower product costs, and increased scale, allowing us to share these cost savings with our customers. Our third priority is to pursue partnerships and acquisitions that can accelerate our drive toward the quadruple aim. Lastly, we return capital to shareholders with a focus on long-term value in these distributions.
https://isrg.gcs-web.com/static-files/80b10bf5-c1da-4ad3-bb0e-8c595e2c712c
Edwards Lifesciences (EW)
Another quality medtech company led by an outstanding Mike Mussallem. I wrote about Mussallem some time ago.
On the importance of investing during challenging times:
We’ve continued to invest in developing solutions that extend lives, improve quality of life and bring value to the healthcare system. Our consistent and significant R&D investments allowed us to fuel this progress. To support our innovation and growth, we continued investing in our people, technology pipeline, robust evidence and our infrastructure. During a year when many companies furloughed or reduced employees because of COVID, we prioritized protecting jobs and were able to grow our team to nearly 15,000 employees worldwide.
As I write this letter, construction is continuing on our headquarters and research expansion in Irvine. We have also continued to grow our international footprint, with our facility in Costa Rica coming online midyear, and significant progress on new facilities in Limerick, Ireland, and Caesarea, Israel. These important additions to our global supply chain and R&D capabilities will further diversify our network and our ability to serve patients around the world.
https://ir.edwards.com/static-files/dae15223-4f6d-4918-b4a1-3c0efe601898