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St. Pete online stockbroker Webull valued at $7.3B in merger with SPAC

A blank check company of Korean tech conglomerate SK Group is taking Webull public in a deal that values the online stock trading platform at $7.3 billion......»»

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Paul Kelsey discusses plans for 161-acre west Wichita housing, commercial development

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From Andover reopening to branch refreshes, Greater Wichita YMCA presses forward on major projects

"We have something really special here in Wichita with the Y system," Greater Wichita YMCA CEO Ronn McMahon said......»»

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Schools, colleges should buy/lease office buildings in the Triangle

Interesting times call for innovative solutions. With so many office buildings sitting empty, there's an opportunity to save taxpayer money here......»»

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YWCA of WNY taps new CEO, plus 2 more nonprofit leadership changes

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North Country Charcuterie grows via deals with Giant Eagle Market District, regional stores nationwide

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Construction begins on new Caribou Coffee in West Allis

The new Caribou Coffee coming to West Allis builds on the company's growing locations in the southeast region......»»

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PNM completes sale of renewable energy joint venture to Pittsburgh-based firm

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Kroger VP Kate Meyer passed up calling as anthropology professor

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Video shows group violently attacking man in middle of downtown Pittsburgh

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13 Biggest 401(k) Mistakes to Avoid

This article takes a look at the 13 biggest 401(k) mistakes to avoid. If you wish to skip our detailed analysis on unraveling the controversy surrounding 401(k) plans, you may go to 5 Biggest 401(k) Mistakes to Avoid. Unraveling the Controversy Surrounding 401(k) Plans Who is Robert Kiyosaki? More importantly, why does Robert Kiyosaki not […] This article takes a look at the 13 biggest 401(k) mistakes to avoid. If you wish to skip our detailed analysis on unraveling the controversy surrounding 401(k) plans, you may go to 5 Biggest 401(k) Mistakes to Avoid. Unraveling the Controversy Surrounding 401(k) Plans Who is Robert Kiyosaki? More importantly, why does Robert Kiyosaki not like 401k? Robert Toru Kiyosaki, a Japanese-American businessman and author, is famous for the Rich Dad Poor Dad series of personal finance books. According to him, 401(k)s are a “horrible retirement plan. Yet, according to the Bureau of Labor Statistics, 56% of all civilian workers, including both full-time and part-time employees, participated in a workplace retirement plan in 2023. A retirement savings plan is an employer-sponsored plan where plan participants have individual accounts, including 401(k), 403(b), 457, and SIMPLE savings plans. Given these statistics, if retirement plans such as a 401(k) are bad, why are people participating? According to the financial expert, there are many mistakes that folks tend to make with a 401(k) account. For instance, there are high management fees associated with 401(k) plans, which usually tend to eat away at the retirement savings of an individual. Moreover, individuals also tend to have lesser control over the money invested in a 401(k), there is a limit to what can be invested, and you can’t even gain immediate access without paying a fee. Moreover, there isn’t any insurance on these plans, either. Rich Dad staff also notes that 401(k) plans are taxed at higher earned income rates, and provide a false security of employer match. Without a 401(k), your employer should still provide a match equivalent. However, they are only obliged to pay the match if you opt-in. Additionally, vesting schedules may allow the employer to avoid paying the match if the employee leaves before becoming vested. Providing all these arguments, the Rich Dad Poor Dad staff stands their ground that 401(k) plans are simply horrible. Contrarily, T.Rowe Price seems to think that 401(k) plans still make sense. According to T.Rowe Price, 401(k) plans are an important way to save and prepare for retirement. There are many advantages of 401(k) plans. For starters, employers have increasingly been adopting auto-enrollment of such plans which in turn allow for automatic savings for individuals. A T. Rowe Price in 2022 showed that 86% of employees participated in their plan if it was set up for auto-enrollment. Moreover, these plans also help individuals plan for retirement and aid in meeting retirement goals through tax-deferred growth with traditional or Roth savings. While the arguments towards and against a 401(k) plan are many, Charles Schwab agrees that 401(k) plans can be quite complex. Even though they are the most common retirement plans out there, they are not that easy to understand. Consequently, it’s easy to make mistakes when operating one, which only demonstrates a lack of preparedness. Not being prepared or aware of the intricacies revolving around retirement planning is one of the most critical mistakes in retirement planning. As such, navigating the world of 401(k) plans can be a daunting task for many individuals seeking financial security and freedom. While these retirement savings accounts are an excellent opportunity for wealth accumulation, they have their fair share of pitfalls. Making mistakes in managing your 401(k) can have significant consequences on your retirement nest egg. In this exploration, we’ll delve into some of the biggest 401(k) mistakes that individuals commonly make, and why they should be avoided. A financial advisor discussing retirement plans with an elderly couple in their home. Methodology To compile the list of 13 biggest 401(k) mistakes to avoid, we have used several sources such as Bank Rate, CNBC, Kiplinger, Investopedia, Forbes, and U.S. News, to name a few. Next, we adopted a consensus methodology to select the mistakes, with one point being awarded to a mistake each time it was recommended by a source. Scores were summed up and places were ranked in ascending order from the lowest to the highest scores. By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a similar consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders. Here are the 13 biggest 401(k) mistakes to avoid: 13. Inadequate Default Savings Rate One of the biggest 401(k) mistakes that you can make is settling for a low default savings rate. 401(k) contribution rates, also known as deferral rates, act as an important lever of your retirement savings. Having higher deferral rates increases your chances of having a larger nest egg in retirement. According to Vanguard, the average deferral rate was 7.4% in 2022. Even though increasing your default saving rate increases your chances of improving your retirement nest egg, having a deferral rate that is too high can also prove to be dangerous. According to a study by the National Bureau of Economic Research, higher defaults aren’t always better, and overly aggressive rates can cause financial strain on employees, and lead to potential opt-outs, amongst other problems. 12. Forfeiting Valuable 401(k) Matching Contributions If you miss out on the 401(k) match, it potentially means that you’re leaving free money on the table. This is one of the biggest 401(k) mistakes that one can make. The SECURE 2.0 Act of 2022 primarily enhances automatic enrollment options for 401(k) plan sponsors. If an individual is automatically enrolled in a plan, it’s advisable to maximize the benefits available to them. They must ensure that they determine the highest employer match that they are entitled to and understand the required contribution amount to qualify for these benefits in their 401(k). For instance, an employer might provide a 50 percent match on your contributions up to 6 percent, indicating that you can receive up to 3 percent of your salary as an employer match. The matching contribution is contingent on a vesting period that could extend over a few years. If you fail to contribute enough to contribute to the company’s match, you’re leaving your chance to compound your money faster. 11. Under-utilizing Tax Break Opportunities “Anything you can do to tax-defer helps stretch your dollar”. -Shannon Edwards, UFHR Benefits Director. One of the main advantages of a 401(k) plan is that individuals don’t have to pay taxes on the amount contributed. These contributions are subtracted from your paycheck and are not part of taxable income. Consequently, the amount of tax that gets taken out of your paycheck is reduced. The more that an individual contributes to their 401(k) plan, the less taxes they have to pay. According to the Internal Revenue Service (IRS), the amount that individuals can contribute to their 401(k) plans in 2024 has increased to $23,000, up from $22,500 for 2023. The limit on additional catch-up contributions for employees 50 or older is $7,500, the same as in 2023. 10. Overpaying in 401(k) Fees Another 401(k) mistake that can significantly impact the overall returns of your 401(k) investments is failing to look at, and consequently overpaying in 401(k) fees. While it is true that many plans negotiate lower costs on behalf of the employees. However, there are plenty of others that charge hefty fees instead. Since different 401(k) plan investments come with different fees, it is best to compare the fees of different plan investments before choosing one. 9. Early Withdrawal Penalties According to the IRS, any amount that an individual withdraws from an IRA or a retirement plan before reaching the age of 59 ½ is called “early” or “premature” distributions. For such early or premature distributions, there is a 10% early withdrawal tax. There are certain exceptions to this 10% withdrawal penalty, which can be checked out in detail on the IRS website. Even if there is no penalty on your withdrawal, you will still reduce your retirement savings and even miss out on any investment gains that the money would have earned you. 8. Initiating Risky 401(k) Loans When you take out a 401(k) loan, you are taking a loan from your retirement account. According to Charles Schwab, if you’re disciplined, responsible, and can manage to pay back a loan, go ahead. However, there are potential drawbacks related to initiating these loans. First, you’re removing money from your retirement account that would otherwise grow tax-free. According to Investopedia, since money taken from a 401(k) loan is typically tax-exempt, it is better than taking a hardship withdrawal. However, the best course of action is to not initiate a 401(k) loan at all. 7. Neglecting Old 401(k) Plans Another critical mistake that potential retirees are making is at the time they are switching jobs. This mistake involves ignoring or forgetting about your previous 401(k) plans. Failing to roll over your old 401(k) is a big mistake, resulting in lost opportunities for portfolio management and growth. Therefore, the best course of action is to roll it into your new employer’s 401(k) plan. In the case you leave your old plan with a previous employer, you may have to risk a forced cash-out, for example, which leads to tax implications and penalties. According to Charles Schwab, individuals should compare the pros and cons of all available options, including fees and expenses, investment and distribution options, legal and creditor protections, loan provisions (if any), and tax treatment. 6. Rolling 401(k) Plan into an Existing IRA Next up on our list of biggest 401(k) mistakes is rolling your 401(k) plan into an existing IRA. In the case that an individual switches jobs, they have the option to move their old 401(k) plan to a new qualified retirement plan. This helps them avoid early distributions and even helps them to allow their money to grow tax-sheltered. Many individuals aren’t aware that commercial creditors typically can’t touch your 401(k), while they can do so with an IRA. According to the Bankruptcy Abuse Prevention and Consumer Protection Act, the assets in your 401(k) plan are safeguarded from creditors. However, it’s important to note that under federal bankruptcy law, only the initial $1,512,350 of assets in an Individual Retirement Account (IRA) is exempt from creditors’ claims. This means that amounts beyond this threshold may be subject to creditor claims in the event of bankruptcy. This exemption limit doesn’t affect funds in an IRA rolled over from a 401(k), provided they are kept separate from any initial IRA contributions. To safeguard unlimited creditor protection, it’s advisable to perform a 401(k) rollover into a distinct IRA if you have an old 401(k) plan. Click to continue reading and see the 5 Biggest 401(k) Mistakes to Avoid. Suggested Articles: 20 Countries That Read the Most in the World 50 Best Countries in the World 18 Most Tax-Friendly States to Retire in 2024 Disclosure: none. 13 Biggest 401(k) Mistakes to Avoid is originally published on Insider Monkey......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q4 2023 Earnings Call Transcript

Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q4 2023 Earnings Call Transcript February 28, 2024 Lindblad Expeditions Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.53 EPS, expectations were $-0.3. Lindblad Expeditions Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). […] Lindblad Expeditions Holdings, Inc. (NASDAQ:LIND) Q4 2023 Earnings Call Transcript February 28, 2024 Lindblad Expeditions Holdings, Inc. misses on earnings expectations. Reported EPS is $-0.53 EPS, expectations were $-0.3. Lindblad Expeditions Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello, everyone, and welcome to the Lindblad Expeditions Fourth Quarter and Full Year Financial Results. My name is Bruno, and I’ll be operating your call today. [Operator Instructions] I will now hand over to your host and Chief Financial Officer, Craig Felenstein. Please go ahead. Craig Felenstein: Thank you, Bruno. Good morning, everyone, and thank you for joining us for Lindblad’s 2023 fourth quarter and year-end earnings Callc With me on the call today is Sven Lindblad, Lindblad’s Founder and Chief Executive Officer. Sven will begin with some opening comments, and then I will follow with some details on our 2023 financial results and current expectations for 2024 before we open the call for Q&A. You can find our latest earnings release in the Investor Relations section of our website. Before we get started, let me remind everyone that the company’s comments today may include forward-looking statements. Those expectations are subject to risks and uncertainties that may cause actual results and performance to be materially different from these expectations. The company cannot guarantee the accuracy of forecasts or estimates, and we undertake no obligation to update any such forward-looking statements. If you would like more information on the risks involved in forward-looking statements, please see the company’s SEC filings. In addition, our comments may reference non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures and other associated disclosures are contained in the company’s earnings release. And with that, let me turn the call over to Sven. Sven-Olof Lindblad: Thanks, Craig, and good morning, and thank you all for joining us today. When I returned to CEO of Lindblad Expeditions in June of 2023, I laid out for you a variety of priorities that I believe would usher in a new era for our enterprise. With eight months now in the rearview mirror, I would like to take a few minutes to discuss the progress we have made in each of these areas while providing some color on what drove our success this past year and why we are excited about the growth opportunity we have in the months and years ahead. First and foremost, the new era starts with putting the pandemic definitively behind us. The record financial results we delivered in 2023, including 35% revenue growth and adjusted EBITDA of over $71 million, a pretty good indication that we are well on our way to achieving that outcome. Craig will go through our financial results in a moment, but we took nearly 30,000 guests more than ever before to the remarkable destinations we have been visiting for decades. And most importantly, the guest feedback has been nothing short of extraordinary. All the drivers of our business were up this year, led by a 33% increase in guest nights, as we began to fully utilize our expanded fleet. As we increase capacity, we also saw meaningful growth in net yield, up 12% to $1,097 per guests night and occupancy taking up to 77% from 75% a year ago. I know there is a tendency to focus on occupancy, but in isolation, it is a misleading metric, especially in our business. Understandably, at the big cruise lines, there is a commitment to 100% occupancy even if the last percentages represent very low or perhaps even no yield. The reason is obvious, the onboard spend is meaningful in the casino, shops, spas, bars, land excursions, etc. So even if you add guests for free, you would be better off. In our case, there is minimal onboard spending. So that approach has absolutely no value. Also, we are extremely committed to maintaining price integrity, given long-term ramifications as there is no benefit in adding occupancy if yield decreases proportionately. So price integrity is a key metric and essential to preserve even if occupancies move ahead a bit slower in the short term. The second catalyst of our new era is capitalizing on the massive growth of interest in expedition travel. The poll to connect authentically with nature and culture is growing by the day, and there’s no other company in this segment with our track record or with our commitment to providing authentic and immersive itineraries. This past November, we further solidified our ability to take advantage of this growth with the extension and expansion of our 20 year old partnership with National Geographic, one of the world’s most respected and beloved brands. This new agreement, which runs through 2040 will enable us to grow our brand on an international scale and reach more citizen explorers than ever before. Beyond enhancing our shared expertise and the onboard experience for our guests, it will increase the earnings potential of the company by opening larger addressable markets through new worldwide audiences. In short, it will further solidify our position as the leader in expedition cruise and experiential adventure in travel, a segment we have been leading for more than 50 years. It also brings with it the power of Disney, the world’s largest media and entertainment conglomerate. They have so many different capabilities to promote and activate the market. And in past months, our team, along with their marketing and sales teams have been deep in the strategy and tactical plans on a regular basis meeting monthly to plan specific initiatives to drive business. By year’s end, we will be able to report with far more accuracy the detail about how the anticipated significant National Geographic and Disney effect, about the National Geographic and Disney effect, but harnessing that collective power is extremely exciting at a time with a poll to connect authentically with nature and culture is growing by the day. I firmly believe that this will result in meaningful accelerated growth in terms of occupancy, yield protection and expansion of the fleet for years to come. Third, in this new era is building our technology to support innovative ways to drive the business. In many ways, 2023 was a year of transition on this front as we launched our new reservation system in May, the final building block in our digital stack transformation, which also included a new CRM, a new connect management system, a new digital asset management system and a new customer data platform. Not surprisingly, the rollout of the reservation system was complex with numerous challenges that had to be solved. It was certainly a distraction for various parts of our organization, but we kept our focus on our guests and have put most of those challenges behind us. We still have ways to go before we finally exploit the possibilities that these systems provide, but we are already seeing record bookings coming through our website. We are achieving higher conversion rates across all parts of the funnel and we are delivering stronger guest service metrics at our contact center. A fourth pillar in this new era is reconnecting with our community in creative ways and creating the most modern marketing and sales platform to propel growth. The new agreement with National Geographic and our upgraded technology platform will certainly be a big part of that moving forward, but we are already reaching new audiences. With an expanded sales team and upgraded digital lead generation capabilities, we have been focusing on driving first-timer bookings through elevated search campaigns to capture and convert more prospects than ever before. Growing first timers is critical and that repeat behavior is significant, and they become the key community to propel growth. A new era also means bring R&D back to the forefront in terms of new geographies, new experiences in parts of the world we have been visiting for years and integrating the ways we immerse our guests in these remarkable destinations. For 2024, we have developed a variety of new itineraries specifically designed to attract new guests. Most are shorter duration in order to get people into the system for the first time. Examples of a multi-month commitment in Iceland this summer and our recently launched collaboration with Food & Wine magazine, preparing 14 trips along the Columbia and Snake Rivers in Washington and Oregon with programming elements, wine selections and specials of guest selected by the editorial staff of Food & Wine. One of our biggest initiatives — the biggest initiative, new initiative is a fly-in component for one of our Antarctica ships, creating itineraries that avoid crossing the Drake passage on some voyages and just one way on others. It also allows for people with more limited time to visit Antarctica. These offerings have literally flown off the shelves and are allowing us to connect with new travelers who wouldn’t have been — who wouldn’t have considered this kind of expedition before. The last component of the new era, I mentioned, was maximizing our diverse portfolio of land businesses while looking for additional expansion opportunities either through new capacity or further diversification of land offerings. The investments we have made thus far in broadening the land portfolio has proven widely successful, laying the vision of expertise and entrepreneurial spirit of the founders with the operating and marketing power of Lindblad has grown our land portfolio from EBITDA of just over $3 million when we first acquired Natural Habitat to nearly $23 million in 2023, including nearly 30% growth year-on-year. This has not only created significant value for our guests and shareholders but also is a great calling card as we strategically look to find additional companies to join our family. So as you can see, the new era has clearly begun for Lindblad Expeditions and we are excited to further accelerate that new era in 2024. We start the year with a strong foundation of future bookings with the Lindblad segment pacing 2% ahead of where we were at the same point in 2023, despite having significantly less carryover business from cancellations during COVID. Excluding these carryover bookings, we would be 21% ahead of a year ago. There are a couple of headwinds to point out for the upcoming year. Due to the gang violence that erupted in Ecuador, on January 10, we canceled two voyages out of precaution in the first quarter, and there was some booking instability. Fortunately, Ecuador’s young, energetic President seems to have quelled the violence. And for all practical purposes, the country has largely stabilized. We certainly are feeling no disruption of activity and bookings are returning to a more normal pattern. Another potential headwind in Q2 is the possible rerouting of water warships around the tip of Africa to avoid the Red Sea due to the recent attacks from Yemen. We did not operate with guests in the Red Sea. But if we reroute the transit, there would likely be a couple of voyages impacted. While these isolated events are certainly frustrating, we have come to expect a certain amount of external disruption, and these short-term headwinds tail in comparison to the broader opportunity. As to the — to expedition travel more broadly and incorporating adventure travel, this still represents one of, if not the largest growth segment in the travel industry. I get why nature and particularly the concern over its long-term future is fueling interest. And while there is much more competition than ever, I believe that a very strong brand will inevitably be elevated by expanding interest. So I’m really excited about the next years as we, together with our partners with National Geographic and Disney, build and grow our business, expand our ideas, our relevance in supporting necessary strategies that help protect environments, communities and history. So many thanks for your time. And now I will turn it back to Craig. Craig Felenstein: Thanks, Sven. As Sven highlighted, Lindblad delivered record revenue and EBITDA in 2023 as we further ramped operations with broader deployment of our expanded fleet and additional departures across our platform of land-based businesses. As we have discussed previously, the earnings potential of the company has increased considerably over the last several years with the addition of over 40% more ship capacity and three industry-leading land operators. And the record results we delivered in 2023 demonstrates the opportunity we have across our diverse portfolio of experiential offerings. Before we look ahead, let me take a few minutes to discuss our performance from this past year as we focused on further ramping ship operations, fueling the growth of our differentiated land portfolio and solidifying our overall infrastructure, technological footprint and marketing and sales capabilities to allow us to maximize the earnings potential in the years ahead. Total company revenue for the full year 2023 of $570 million increased $148 million or 35% versus 2022, as we continue to ramp operations with strong growth across both our Lindblad and Land Experiences segments. At the Lindblad segment, revenue of $397 million increased $119 million or 43% year-on-year, primarily due to a 33% increase in available guest nights from broader utilization of the fleet. Additionally, net yield increased 12% to $1,097 per available guest night due to higher pricing and occupancy expansion to 77%, despite the significant increase in available guest nights year-over-year. As we further ramp occupancy towards historical levels, you can see both the revenue opportunity and the operating leverage inherent in our marine platform as we attract more and more guests while maintaining strong pricing discipline across the expanded fleet. Similar to our ship operations, our land portfolio is also delivering strong growth, driven by additional departures and guests across each of our four unique businesses. Land Experiences revenue of $172 million increased $29 million or 20% versus a year ago, led by Natural Habitat’s polar bear and Africa trips, DuVine’s cycling tours across Europe, Classic Journeys walking tours in Italy and Morocco and Off the Beaten Path trips to the U.S. National Parks. The strong revenue growth across both segments generated significant operating leverage in 2023, with total company adjusted EBITDA of $71 million, an increase of $83 million versus a year ago, driven by a $78 million increase at the Lindblad segment and a $5 million or 29% increase at the Land Experiences segment. Looking a little closer at the cost side of the business, operating expenses before depreciation and amortization, interest and taxes increased $65 million or 15% versus 2022, led by a $39 million or 14% increase in cost of tours versus a year ago, primarily related to operating additional ship and land-based itineraries. Fuel costs decreased year-on-year as increased usage from operating additional trips was more than offset by lower pricing versus a year ago. Fuel was 5% of revenue in 2023 as compared to 7% of revenue in 2022. Sales and marketing costs increased $10 million or 17% versus a year ago, primarily due to higher commissions and royalties related to the increase in revenue and from increased search and direct mail marketing to drive future bookings. And G&A spending increased $15 million or 17% excluding stock-based compensation and onetime items versus a year ago, primarily due to higher personnel costs as we ramp operations and increase credit card commissions related to final payments for upcoming itineraries and higher deposits on new reservations for future travel. Total company net loss available to stockholders of $50 million or $0.94 per diluted share improved $66 million versus the net loss available to common stockholders of $116 million or $2.23 per diluted share reported a year ago. The improvement reflects the significant ramp in operations, partially offset by $8 million of additional interest expense net associated with the higher rates and increased borrowings mostly related to our debt refinancing in May of 2023 and a $7 million increase in stock-based compensation primarily related to the increase in value of Natural Habitat. Looking quickly at the fourth quarter of 2023, revenue increased 6% compared to the same period in 2022, due in large part to broader utilization of the fleet and additional land trip operations. Available guest nights at the Lindblad segment increased 18% due in large part to an additional transit voyage from Southeast Asia to French Polynesia on the resolution as well as from the timing of dry docks. As I highlighted on the last call, while taking guests on our transit voyages generates additional revenue on voyages that would normally be non-revenue generating, they do have a negative impact on occupancy and yields, which was evident in the Q4 metrics. The decrease in occupancy versus a year ago was predominantly due to the additional transit nights for sale as well as from increased cancellations on our Egypt itineraries due to the Israeli-Hamas war. Adjusted EBITDA in the fourth quarter of $4 million increased $7 million from the fourth quarter a year ago, as the majority of the revenue growth in the quarter fell to the bottom line with operating expenses before depreciation and amortization, stock-based comp, interest and taxes up only 1% versus the fourth quarter a year ago. Turning to the balance sheet. We ended the year with $187 million in cash and short-term securities, an increase of $58 million versus the end of 2022, primarily driven by the net proceeds of $67 million from the debt refinancing back in May of 2023, which was offset by free cash flow use of about $4.5 million. Free cash flow for the year included $25 million in cash from operations, led by the improved operating performance, which was partially offset by interest payments of $44 million. Please note that cash from operations was also negatively impacted by the use of future travel credits, which made up approximately 8% of ticket revenues in the current year. Cash from operations was more than offset by CapEx of $30 million, mostly from routine vessel maintenance as well as from investments in our digital initiatives. Looking ahead, we are excited by the sustained operating momentum across our expanded platform, and we anticipate significant growth in 2024, driven by higher occupancies and increased net yields across our fleet as well as additional travelers across our growing land businesses. The Lindblad segment is in a strong booking position for the upcoming year and the booking momentum has only accelerated with booking since the start of December for travel in 2024 up over 50% versus the same period a year ago for 2023. Additionally, we have already booked over 87% of our full year projected ticket revenues for the year. Given the strong booking trends we are generating, we expect total company tour revenue in 2024 between $610 million and $630 million and adjusted EBITDA between $88 million and $98 million. Please note that these projections reflect the increased royalty rate associated with the expansion and extension of our National Geographic relationship as well as the impact of the voyage cancellations that Sven mentioned earlier. In addition to the robust P&L growth in 2024, we also anticipate strong free cash flow generation, excluding any growth CapEx. Maintenance CapEx is expected to be approximately $25 million to $30 million in the current year, which includes vessel maintenance as well as some additional investments in our digital initiatives. We do anticipate buying part of the minority interest in our land companies during the first quarter, and we will continue to explore additional growth opportunities in the year ahead, including further diversifying our product portfolio or opportunistically expanding our fleet to capitalize on the continued growth in the demand for experiential travel. Thanks for your time this morning. And now Sven and I would be happy to answer any questions you may have. See also 20 Countries With the Longest Coastlines in the World and 15 Best Stocks to Buy According to Billionaire D.E. Shaw. Q&A Session Follow Lindblad Expeditions Holdings Inc. (NASDAQ:LIND) Follow Lindblad Expeditions Holdings Inc. (NASDAQ:LIND) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Our first question comes from Steve Wieczynski from Stifel. Steve, your line is now open. Jackson Gibb: Hi This is Jackson Gibb on for Steve Wieczynski. So we’ve seen a fair amount of these disruptions over time and kind of how they’re magnified by your scale and in some cases, the uniqueness and your replaceability of the destinations you visit. But is there anything about the new expanded Disney deal that might help mitigate that impact by maybe filling funnel more from the demand side moving forward? Any kind of specifics about how you’re thinking about the deal might help mitigate impacts from shifting itineraries would be helpful. Sven-Olof Lindblad: Yeah. That’s an interesting question. Well, first of all, the — as a consequence of this new deal with National Geographic and by extension Disney, our marketing prowess or power, if you will, will increase, we believe, rather dramatically. Obviously, we will know more specifically and in greater detail by the end of the year how that manifests itself in terms of combating situations around the world that periodically arise, we will have to see. I mean one of the things we have done — first of all, there’s always been — if you think about going back decades, there’s always been something almost invariably, every now and then, you get through a year where absolutely nothing happened in the world that has any consequence or disruption in any way. But generally speaking, there’s always a couple of things — two or three things that cause you to have to maybe reroute a ship or diminish booking somewhat, in certain instances, significantly. So most areas we’re in are — we’re not in for extended periods of time, except for places that are traditionally very, very stable, Alaska, Galapagos, okay, we had some recent disruption, but that’s not — historically, there has not been disruption there, Iceland, Antarctica, the Arctic. So we’re very conscientious of making sure that we’re not in places in a significant — for a significant amount of time that are questionable in terms of the degree to which political influences and such can affect them. So I would say that — put it this way, we are going to be strengthened as a consequence of this relationship. Now we have a triangle. In essence, we have National Discovery, Disney and ourselves, and that’s a real powerhouse. So anything we face should be faced much — in a stronger way than we would have without them as part of it. I hope that answers your question. Craig Felenstein: Yeah. Thanks, Sven. The other side of this — yes, thanks, Sven. Jackson, the other side of this from my perspective is that there’s two aspects of our business that are pretty unique. One is we should have fair enough flexibility as Sven kind of highlighted, which is because of we are expedition by nature and we’re less reliant on individual ports or resources, we can’t take our ships and move them when these disruptions happen as long as there’s enough notice to ultimately sell whatever the change, ultimately we’re going to do is. The second thing is the company has scaled up pretty dramatically. If you think about where we were back in 2016 before we embarked on our expansion of our overall fleet, the fleet itself is up over 60% in terms of size. And then when you look at the land companies that we’ve expanded, the company’s earnings power has increased so dramatically that these kind of issues, the ones that you’re seeing in something like Ecuador potentially in the Red Sea have much less of an impact than they ever had before. The second thing on that front is we will continue to expand the company. As we continue to increase the scale and diversify the company, these things will continue to have less and less of an impact as we move forward. So to echo Sven’s point, it is something that is inherent in our business, but traditionally, the impact has not been significant or it will be even less so here moving forward as we continue to scale. Jackson Gibb: Okay. Awesome. That’s super helpful. I guess on the subject of expanding the company, we’ve seen a couple of your larger peers put in new ship orders, obviously, much different size and scale and different areas of operation. But is that something that you’re considering more seriously now? And I guess, a different way, what would have to happen for it to be the right time to order a new ship to make an addition to the fleet? Sven-Olof Lindblad: Yeah. So first of all, it’s absolutely clear that the most valuable thing, the single most valuable thing that we can do as a company and our focus on doing as a company is maximizing the inventory that we have already bought and spent money on acquiring, right? So getting the occupancies back up and making sure that the yields are maintained is the primary key element of growth, obviously, internally. So this year, we will learn a lot about what this triangle, and it’s the first time I’ve actually referenced it in that way. Disney, National Geographic and Lindblad, what the power of that is and assume as we understand that somewhat better, that will accelerate in all likelihood the commitment to acquire new vessels, whether that is acquiring vessels that exist that are no longer viable in the companies where they live or building new ships. Those are two avenues. If you think about our fleet broadly, up until 2015, there was — that we — up until 2017, we hit — always bought existing ships, modified them and made them suitable for our purposes, and then we started building ships. So we only built four new ships, and we have acquired a lot more than that over time. And so going forward, we will also be looking at these two avenues: are there existing ships that are suitable to us that need a happy home or are there — or should we build — be building new ships? And we will begin looking closely at that in the not-too-distant future as to which of those avenues is most suitable going forward. Jackson Gibb: Okay. Understood. And if I could just squeeze in one more. I just wanted to get some updated thoughts on how you’re thinking about buybacks. You’ve been unrestricted by — from a covenant perspective since February 2023, seem to have fairly ample liquidity. Just wanted to get your perspective on how you’re thinking about share repurchases now? Craig Felenstein: Sure. Thanks, Jackson. So I would say we really haven’t changed the way we look at share buybacks, really since we put our share buyback plan in place prior to the pandemic. And that is when you think about the cash at the company and what we want to do with that cash, our first priority is to grow the business organically. Our second priority is to look for M&A opportunities that will ultimately increase the earnings potential of the company here moving forward and increase the opportunity to grow. And then third, we have no hesitation about returning capital to shareholders, either through buying back shares or obviously lowering our outstanding debt when we have the ability to do so. So I would say that’s how we weigh all of our cash return at any given moment, and we’ll continue to do that moving forward. Jackson Gibb: Got it. Thanks, great. That’s all from me. Thank you. Operator: Our next question comes from Eric Wold from B. Riley Securities. Eric, your line is now open. Eric Wold: Thank you. Hi, everyone. Just a couple of questions for me. I guess first, Craig, if we think about the obviously strong growth in EBITDA year-over-year, we think about the numbers came in towards the lower end of the guidance range that you gave or kind of reaffirmed on the Q3 call. I know that there’s disruption from the Israeli-Hamas war, which was known at that time. Maybe just kind of give us a sense of kind of what are the biggest factors that kept EBITDA towards the lower end versus possibly getting up towards that higher end? Craig Felenstein: Sure. Yeah. I think you pretty much touched upon it, Eric, more than anything else, right? So when you look at the fourth quarter, everything pretty much came in where we anticipated it to come in from both revenue and cost perspective with the exception of the cancellations that came because of the conflict that was happening over in the Middle East. So when you ultimately have cancellations, they tend to have a pretty dramatic effect on revenue and it tends to fall right to the bottom line. So in the absence of that, the numbers certainly would have been a little bit higher, but the expectations for everything else pretty much came in where we thought they would. Eric Wold: Okay. Perfect. And then kind of a broader question. I know you’ve had now a number of months of working with kind of the expanded National Geographic, Disney team since you announced the extended agreement. I guess maybe give us, if you had more time to work with them, updated sense on, I guess, timing of when you expect kind of the full effect of kind of the Disney travel team to really start working with yours and start pushing the Lindblad tours? How visible do you think this relationship will be to consumers now versus maybe previously how visible consumers know that you’re a partner or kind of working with Disney and a part of that relationship? And then any sense on how those teams will kind of market your voyages relative to Disney’s own mass crews and kind of how that will be kind of — since you kind of parsed out in kind of their efforts, so to speak? Sven-Olof Lindblad: Yeah. So this is a multifaceted answer because it’s a multifaceted campaign, if you will. So there are three buckets of investment in terms of marketing. One is a joint investment between Disney and ourselves, which is managed jointly. There’s the National Geographic expeditions investment and there’s our investments, all pulling in the same direction because we have no longer any attribution connected with how business comes in. We — for the 20 years previously, we’ve had attribution. There’s specific business that’s coming through the National Geographic expeditions channel and through our own. And those have different financial mechanisms connected with it. That has been completely eliminated. So we’re all pulling in absolutely the same direction. None of us care where the business comes from, which of the channels it comes from and there’s value in all of the channels. So when you think about the addition of Disney, right, you had National Geographic expeditions in Lindblad, that’s been going on for 20 years. Now Disney comes into the mix as part of it. They have extraordinary distribution channels. When it comes to — I mean they have a huge sales force, for example, that accesses the trade. They have so many sort of distribution avenues, where they are intending to showcase Lindblad Expeditions, National Geographic. The teams are meeting regularly month to month on a disciplined basis for an extended period of time to develop strategies and tactics. And periodically, we get together on a wider basis at different levels of engagement between ourselves, the Disney team and the National Geographic expedition’s team to deal with longer-term issues that we believe can drive the business. So the engagement between the organizations has just been hugely cooperative and very excited and very, very committed to the idea of growing our business together because there’s lots of value for all parties if we do that. The good thing about a really, really good agreement is where you pretty much assured that everybody that’s part of that agreement gain significant value as a consequence of growth, and that’s what this agreement is. Eric Wold: Helpful. Thank you. Thank you, both. Operator: [Operator Instructions] Our next question comes from Alex Fuhrman from Craig-Hallum Capital Group. Alex, your line is now open. Alex Fuhrman: Hey, guys. Thanks for taking my question. It sounds like you’re obviously guiding to pretty significant revenue growth this year and the vast majority of the revenue that you’re projecting is already on the book. Can you help us square that a little bit with a relatively modest 2% increase in bookings compared to the same time last year? Are you starting to see people maybe book a little bit closer to the departure time now that it’s harder for them to cancel or reschedule their voyages? Craig Felenstein: Yeah. So let me touch on that, and then I’ll turn it over to Sven for any comments. The 2% increase in terms of revenue today is very misleading because we had this significant pile of money that was in — from cancellations that happened — cancellations from deferrals that happened during COVID into 2023 that were on the books at this point versus what we’re seeing this year, which is we had less of the carry in, but the week-on-week growth of bookings is so much more significant than it was a year ago in terms of the weekly bookings. So what we’re seeing is that 2% growth number is expanding rapidly every single week. So if I looked at it several weeks ago, it was down and now it’s already up and it will continue to head in that direction because, again, as I mentioned in my comments, if you look at the bookings from kind of December 1 through today, we’re up 50%, 5-0, versus where we were in the same bookings a year ago. So the momentum is really, really strong, and it has really just continued, so we fully anticipate that, that opportunity will continue to expand moving forward. Sven, I think you want to add. Sven-Olof Lindblad: Yeah. Well, just to clarify, so when — during COVID, we issued a ton of — and Craig can give you the actual amount of what’s called future travel credits, right, rather than canceling, they got a credit for the future. So we already received the money and then they were able to travel in the future. And so last year, a lot of — a significant number of those credits were utilized and were part of the — or considered part of the revenue. So this year, it’s all new people, by and large, very, very few future travel credits. So in a sense, the 2% is really misleading. If you exclude that particular metric, it’d be more like 20%, 21% ahead and 50% in the last couple of months in terms of future growth. So you got to take that in context. Alex Fuhrman: Okay, guys. That’s really helpful. I appreciate that. Thank you, both. Sven-Olof Lindblad: Thank you. Operator: We have no further questions. So I’d like to hand the call back to you, Craig. Craig Felenstein: Thank you, operator. Thank you, everybody else for joining us today. We appreciate your time. As always, if you have additional questions, please reach out. And we look forward to hearing from each of you. Thank you. Sven-Olof Lindblad: Thank you very much. Operator: Ladies and gentlemen, this concludes today’s call. Thank you for joining. You may now disconnect your lines. Thank you. Follow Lindblad Expeditions Holdings Inc. (NASDAQ:LIND) Follow Lindblad Expeditions Holdings Inc. (NASDAQ:LIND) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Accel Entertainment, Inc. (NYSE:ACEL) Q4 2023 Earnings Call Transcript

Accel Entertainment, Inc. (NYSE:ACEL) Q4 2023 Earnings Call Transcript February 28, 2024 Accel Entertainment, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello, everyone. Thank you for attending today’s Accel Entertainment Q4 and 2023 Earnings Call. My name is […] Accel Entertainment, Inc. (NYSE:ACEL) Q4 2023 Earnings Call Transcript February 28, 2024 Accel Entertainment, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello, everyone. Thank you for attending today’s Accel Entertainment Q4 and 2023 Earnings Call. My name is Sierra, and I will be your moderator today. All lines will be muted during the prepared remarks for our management team with an opportunity for questions-and-answers at the end. [Operator Instructions] I would like to pass the conference over to our host, Derek Harmer. Derek Harmer: Welcome to Accel Entertainment’s fourth quarter and year ended 2023 earnings call. Participating on the call today are Andy Rubenstein, Accel’s Chief Executive Officer; and Mat Ellis, Accel’s Chief Financial Officer. Please refer to our website for the press release and supplemental information that will be discussed on this call. Today’s call is being recorded and will be available on our website under Events & Presentations within the Investor Relations section of our website. Some of the comments in today’s call may constitute forward-looking statements within the meaning of the Private Securities Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those discussed today, and the company undertakes no obligation to update these statements unless required by law. For a more detailed discussion of these and other risk factors, investors should review the forward-looking statements section of the earnings press release available on our website as well as other risk factor disclosures in our filings with the SEC. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of the non-GAAP financial measures as well as other information regarding these measures, please refer to our earnings release and other materials in the Investor Relations section of our website. I will now turn the call over to Andy. Andrew Rubenstein: Thanks, Derek, and good afternoon, everyone. Thank you for joining us for Accel’s fourth quarter and 2023 earnings call. I’m pleased to report we had another record-setting year, with total revenue of $1.2 billion and adjusted EBITDA of $181 million, year-over-year increases of 21% and 12%, respectively. For the quarter, we reported revenue of $297 million and adjusted EBITDA of $45 million, year-over-year increases of 7% and 3%, respectively. Revenue growth throughout 2023 was driven by the Century acquisition adding new locations and 3% same-store sales growth in Illinois. We also saw growth in our developing markets where we continue to add locations, attract new players and improve our offering with better equipment. Our continued growth demonstrates the strength of our local business model. Our location partners recognize the value we provide and rely on the incremental revenues our high-quality offering brings to their businesses. On the expense side, our cost structure continues to remain in line with our expectations despite the inflationary impacts on labor and other expenses such as parts. Our asset-light business model and highly variable cost structure allow us to quickly calibrate our business to any changes in the economy. Looking at future growth, our pipeline remains more active than ever as we evaluate multiple opportunities across the country. We are working hard to get the right opportunities across the finish line and look forward to sharing them with you in the near future. We are also optimistic about the opportunities in the markets where we currently operate. Our strong balance sheet, locally focused business model and consistent growth offers one of the best returns in gaming. With that, I’d like to turn it over to Mat to walk you through our financials in more detail. Mathew Ellis: Thanks, Andy, and good afternoon, everyone. For the fourth quarter, we had total revenue of $297 million, a year-over-year increase of 7%, and adjusted EBITDA of $45 million, a year-over-year increase of 3%. For the year, we set a new Accel record, with total revenue of $1.2 billion and adjusted EBITDA of $181 million, year-over-year increases of 21% and 12%, respectively. As a reminder, Century has been included in our results since June 1, 2022, and Century operates in markets where the revenue split between Century and the location is negotiated. The margins are attractive, but far lower than our other markets. CapEx for the fourth quarter was $22 million cash spend and CapEx for the year was $82 million cash spend. The year-over-year increase was due to several factors. First, we accelerated purchases of our redemption terminals to protect against supply chain disruptions. Second, four new high-performing gaming terminals were introduced in Illinois at the same time. In the past, we would normally see one high-performing cabinet released every 12 to 18 months. Lastly, we continue to invest in our developing markets such as Nebraska and Georgia. Based on everything I just mentioned, we view a portion of 2023’s CapEx as onetime in nature and we are projecting CapEx in 2024 to be between $55 million and $65 million, a decrease of more than 20%. Over the longer term, we expect CapEx to decrease even further. As of December 31, we had 25,083 terminals and 3,961 locations, year-over-year increases of 7% and 6%, respectively. Excluding Nebraska, terminals and locations increased year-over-year by 5% and 3%, respectively. Location attrition continues to remain low and is mostly attributable to our lowest performing locations closing their doors. At the end of the fourth quarter, we had approximately $281 million of net debt and $566 million of liquidity, consisting of $262 million of cash on our balance sheet and $304 million of availability on our current credit facility. I would now like to provide an update on our capital allocation strategy. We continue to make progress on our $200 million share repurchase program. During the quarter, we repurchased 1.4 million shares at an average purchase price of $10.31 per share. We are almost 60% through the repurchase program, with more than 11 million shares repurchased at a cost of $118 million. With our strong balance sheet and low leverage, we are in a unique position where we can grow our business and return capital to shareholders. Similar to prior quarters, we are not issuing guidance due to the near-term macroeconomic uncertainty. With that, I’d like to turn it back over to Andy. Andrew Rubenstein: Thanks, Mat. We’re pleased with another strong year and remain focused on executing our growth strategy to create value for our investors. We’re confident that our turnkey, full-service, local gaming solutions provide a platform to continue to produce strong and consistent results. Our focus is to provide unmatched customer support, guidance and expertise so our location partners can grow their businesses. We will now take your questions. See also 11 Best Copper Stocks To Invest In According To Analysts and 25 Countries with the Highest Employment Rates in the World. Q&A Session Follow Tamir Biotechnology Inc. (OTCBB:ACEL) Follow Tamir Biotechnology Inc. (OTCBB:ACEL) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: We will now begin the Q&A session. [Operator Instructions] Our first question today comes from Steve Pizzella with Deutsche Bank. Please proceed. Steven Pizzella: Hey, good evening Mat and Andy. Thanks for taking our questions. Just wanted to focus on Illinois location growth first, if we could. It looks like up a little bit over 4% versus the market up about 3% for Illinois, implying you are gaining some share. Can you just talk about what is driving that? Are these new locations? Are these conversions? And how does your current pipeline look? Andrew Rubenstein: Thanks, Steve. So as we look at it, we’ve always had a very strong sales effort. We see that a lot of new business owners choose Accel as their partner. And what we’re seeing more and more of is the competitors’ locations are recognizing that Accel has a preferred offering and is a preferred business partner. So we’re seeing both of that help grow our current base. We’re always looking at our portfolio. So we are constantly paring down the bottom of our portfolio where locations aren’t profitable. But as we continue to grow, I think you’ll see more and more establishment owners choosing Accel, as they have through the last 12 years. Steven Pizzella: Okay. Thank you. And then, I guess, turning to margins, down modestly year-over-year and sequentially. How should we think about the margin moving forward into this year? And I guess what kind of topline growth do we need to see to get some margin expansion? Mathew Ellis: Yes. So Steve – hey, it’s Matt. Thanks for the question. I think the first part is, obviously, you’ve adjusted for Century and all of that. What it really comes down to is sort of that balance of revenue growth versus labor. And we’ve talked about it, and I think the expense side of our business is really easy to forecast. Again, labor seems to be in line, and we’re not seeing sort of those crazy hikes we saw nearly almost 1.5 years ago. But there’s still inflation out there, and the labor market does remain a bit challenging. The other side of it is our revenue. And the beauty of our business is there’s no concentration of revenue. There’s no microeconomic thing that’s going to hit us hard. The hard part is we don’t have those forward-leaning forward indicators, early bookings or anything like that to predict. So I think, again, we’re coming into this year, some cautious, but if we get the growth like we’ve seen and the weather holds up, and again, we depend on people sticking close to home and sticking to their routines, we’ll get that revenue pop. It’s hard to give you an exact number. But if we get to that upper, mid, slightly below mid-single digit revenue growth, you’ll see that margin come back up. But it’s really just a balancing act right now. Overall, I’d say it’s relatively – we had some tough comps. We had great weather last January and February, but the year started out like we’d expect. But the old days of mid and upper single-digit growth aren’t there. So I think it will be relatively flat, but we’ll see how it turns out. Steven Pizzella: Okay, great. Thank you. Operator: Our next question today comes from Chad Beynon with Macquarie. Please proceed. Chad Beynon: Hi, afternoon, Andy and Matt. Thanks for taking my question. I wanted to ask about the M&A environment. We’ve been talking about the potential rate declines here for some time. Obviously, the rates came down a little bit, and now they’re kind of stubbornly at levels that are higher than we thought at this point in the year. But when you talk to potential sellers, is this still a potential catalyst? Or are they waiting for rates to come down? Are you guys waiting for rates to come down? And could this still be an opportunity in the next six to 12 months as we kind of get through the cyclical period to just add inorganically? Thanks. Andrew Rubenstein: Yes. Thanks, Chad. As we look at, I mean there’s always opportunities. And we’ve, I think, identified a few that we have continued to work with. And we’ll see how that plays out over the next couple of quarters. But I think what has been a challenge is a gap between the buy and the sell and that – where the seller expectation is still closer to what we saw in 2019 and 2020 and the buyers have kind of adjusted to a different economic environment. Do I see that gap closing? A little bit. But I don’t think it’s going to close until you have some of the rates kind of decline from the levels that they’re at, or you see some of the pressure on some of these companies who are over-levered that they need to take action. And so we believe we’re well positioned as a buyer. We have low leverage. We have great availability. And I think what you’ll end up seeing is that we’ll execute in the next 12 to 18 months on some opportunities that will be appropriately priced. Chad Beynon: Thanks, Andy. Mat, on the $80-plus million of CapEx in 2023. So you mentioned that, that’s coming down in 2024 quite significantly. Because it was a higher period and it doesn’t sound like it was deferred CapEx, it sounds like it was CapEx to grow the business, is there some type of return that we should assume on kind of the extraordinary CapEx in the year with some new terminal purchases? Are you seeing those returns absent some of the weather? Is it bringing a new customer? Just any additional information in terms of the extra cash outflow and kind of how that can lead to growth? Thanks......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Inari Medical, Inc. (NASDAQ:NARI) Q4 2023 Earnings Call Transcript

Inari Medical, Inc. (NASDAQ:NARI) Q4 2023 Earnings Call Transcript February 28, 2024 Inari Medical, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and welcome to Inari Medical’s Fourth Quarter and Full Year 2023 Conference Call. At this […] Inari Medical, Inc. (NASDAQ:NARI) Q4 2023 Earnings Call Transcript February 28, 2024 Inari Medical, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and welcome to Inari Medical’s Fourth Quarter and Full Year 2023 Conference Call. At this time, all participants are in a listen-only mode. At the end of the company’s prepared remarks, we will conduct a question-and-answer session. As a reminder, this call is being recorded and will be available on the company’s website for replay shortly. And now I will turn the call over to John Hsu, Vice President of Investor Relations. Please go ahead. John Hsu: Thank you, operator. Welcome to Inari’s conference call to discuss our fourth quarter and full year 2023 financial performance. Joining me on today’s call are Drew Hykes, President and Chief Executive Officer; and Mitch Hill, Chief Financial Officer. This call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements, including statements related to Inari’s estimated full year 2024 revenue, operating loss or profitability expectations, and the expected operating performance and potential strategic benefits of LimFlow are based on Inari’s current expectations, forecasts, and assumptions, which are subject to inherent uncertainties, risks, and assumptions that are difficult to predict. Actual outcomes and results could differ materially from any results, performance or achievements expressed or implied by the forward-looking statements due to several factors. Please review Inari’s most recent filings with the SEC, particularly the risk factors described in our latest Form 10-K for additional information. Any forward-looking statements provided during this call, including projections for future performance, are based on management’s expectations as of today. Inari undertakes no obligation to update these statements, except as required by applicable law. On today’s call, we will refer to both GAAP and non-GAAP financial measures in announcing our Q4 and full year 2023 results. Please refer to today’s press release for reconciliation of the non-GAAP measures discussed on this call and referred to in the press release. The press release and the slides accompanying this call are available on our website at inarimedical.com. A recording of today’s call will be available on our website by 5:00 p.m. Pacific time today. With that, I’ll turn our call over to Drew. Drew Hykes: Thank you, John, and thank you for joining our call today. We are thrilled with our Q4 and full year 2023 performance. In the fourth quarter, we achieved record revenue of more than $132 million, driven by strength in our core VTE business, strong growth from our emerging therapies portfolio, and continued traction from international expansion. For the full year, we generated revenue of over $493 million, reflecting 29% growth for the year. We also made meaningful progress on our path to profitability, positioning Inari for sustained operating profitability in the first half of 2025, despite the incremental operating deficit support associated with our LimFlow acquisition. I would like to thank the Inari team for their hard work to make this year a success by every measure. We are succeeding on our goal to drive strong adoption of our market-leading PE and DVT therapies, while also executing on our plans to expand internationally and diversify commercially into sizable new patient populations that are underserved by today’s standard of care. This expansion into new patient populations included the acquisition of LimFlow, which we announced and closed in Q4. LimFlow’s purpose-built system allows for the transcatheter arterialization of the deep veins and is indicated to treat patients with chronic limb-threatening ischemia, or CLTI. This technology addresses a spectacular unmet need for these patients, providing new hope and an important new treatment option. I’ll have more to share about our progress with LimFlow later in the call. Going forward, we will begin providing a new revenue breakout that we believe better aligns with the three growth pillars of our business. Specifically, we’ll report revenue from our global VTE portfolio and from our global emerging therapies portfolio, while also continuing to breakout U.S. and international revenue. Mitch will have more to share about this new framework in his remarks. Before turning to these growth pillars, I wanted to share, as we always do, a story about the incredible impact our technology has on patients. Recently, a 30-year-old woman, just two weeks postpartum, presented to an ER in Louisiana with severe trouble breathing and leg swelling. As a complication from her recent pregnancy, this young mom was diagnosed with both a pulmonary embolism and a clot in her inferior vena cava, or IVC, a life-threatening situation. After consulting with her physicians, she decided to undergo thrombectomy. First, her physicians used the new ClotTriever XL catheter to effectively remove all the clot in her IVC, as it was purpose-built to do. The ProTrieve sheath was also used adjunctively to protect against the risk of clot embolization. Next, her pulmonary embolism was successfully and efficiently treated using the T24 catheter. After a short hospital stay, the patient was able to return home to her newborn baby and family. Her successful outcome was made possible by the skill of her treating physicians and the breadth and depth of Inari’s purpose-built toolkits across both DVT and PE. During 2023, we surpassed 130,000 cumulative patients treated globally, including this young mom. This was a humbling milestone for our organization. But despite all our success to date, much more work remains, and we believe we’re in the earliest phases of the impact we can have on patients globally across multiple disease states. I will now provide an update on each of our three growth pillars, starting with VTE, which we believe represents a $6 billion TAM in the U.S. alone. Our growth strategy in VTE continues to focus on commercial expansion, market development, high-quality clinical evidence, and continuous innovation. Commercially, we remain committed to our high-touch approach. We continue to split territories, adding reps selectively at a measured pace in areas with the greatest need. Given our high level of national count penetration, as the pace of new territory adds continues to moderate, we have started to see some nice corresponding productivity gains. Looking ahead, we remain confident in the ability of our world-class commercial team, the largest VTE-focused sales force in the industry, to drive significant growth. Turning to market development, we’re increasing penetration within existing accounts via VTE Excellence, our comprehensive market development program. VTE Excellence is a series of playbooks and activities that we systematically execute to help support hospitals in the development of VTE programs. The goals analogous to the programs have been created in stroke, STEMI, and TAVR. As we execute VTE Excellence, our penetration into the TAM at the account level increases and we are encouraged by the progress we are making. Today, in many of our most advanced accounts, we are now seeing TAM penetration rates above 50%. Most importantly, we believe VTE Excellence is scalable and repeatable. On the clinical evidence front, we remain steadfast in our commitment to produce the highest quality clinical data to drive awareness and ultimately change the standard of care in VTE. This commitment is reflected in the significant progress we continue to make across all three of our randomized controlled trials. In fact, we just completed patient enrollment for PEERLESS, our trial randomizing FlowTriever to catheter-directed thrombolysis. We were able to fully enroll this study in just over two years, a considerably faster pace than other currently enrolling RCTs. We look forward to the data readout in the second half of 2024. Enrollment for DEFIANCE and PEERLESS 2 are also tracking in line with our expectations. Currently across the industry, there are no fewer than seven actively enrolling RCTs, each studying different aspects of VTE. This represents an exciting new era of investment and shared commitment to change the standard-of-care for this huge underserved group of patients. But make no mistake, Inari continues to be the clear leader in this effort. Taken together, we will study over 2,000 patients in our three RCTs, more than those conducted by all other sponsors combined. We believe this high-quality clinical evidence will ultimately enable us to treat a significant portion of the 700,000 U.S. patients suffering from VTE each year. Finally, we continue to innovate across our best-in-class toolkits to protect and extend our leadership position. Over the past 12 months, we commercialized multiple new products to augment our VTE franchise, including T16Curve, ClotTriever XL, and ClotTriever BOLD Gen 2. The FlowTriever and ClotTriever systems are fourth- and third-generation platforms, respectively, benefiting from six years of continuous iteration and improvement. However, we remain committed to further innovation within VTE. Next, I will provide some updates across our portfolio of Emerging Therapies, our second growth pillar. This segment consists of four distinct patient populations outside of VTE, where we have identified an unmet need we believe we can address by leveraging our core competencies. Taken together, we believe these markets represent a $4 billion TAM in the U.S. alone, and we are just getting started in each. Beginning with chronic venous disease, we continue to be encouraged by the initial commercial traction of RevCore, the first mechanical thrombectomy device to treat venous stent thrombosis. Between incidence and prevalence pools, we believe the addressable market for RevCore totals nearly 50,000 patients, representing a $500 million U.S. TAM. Looking ahead, in 2024, we plan to launch the second purpose-built tool within the CBD toolkit, further augmenting our portfolio and unlocking another portion of this significant TAM. Turning to dialysis access management, InThrill continues to build commercial traction over the past several quarters. InThrill is a thrombectomy system designed for small vessels, including AV fistulas and veins in the upper extremities and below the knee. The combined total addressable market is 250,000 procedures per year in the U.S., representing an incremental $1 billion market opportunity. Turning to CLTI, since closing the LimFlow acquisition in mid-November, we’ve made important progress in beginning to integrate the business into Inari, while also executing the early U.S. launch. We have successfully established the initial LimFlow organization through a combination of LimFlow and Inari personnel and a small number of external hires. We’ve undertaken important work to stabilize and build capacity across the supply chain, while also beginning to integrate corporate support services. Commercially, the U.S. launch is proceeding in line with our expectations. We are successfully navigating back approvals and have completed initial series of commercial cases. We held our first training summit in late January and had great engagement and feedback from the event. We anticipate building momentum throughout the year, highlighted by incremental reimbursement via NTAP, which would go into effect in October. Taken together, we continue to view 2024 as a foundational year focused on physician training, VAC approvals, thoughtful patient selection and deliberate wound care follow-up. LimFlow offers new hope and new options to the 55,000 no-option CLTI patients. We are encouraged by the progress we’ve made to date in accessing this $1.5 billion U.S. TAM. Our last emerging therapies category is acute limb ischemia, a $600 million U.S. TAM characterized by tremendous unmet needs and a lack of purpose built tools. In fact, roughly 50% of ALI patients today must undergo an open surgical procedure to successfully remove their clot. We remain committed to better outcomes for these patients and continue working to bring our second generation Artix system to market later in 2024. Finally, I would like to discuss our third pillar, international. In Q4, we continue to see strong growth led first and foremost by our European franchise. Alongside Europe, we continue to gain incremental product approvals and are now commercial in over 30 countries globally. Overall, international revenue was nearly $8 million in Q4, up more than 130% versus the prior year. Looking forward, we recently received favorable incremental reimbursement in France. Also, we remain on track to treat patients in both China and Japan this year on a commercial basis. While international sales are just 5% of our total revenue today, given the spectacular unmet need and the investment we’ve made in establishing an international commercial footprint. We expect international sales to account for at least 20% of revenue over time. In closing, we’re pleased with how the business performed in Q4 in 2023. For the year, we generated record revenue and strong growth of nearly 30%, driven by crisp execution across our growth pillars. Our field team continued to drive patients toward frontline treatment with our therapies while working to support the development of VTE programs. We announced our third RCT and built meaningful momentum across new product launches, and we saw another record quarter and strong growth from our international business. In addition, we laid the foundation for strong sustained revenue growth via expansion of our purpose-built toolkit into new disease states with significant unmet needs. We also announced closed and began to integrate LimFlow, our first acquisition. Finally, we delivered meaningful operating leverage while continuing to invest in burgeoning parts of the business. Going forward, I’ve never been more confident in the health of our business and our ability to generate meaningful revenue growth across our three growth pillars in 2024 and for many years to come. With that, I’ll now turn the call over to Mitch. Mitch Hill: Thanks, Drew. Before I begin, I want to share additional color on the revenue breakouts Drew described. We’re pleased to be introducing additional visibility to our growth pillars by sharing the revenue contributions of our VTE and our emerging therapies products. VTE includes sales of the entire ClotTriever and FlowTriever product families globally. Emerging therapies includes our portfolio of products addressing on a global basis, chronic venous disease, dialysis access management, chronic limb-threatening ischemia, and acute limb ischemia. In our press release, we have provided quarterly historical revenue for these growth pillars going back to the start of 2022 to provide a sense of the strong growth and adoption we are seeing in all areas of the business. Please note that we will also continue to provide U.S. and international revenue splits as we have done historically. Turning to the fourth quarter and full year 2023 results, Inari revenue in the fourth quarter of 2023 was $132.1 million, up 23% over the same period of the prior year. On a year-over-year basis, VTE drove more than 85% of the growth and emerging therapies accounted for roughly 15% of the growth. Gross margin was 87.1% for the fourth quarter of 2023, compared with 87.8% in the prior year period. Operating expenses were $124.4 million in the fourth quarter of 2023, compared with $100.5 million for the same period of the prior year. R&D expense was $22.9 million in the fourth quarter of 2023, up 12%, compared with $20.4 million for the same period of 2022. The increase in R&D expense was primarily due to increases in professional fees and clinical and regulatory expenses. SG&A expense was $101.5 million in the fourth quarter of 2023, up 27%, compared with $80.1 million for the same period of the prior year. The increase in SG&A expense was primarily due to increases in personal related expenses from increased headcount, increased commissions due to higher revenue, and professional fees, which are primarily attributable to the acquisition of LimFlow. Also in December 2023, we received a civil investigative demand from the Department of Justice requesting information primarily related to meals and consulting service payments provided to healthcare professionals. We are cooperating with this investigation. Going forward, legal and associated expert expenses related to this matter will be recorded in our SG&A expense. Inari recorded a GAAP operating loss of $9.3 million in the fourth quarter of 2023, compared with a GAAP operating loss of $5.9 million for the same period in the prior year. On a non-GAAP basis, which excludes acquisition related expenses and acquired intangible asset amortization, the fourth quarter operating loss was just $300,000. There were no non-GAAP adjustments related to our 2022 operating loss. Net loss for the fourth quarter 2023 was $4.7 million, compared to a net loss of $5.8 million for the same period of the prior year. The basic and fully diluted net loss per share for the fourth quarter 2023 was $0.08 based on the weighted average basic and fully diluted share count of $57.6 million. This compares with a basic and fully diluted net loss per share of $0.11 based on the weighted average basic and fully diluted share count of $53.6 million for the same period of the prior year. Shifting to full year 2023 results, we reported revenue of $493.6 million, up 29% over the prior year. VTE accounted for over 85% of the growth, while emerging therapies contributed nearly 15% on a year-over-year basis. Gross margin was 88% for the full year 2023 compared to 88.4% for the full year 2022. Operating expenses were $448.6 million for the full year 2023, up 22% compared with $367.1 million for the full year 2022, including one-time expenses related to the LimFlow acquisition. R&D expense was $87.5 million for the full year 2023, up 18% compared with $74.2 million for the full year 2022. The increase in R&D expense was primarily due to increases in personal related expenses, materials and supplies, clinical and regulatory expenses, and software costs and depreciation in support of our growth pillars. SG&A expense was $361.1 million for the full year 2023, up 23% compared with $292.8 million for the full year 2022. The increase in SG&A expense was primarily due to increases in personal related expenses and professional fees largely associated with the acquisition of LimFlow. GAAP operating loss was $14 million for the full year 2023, compared with $28.1 million for the full year 2022. On a non-GAAP basis, which excludes acquisition related expenses and amortization of acquired intangible assets, operating loss was $2.4 million for the full year 2023. There were no non-GAAP adjustments related to our 2022 operating loss. Net loss for the full year 2023 was $1.6 million, compared to a net loss of $29.3 million for the full year 2022. The basic and fully diluted net loss per share for the full year 2023 was $0.03 based on the weighted average basic and fully diluted share count of $56.8 million. These compared with a basic and fully diluted net loss per share of $0.55 based on the weighted average basic and fully diluted share count of $52.8 million for the full year 2022. Moving on to the balance sheet, our cash and investments at the end of the fourth quarter totaled $116.1 million. Our cash flows provided by operating activities were $35.9 million in 2023 compared to cash flows used in operating activities of $14 million in 2022. Turning to our 2024 outlook, we are reiterating our full year 2024 revenue guidance of $580 million to $595 million reflecting growth of approximately 17.5% to 20.5% over 2023. Our guidance reflects contributions across all three of our growth pillars: VTE, emerging therapies and international. For LimFlow we continue to view 2024 as a foundational year and expect a modest revenue contribution. We currently anticipate sequential revenue growth of approximately 4% for Q1 of 2024 relative to Q4 of 2023. For 2024 from a phasing perspective we expect strong revenue growth momentum in the back half of the year. Turning to profitability we are continuing to invest on our growth pillars while positioning the business to achieve sustained operating profitability. In 2024 we expect to see greater operating losses in the first half of the year than in the second half of the year. And as we shared early in the year, we continue to forecast reaching sustained operating profitability on a consolidated basis in the first half of 2025. With that, I’ll turn the call back to the moderator for questions. For the Q&A segment Drew, John and I will be joined by Dr. Tom Tu, Inari’s Chief Medical Officer. See also 18 of the Easiest Languages for English Speakers to Learn and 14 Stocks With Heavy Insider Buying In 2024. Q&A Session Follow Inari Medical Inc. (NASDAQ:NARI) Follow Inari Medical Inc. (NASDAQ:NARI) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Our first question comes from Travis Steed from Bank of America. Please go ahead. Travis Steed: Hey, thanks for taking the question. I wanted to ask about the DOJ investigation you mentioned Mitch. I guess the list of questions I’d have on that is, how broad is the investigation? When did it start? What are the next steps? How long do you expect it to last? And do you expect it to have any impact on customers or revenue in 2024? Drew Hykes: Yes, thanks for the question, Travis. This is Drew. I can get started on that. So, as you likely understand from some of the precedent examples of other companies navigating these same waters, we’re not going to have a lot of additional background. We’re going to be able to share beyond what’s in the disclosure. We got the CID back in December, so it’s still relatively early. We are cooperating with the DOJ. We take compliance seriously. Today we always have at every step of our commercial activity here in the U.S. going back to 2018. We do not expect that this will have any impact on our ability to execute commercially. The focus of the CID is described in the 10-K, it’s a couple of very specific areas related to healthcare professional relationships. Going forward, we’ll update you as we can, but again based on the precedent I think the timeline is most likely going to be measured in years as opposed to months and quarters. Travis Steed: Okay, thanks for that. And then a question on the 2024 guidance, I’m curious how you’re seeing the core and that 17.5% to 20.5% guide. And when you look at the core for 2023, it was around 25%. So just curious why you’re assuming such a slowdown in the core business and 2024, if it’s just conservatism or anything else, you’d call out on that? Drew Hykes: Yes. I think in general, I’d probably start with reiterating what our philosophy is around guidance. And historically when we put out a number, we want to be highly confident in being able to deliver on that number. That’s been our historical practice, and that was certainly consistent with how we approach guidance here last month for 2024. We feel really good, very comfortable and confident in that guidance range of 580 to 595. The factors growth in across all three of our growth pillars. Certainly, VTE will be the majority of the growth and the revenue still in 2024. We anticipate continued strong growth there from commercial expansion, from taking share from analytic based interventions, from TAM expansion via market development efforts, new data innovation all of that factored into the anticipated growth in the VTE pillar. Emerging therapies we’re factoring in growth across all four of those new patient populations that we’re beginning to do work in. Certainly continued traction in CBD and InThrill, new products coming with Artix, and as you’ve heard us describe a modest contribution from LimFlow. And then finally, we’re factoring in continued growth and strength internationally, led first and foremost by Europe, but also factoring in contributions from some of the other geographies as well. So we’ll have an opportunity to discuss guidance again here in 60 days or so on the formal Q1 call but in the meantime, we’re going to continue to focus on execution that we’ve always taken great pride in. Operator: The next question comes from Adam Maeder from Piper Sandler. Please go ahead. Adam Maeder: Hi. Good afternoon. Thank you for taking the questions. Wanted to start with a Q4 question, and apologies for the granularity here. But I was hoping you could give us some color on Q4 in terms of kind of how that played out in terms of monthly progression and commercial momentum. Your competitors talked about a pickup in their business in Q4, I think in the late November time frame, wondering if you have any reaction to that comment, and then just any early commentary that you can give us on your business thus far year-to-date in Q1. Thank you. Drew Hykes: Yes, thanks for that, Adam. So we saw a nice momentum building in Q4 particularly in the tail end of the quarter, and we saw that momentum carry over here into the beginning of this year. As you know, we don’t normally provide detailed intra quarter commentary, but what I can tell you is that that momentum did carry over nicely into the beginning of this year. January was a step up, actually a nice step up from what we saw in December, and that momentum has continued here. So, taken together, we’re feeling really good about how we’re positioned here at the beginning of the year. We like the plan. The team is executing really crisply, really consistently. We’re seeing nice growth across all three of those growth pillars. And looking ahead from here, we see some really nice catalysts shaping up for the remainder of the year across those pillars. New territories and new data, driving continued traction in VTE. New products and new markets that we’ll be getting started in with emerging therapies, contributions from LimFlow along the way there as well. And then obviously, some nice traction continuing internationally with Europe leading the way, more geographies contributing in more meaningful ways, and still on track in both China and Japan for treating patients in those two markets. So far, so good, we’re feeling very confident in how we’re positioned here, not only in Q1, but as we look out from here through the remainder of the year. Adam Maeder: Thanks for the color there, Drew, and I guess for the follow up. I’ll ask a question on competition as it relates to 2024. The last, Travis, was asking about your outlook for 2024, but was curious kind of what you’re baking in from a competition standpoint, competitive standpoint for your guidance in 2024, both from your primary competitor and then any new market entrance on the DVT side of things? Thanks for taking the questions. Drew Hykes: Yes. So competition and competitive dynamics are clearly incorporated into our guidance. This is an attractive market. We are going to see competitive entrants, become active in this market. Keep in mind it’s a $6 billion market. 6% penetrated our focus primarily historically, and today remains on market growth, on making the investments we believe are necessary to change the standard of care for this patient population. That’s where we have focused on training and education, on innovation, on high quality evidence. All those areas you’ve heard us describe before, all of them designed to drive market growth, that’s where the real opportunity is. We’re going to see competitive entrance. We’ve factored that into our guidance. We started 2023 as the clear market leader. We exited 2023 as the clear market leader, and we would absolutely expect to continue to be the market leader in 2024. That confidence in leadership comes from the performance of our products, the undisputed, solid clinical data that we have, the new innovation, the way our team is executing, all that gives us confidence we’re going to continue to be the leader in this market. And that is despite what will undoubtedly be new entrants. Maybe the last point I’d make is to the extent we do have new entrants that can help participate in the market development work, that’s obviously going to be constructive for everyone and ultimately constructive for patients. Operator: Our next question comes from Kallum Titchmarsh from Morgan Stanley. Please go ahead, please guys. Kallum Titchmarsh: Thanks for taking the question. I think one for Mitch here. Just on the gross margin side, I think 87.1% in the fourth quarter was a bit below where the Street was. So just keen to understand how we should be thinking about the setup for this in 2024 and maybe just some color on how you expect gross margins to trend longer term with these emerging products coming through, I guess, are you still comfortable remaining in that mid- to high-80% range longer term? Thanks a lot. Sure. Mitch Hill: Sure. Yes. Thanks for the question, Kallum. And in terms of the Q4 gross margin we saw some impact from the acquisition. There’s a portion of the gross margin decline that related to the LimFlow acquisition, even though that was just in the picture for about 45 days, we continued to see some margin impact due to the internationalization of the business, as well as the new – some of the emerging therapy products have a lower gross margin profile than the kind of the VTE products that we’ve historically been selling. So that’s kind of a couple different factors that affected the change in gross margin from Q3 to Q4. As we think about the gross margin in 2024, I would say we’re going to likely have another quarter or so of margin kind of in the low 87% range, and then we probably actually look for some margin pickup in the second half of the year. And then longer term, we’ve messaged and we still feel confident in our messaging about the gross margin kind of in the mid-80s. There’s a lot of different factors that kind of go into the stew when we put that together. But overall, we think this business has a premium gross margin profile. We expect it will continue to have that, and we’ve kind of accounted for all the different factors in there as we kind of forecast that mid-80s percent gross margin over time. Kallum Titchmarsh: Great. Thanks a lot. Operator: The next question comes from Larry Biegelsen from Wells Fargo. Please go ahead. Larry Biegelsen: Hi. Good afternoon. Thanks for taking the question. Drew, historically, you’ve said the core U.S. VTE market is a 20% growth – 20% plus, I think, growth market. What are you seeing now, and what are your expectations for 2024? Drew Hykes: Yes. We still see this as a massive market in the earliest stages of penetration. We’re making the investments to drive that market growth, and we’re continuing to see a very robust backdrop of market growth. We have every expectation that that’s going to continue as we look out from here, certainly in 2024. So, no change in our view of the underlying strength of the market growth. Month to month, quarter to quarter, there may be fluctuations here and there, just given how early we are in penetrating this market, but the trend line is unmistakable. This is a $6 billion market in the earliest phases of transitioning from conservative medical management to frontline therapy with FlowTriever and ClotTriever. Larry Biegelsen: Thank you. And to help us understand the emerging technology and international lines better, can you talk about what’s assumed for Artix and what’s assumed for Japan and China and any color on those market opportunities and your confidence in Artix the second time around here that you’re going to be successful? Thank you. Drew Hykes: Yes, so relative to Artix, we’ve been working almost a back – a year and a half now to reset that platform and do the development work you’ve heard us describe coming out of the first gen LMR. We’ve been hard at work. We are cautiously optimistic that we’ve improved the product in terms of the effectiveness and ease of use that you’ve heard us describe before. But until we actually execute the LMR, we’ll need to be a little cautious about what kind of contribution we’re going to be describing. We’ve taken that into account in the guidance. It’s a relatively modest component of our guidance as a result. Similarly with China and Japan, we’re confident we’re going to be able to treat patients in those two markets this year, but there is some uncertainty around when the exact approvals will take place as well as how quickly the initial ramp will take place. And as a result of those uncertainties, we’ve also factored in a pretty modest contribution from both China and Japan into that 2024 guidance. Operator: The next question comes from Marie Thibault from BTIG. Please go ahead. Marie Thibault: Hi, thank you for taking the questions. I wanted to ask a quick clarification on the emerging therapies revenue breakout. Am I fair in assuming most of that’s out of the U.S., all of that’s out of the U.S., or are there some emerging therapy treatments being done internationally? Drew Hykes: Yes, Marie, there is a – it’s primarily U.S. revenue when we’re looking at the emerging therapies. So, for example, if you look at the table that’s at the back of the press release, those are almost exclusively in the U.S. For the reasons you’d imagine, we’re in the process of pursuing regulatory approval for many of those products for international markets, probably initially focused on Europe and then we’ll kind of roll those out in other parts of the world, but we’re still kind of going through the process. Marie Thibault: Okay, that’s helpful. Then let me ask, I guess, a two-part question, largely on cadence and sort of the path to think about this year. Cadence for the sales guidance throughout this year, if I’m recalling correctly, Q2 was just a slight sequential step up from Q1, so I’d like to try to understand that for modeling purposes. And then similarly, the path to profitability in the first half of 2025 on operating profitability, what do you need to do kind of operating leverage-wise, and what gets you to that goal? Mitch Hill: Yes, Marie, thanks for the question. In the prepared remarks, I commented on kind of the Q4 target, sorry, a 4% target in terms of sequential growth from Q4 to Q1 as we move into 2025. Past couple of years, we’ve seen some seasonality softness in Q2. We’re still not sure about that, if that’s a real thing in our business or not, different reasons and theories around that. But then I did mention in the script that we would expect accelerating revenue sort of in the second half of the year. So that would give you a sense for kind of the overall revenue profile. From an operating leverage and kind of path to profitability point of view, I am glad you asked about that. I was just thinking in Q4 of – in terms of our Q4 numbers, with 23% revenue growth, OpEx grew by 24%, but if we exclude the LimFlow one-time costs, the OpEx grew by 15%. So really nice progress there in Q4. Then looking at the full year numbers, revenue growth of 29%, OpEx growth of 22%, and then if we exclude the LimFlow one-time stuff, about 19%. So we’ve taken this challenge of operating leverage seriously as a company. There’s a lot of buy-in across the company to looking at all the areas of the OpEx spend and making sure that we are seeing some nice productivity of our investments there. That’s contributing to our confidence as we think about the progress of the business from a profitability point of view in the first half of 2024 versus the second half of 2024, so less basically operating loss as we move through the course of the year, and then moving towards sustained operating profitability in the first half of 2025. Operator: The next question comes from Bill Plovanic from Canaccord. Please go ahead. Hi, Bill… Drew Hykes: Hi, Bill. Are you there? Bill Plovanic: Yes, I’m here. Thanks for taking my questions. Let’s start off with, can you help us understand just any commentary regarding competitive trialing, share gain/loss, where are you seeing the biggest impact, DVT, PE? I think as we look at these numbers on the VTE business, you grew just under 20%. You’ve had some solid growth internationally, which puts the U.S. more into the mid to high teens. I guess what I’m trying to get at is how much of this is behind you, and what are you expecting in 2024 in terms of this? Drew Hykes: Yes, so I’m happy to answer some of that, Bill, and Mitch may want to pile on as well. We’ve been pretty clear about the competitive dynamics as we move through 2023. I think much of the competitive trialing was front-end loaded on the year, but we did see it kind of splash over into Q3 and Q4. You’ve heard us describe those are cases that we would have had. That’s revenue that we would have generated. And due to the competitive trialing, we don’t have access to it. So it has definitely had an impact. At the same time, again, we began the year as the market leader. We’re exiting the year as the market leader. We are very confident in continuing to be the market leader. This is an attractive market. There are going to be new entrants that come. Where we compete head-to-head, we like our chances. We like the way our technology is performing, third, fourth-generation platforms at this point. We have a very capable and well-established commercial presence and field team that are doing good work day-in and day-out. We’ve got a mountain of high-quality clinical evidence getting bigger every day, and we’re continuing to innovate on the technology as well. On top of that, a very differentiated approach to market development. So you take all that together, we’re very confident in our ability to continue to lead in this market. And to the extent new entrants can help develop the market, after all, that’s where our focus is, that’s where the real value is on a patient front as well as a value creation front. Anything you want to add to that, Mitch? Mitch Hill: Yes. Just, Bill, from the point of view of the VTE growth, so I am kind of looking at some of the revenue aggregation that’s in that table we disclosed in the back half of the press release. I am just looking at the sequential revenue growth, let’s say, of Q4 over Q3, so just over 4% there. Then when I look at the year-over-year number for VTE, about 19.5% revenue growth comparing 2023 and 2022. So I think those numbers are pretty attractive, you know, from a growth perspective, and we feel pleased with the progress and the performance of the business during 2023. And for all the reasons you heard from Drew, very optimistic about 2024 as well. Bill Plovanic: And then, just you mentioned, Mitch, on the profitability of the business, you subtracted out the LimFlow acquisition costs. I’m sure there’s some – when you did that, is it just the acquisition, or is that also the ongoing LimFlow costs when we kind of looked at that from the core, was that like a core business look in terms of your answer to a prior question? Mitch Hill: Yes, the answer to the prior question, I was just looking at the 2023 Q4 numbers and also the full-year numbers, and then just backing out the one-time costs which are identified in the press release, essentially that was $9 million in Q4, and then $11.7 million for the full year. Happy to share some commentary, if you’d like in terms of how that looks in 2024 as well. I think we would expect the one-time costs if you’re kind of interested in that, from a Q4 perspective, I think, the one-time costs in Q1 would be about the same as Q4, and then potentially drop into about half of that for the remainder of the year. And that’s made up of both the transaction costs, which dissipated as we moved through the year, and then this purchase price amortization thing that I talked about, the amortization of the acquired intangible asset. So happy to talk further about that, but hopefully that’s helpful with at least some directional feeling on that. Bill Plovanic: Yes, so you’re seeing another $9 million in Q1, and then we’ll see about $2.5 million to $3 million a quarter from the amortization in Q2 through Q4, is that how to think about it? Mitch Hill: Yes, that amortization number stays pretty consistent through the course of the year, around $2.5 million. The total one-time stuff in Q2 through Q4 is more in the $4 million to $5 million range, because there is still some transaction costs involved. Bill Plovanic: Great, thank you. Thanks for taking my questions. Mitch Hill: But, Bill, just to make sure I’m clear, when I was talking earlier about the company’s profitability, we’re speaking about GAAP profitability, so I’m not talking about this non-GAAP number that we have in the press release, so I just want to make sure everybody is clear on that. Bill Plovanic: Thank you. Mitch Hill: Yes. Operator: The next question comes from Chris Pasquale from Nephron Research. Please go ahead. Chris Pasquale: Thanks. Just one quick one on the quarter. Any color on the VTE mix between FlowTriever and ClotTriever in 4Q? Drew Hykes: The overall mix, Chris, still has been pretty consistent. I think you’ve kind of seen historically, you can look back for several years, actually, for us, and you can see the breakdown in terms of product-wise, revenue-wise between the FlowTriever family and the ClotTriever family. So I would say that’s pretty consistent. That’s one thing that, as a part of this new revenue aggregation as we move forward we are not going to talk specifically about that. But I think you’ve got a pretty good flavor for it based on how the business has operated historically. Chris Pasquale: Okay, that’s fair enough. And then just a couple questions on PEERLESS. So, it’s complete enrollment, it’s short follow-up. You talked about data being presented in the back half of this year. It seems like you might know what it looks like before then, just given the timing here. So, are you targeting a particular venue for that? And how would you frame the impact positive data could have? You know, what percentage of patients are getting CDT today and could shift to mechanical thrombectomy if that data is really compelling? Drew Hykes: Great questions, Chris. Thanks for bringing them up. So, firstly, as regards to the timing of the PEERLESS data release, we’re really excited about the completion of enrollment in this study. I think it’s a testament to the level of interest of clinical investigation in this space, as well as the execution of the clinical team. We are targeting a major cardiovascular meeting for the release of the data, and you can imagine towards the back half of the year what possible meetings that might be. I think this being a groundbreaking study deserves the kind of platform that that might provide. So, that’s as much as timing. As far as the potential impact, we know that CDT has been progressively diminishing as a treatment for pulmonary embolism. Although there are still people who consider that as therapy, and I think this data set is going to go a long way towards targeting conversion of CDT therapy to definitive mechanical thrombectomy. Operator: Our next question comes from David Rescott from Baird. Please go ahead. David Rescott: Great. Thanks for taking the question. Good afternoon. I wanted to start on the emerging therapies bucket and some of the prior year-over-year – prior data that you provided. When we look at, I think, maybe Q2 through Q4 of 2023, it looks like there is a pretty significant step up, at least closer to that $4 million to $5 million per quarter number versus the $2 million or so in Q1. So I’m wondering, one, if that is kind of the right way to start off thinking about emerging therapy contribution as early as, I guess, the first quarter of 2024, and I am curious what maybe the biggest kind of contribution segment or product in that $4 million to $5 million per quarter that we’ve seen and whether or not that’s been steady throughout those two to three quarters in the back half of 2023, or if there is any movement around some of those new products having a bigger contribution on a quarterly basis. Drew Hykes: Yes David I am happy to get started on that, Mitch may want to add some additional thoughts as well. So as you look back over the course of 2023 across the emerging therapies portfolio, keep in mind these are still relatively small numbers, but you’re seeing the impact of some of the new product introductions that we made earlier in 2023, specifically RevCore and InThrill. And so you are seeing the impact of those product launches and some of those step ups. Looking ahead from here, we absolutely would expect the emerging therapies portfolio to grow on a relative basis quite a bit faster than VTE, but obviously off a much smaller base. We will be bringing a new product into the CVD toolkit alongside RevCore. We talked about that in the prepared remarks. There will be some incremental growth, hopefully, from that new product introduction. We’ll have continued traction with InThrill. LimFlow is included, obviously, in the CLTI component of emerging therapies. We’ve only factored in a modest contribution from LimFlow, but that will be ramping as we move through 2024 and the U.S. launch progresses. And then finally we will get started on Artix if all goes to plan later in the year. And that will be incremental growth in the fourth and final segment of emerging therapies......»»

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Steven Madden, Ltd. (NASDAQ:SHOO) Q4 2023 Earnings Call Transcript

Steven Madden, Ltd. (NASDAQ:SHOO) Q4 2023 Earnings Call Transcript February 28, 2024 Steven Madden, Ltd. beats earnings expectations. Reported EPS is $0.61, expectations were $0.56. Steven Madden, Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and thank […] Steven Madden, Ltd. (NASDAQ:SHOO) Q4 2023 Earnings Call Transcript February 28, 2024 Steven Madden, Ltd. beats earnings expectations. Reported EPS is $0.61, expectations were $0.56. Steven Madden, Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and thank you for standing by. Welcome to the Steven Madden Fourth Quarter and Full Year 2023 Results Conference Call. At this time, all participants will be in a listen-only mode. [Operator Instructions]. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead. Danielle McCoy: Thanks, Abigail, and good morning, everyone. Thank you for joining our fourth quarter and full year 2023 earnings call and webcast. Before we begin, I’d like to remind you that our remarks that follow including answers to your questions contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated into our next quarterly earnings conference call, if at all. The financial results discussed on today’s call are on an adjusted basis unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining me today on the call is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer. With that, I’ll turn the call over to Ed. Ed? Edward Rosenfeld: Thanks Danielle and good morning, everyone. And thank you for joining us to review Steven Madden’s fourth quarter and full year 2023 results. We are pleased to have finished the year on a high note, delivering fourth quarter results that exceeded expectations on both the top and bottom lines. After a tough start to 2023, we saw sequential improvement each quarter throughout the year in both revenue and earnings when compared to the prior year, culminating in the fourth quarter when revenue grew 10% and diluted EPS rose 39% versus the comparable period in 2022. The Q4 results included organic revenue growth in both the wholesale and direct-to-consumer channels, supplemented by the contribution from the newly acquired, Almost Famous, as well as strong year-over-year operating margin improvement. Looking back at 2023 overall, we faced challenging market conditions, with wholesale customers taking a cautious approach to orders and consumers pulling back on discretionary spending. I’m proud of how our team navigated the difficult environment, controlled what we could control, and remained focused on executing our strategy for long-term growth. The foundation of which is driving closer connections with consumers through the combination of consistently trend-right product assortments and effective consumer engagement, which in turn will enable success with our four key long-term business drivers. The first of those drivers is growing our business in international markets. International has been the fastest growing part of our business over the last several years, and the momentum continued in 2023 despite the challenging macro environment. International revenue increased 11% in 2023 to $381 million, or 19% of total. Looking ahead to 2024, continuing to grow our business in the EMEA region will be our top priority as we seek to build on our momentum in Europe, develop our new Middle East joint venture, and capitalize on the exceptional brand heat we have in South Africa. Closer to home, driving continued growth in Mexico will also be a focus, as we look to capitalize on our market-leading position and recent share gains in that country. Our second key business driver is expanding in categories outside of footwear, like accessories and apparel. In 2023, our overall accessories and apparel revenue increased 10% compared to 2022, or 1% excluding Almost Famous. Our Steven Madden handbag business was the highlight, increasing 37%, including strong growth in both wholesale and direct-to-consumer channels, in both domestic and international markets. We also broadened our footprint outside of footwear over the acquisition in October of Almost Famous, a designer and marketer of women’s apparel. Almost Famous markets products in the wholesale channel under its own brands, primarily Almost Famous, as well as private label brands for various retailers. It has also been an exclusive licensee for Madden NYC apparel since its launch in 2022 and has had outstanding success with that brand so far. Almost Famous its core expertise is in the junior apparel category and in value price distribution channels, making it a strong complement to our existing Steven Madden apparel business which is focused on contemporary styling and is primarily distributed in department stores and e-commerce retailers. Our top priority will be to use the Almost Famous platform to introduce Madden Girl apparel and to grow Madden NYC apparel. This will enable us to implement in apparel the strategy that has been so successful for us in footwear and accessories, which is to utilize the Steven Madden brand portfolio, including Steven Madden, Madden Girl and Madden NYC, to reach customers in all tiers of distribution from premium channels down through mass. Beyond the successful integration of Almost Famous, our focus in 2024 will be building on the momentum we have in Steven Madden handbags with a particular focus on driving continued growth in DTC channels, as well as the further development of the Steven Madden apparel business. Our third key business driver is driving our direct-to-consumer business led by digital. After strong growth in this business in 2021 and 2022, our DTC revenue declined 3% in 2023. We did, however, see sequential improvement in the year-over-year top line performance each quarter throughout the year, and Q4 DTC revenue increased 2% compared to the comparable period in the prior year. And if we zoom out and look at the evolution of our DTC business over the past few years, we see that this business is up nearly 60% in revenue and nearly 200% in operating profit compared to pre-COVID 2019. In 2024, we plan to add 10 net new stores driven by expansion in international markets, primarily in EMEA, we will also invest in remodels in key locations, including our flagship store in Times Square in New York City. On the digital side, we’ll be investing in global site enhancements designed to drive greater speed, usability, and conversion, as well as continuing to refine our marketing mix and push more investment up the marketing funnel. Finally, our fourth key business driver is strengthening the U.S. wholesale footwear business. 2023 was a uniquely challenging year in that channel, as many of our wholesale customers entered the year with excess inventory and reduced order significantly in efforts to right-size inventory levels. After a revenue decline of more than 20% in the first half, the trend in this business improved significantly in the back half, but we still saw revenue declines of 6% in Q3 and 2% in Q4. The good news is that inventories in the channel are much healthier than they were a year ago, and so while the sentiment among many of our key customers remains cautious, we are positioned to return to year-over-year revenue growth in this business beginning in Q1. So overall, while 2023 was challenging in a number of ways, we drove sequential improvement throughout the year, ended the year with a strong quarter, and made important progress on our key strategic initiatives. We also demonstrated our ongoing commitment to returning capital to our shareholders, with over $200 million in combined dividends and share repurchases. As we look ahead, while the operating environment remains choppy, we believe the on-trend product assortments created by Steve and his team have us well positioned for 2024. And looking out further, we are confident that the combination of our strong brands and proven business model will enable us to drive sustainable revenue and earnings growth for years to come. And now I’ll turn it over to Zine to review our fourth quarter and full year 2023 financial results in more detail and provide our initial outlook for 2024. Zine Mazouzi: Thanks Ed, and good morning, everyone. In the fourth quarter, our consolidated revenue was $519.7 million, a 10.4% increase compared to the fourth quarter of 2022. Excluded Almost Famous, consolidated revenue grew 2.3% compared to the same period in the prior year. Our wholesale revenue was $354.8 million, up 14.9% compared to the fourth quarter of 2022, or 2.5% excluding Almost Famous. Wholesale footwear revenue was $225.2 million, a 0.4% decrease from the comparable period in 2022, as a modest increase in the brand’s business was offset by a decline in private label. Wholesale accessories and apparel revenue was $129.6 million, up 56.5% to the fourth quarter in the prior year, or 10.3% excluding Almost Famous, driven by another quarter of strong growth in Steven Madden handbags. In our direct-to-consumer segment, revenue was $162.3 million, a 1.9% increase compared to the fourth quarter of 2022, with an increase in the brick-and-mortar business partially offset by a modest decline in e-commerce. We ended the year with 255 company-operated brick-and-mortar retail stores, including 71 outlets, as well as five e-commerce websites and 25 company-operated concessions in international markets. Turn into our licensing segment. Our licensing royalty income was $2.7 million in the quarter, compared to $2.5 million in the fourth quarter of 2022. Consolidated gross margin was 41.7% in the quarter, versus 42.2% in the comparable period of 2022. Excluding Almost Famous, consolidated gross margin increased 80 basis points year-over-year. Wholesale gross margin was 31.7%, an increase of 120 basis points compared to the fourth quarter of 2022, driven by increases in both the wholesale footwear and wholesale accessories and apparel segments. Direct-to-consumer gross margin was 62.7% versus 64% in the same period in 2022, driven by an increase in promotional activity. In the quarter, operating expenses were $163.9 million, compared to $156.5 million in the fourth quarter of 2022, an increase of 4.7%, excluding Almost Famous operating expenses rose 1.3% compared to the same period last year. Operating income for the quarter was $53 million or 10.2% of revenue, up from $42.2 million or 9% of revenue in the comparable period last year. The effective tax rate for the quarter was 14.3% compared to 20.9% in the fourth quarter of 2022. Finally, net income attributable to Steven Madden Ltd for the quarter was $45 million, or $0.61 per diluted share, compared to $33.7 million, or $0.44 per diluted share in the fourth quarter of 2022. Now I would like to briefly touch on the full year results. Consolidated revenues for 2023 decreased 6.6% to $2 billion, compared to $2.1 billion in 2022. Net income attributable to Steven Madden Ltd was $182.7 million, or $2.45 per diluted share for the year ended December 31, 2023, compared to $218.3 million, or $2.80 per diluted share for the year ended December 31, 2022. Moving to the balance sheet, our financial foundation remains strong. As of December 31, 2023, we had $219.8 million of cash, cash equivalents, and short-term investments, and no debt. Inventory was $229 million flat to the prior year. Excluding Almost Famous, inventory was down 5.9% compared to the same period in 2022. Our CapEx in the fourth quarter was $5.6 million, and for the year was $19.5 million. During the fourth quarter and full year 2023, the company spent $38.1 million and $142.3 million on repurchases of its common stock respectively, including shares acquired through the net settlement of employees stock awards. At the end of the year, we had approximately $176 million remaining on the share repurchase authorization. The company’s board of directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 22nd, 2024 to stockholders of records as of the close of business on March 8th, 2024. When combined in share repurchases and the dividend, we returned $205 million to shareholders in 2023 and over $1.4 billion over the past decade. Turn into our outlook, we expect revenue for 2024 to increase 11% to 13% compared to 2023 and we expect diluted EPS to be in the range of $2.55 to $2.65. This includes a forecasted effective tax rate for 2024 of 23.5% up from 21.3% in 2023, primarily due to lower forecasted discrete tax benefits related to stock-based compensation. Now I would like to turn the call over to the operator for questions. Abigail? Operator: [Operator Instructions] Our first question comes from Paul Lejuez with Citi. See also 15 Countries with Most Car Accidents per Capita and 15 Developed Countries with Citizenship Tests. Q&A Session Follow Steven Madden Ltd. (NASDAQ:SHOO) Follow Steven Madden Ltd. (NASDAQ:SHOO) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Paul Lejuez: Hey, thank you guys. You heard from Macy’s yesterday about a significant number of store closings. Just curious if that’s having any impact on how you’re guiding and thinking about 2024. And also just curious to hear how you might think about the impact over the next several years. And then second, just curious on the wholesale footwear business in F24, how are you thinking about that business on the branded side versus private label and what drives growth? Thank you. Edward Rosenfeld : Great. Yes. Good morning, Paul. So in terms of the Macy’s announcement, obviously, we need to get more information there and understand exactly what stores are on the closure list, et cetera. But I don’t think we’re looking for any significant impact to 2024. And even beyond ‘24, my initial take is that there probably will be pretty minimal impact because the bulk of what we do with Macy’s is in the top $250. So Steven Madden Women’s, for instance, is really distributed just in those top 200 Steven Madden Women’s footwear is really distributed just in those top $250, which I assume will not be impacted meaningfully. We do have some things that go to more doors and are distributed to doors that are likely on the closure list. That would include Steven Madden Girl footwear and certain accessory categories. We do a little bit of cold weather and some gifting that goes to more doors there. But that impact should be relatively modest. In terms of the second part of your question about wholesale footwear, we do expect both branded and private label to be up in 2024, although I expect private label to grow faster. And as we’ve talked about, those mass merchant customers that make up the bulk of our private label business were the first ones to see the pullback that happened when folks decided they realized they had too much inventory and pulled back the reins on open device. And so we’re also seeing the recovery there first. And so we expect to see some pretty nice growth even starting in Q1 and wholesale footwear in the private label segment. Unidentified Analyst : Got it, thanks. And just one additional, what do you assume for Almost Famous per 2024? I’m sorry if I missed that. Edward Rosenfeld : Yes, so I guess maybe the way to give it to you is if we exclude Almost Famous, so the revenue growth is 11 to 13 including Almost Famous. If we exclude Almost Famous, it’s mid-single digit top line growth. Operator: Our next question comes from Aubrey Tianello with BNP Paribas. Aubrey Tianello: Hey, good morning. Thanks for taking the questions. I wanted to follow up on that last question about the 2024 revenue guide. Ed, maybe could you break down a little bit more in terms of what you’re expecting between DTC and wholesale on the organic side for 2024 revenues? Edward Rosenfeld : Sure. Yes, so if we’re looking at that kind of mid-single digit overall organic growth rate, it should be a little bit less than that in wholesale or on the lower side of that in wholesale and a little bit higher than that in DTC. So I would say low to mid-singles in wholesale organic and approaching high singles in DTC. Aubrey Tianello: Perfect. Got it. And then just to follow up on the gross margin for 2024, how we should think about that for 2024, I think Almost Famous is maybe like 140 basis points drag or so. So is that about, right? And then what are some of the other components we should think about within gross margin for ‘24? Zine Mazouzi: Hey, Aubrey. It’s Zine. I would think of Almost Famous, the annualization of it at about 110 basis points. If you added the whole year and assumed it didn’t exist before, yes, you get to that 140 that you quoted, but 110 is the annualization. And the other impact that we have as discussed previously is the Red Sea and Canal Suez. And we estimate that currently we have built in based on certain assumption about 20 to 25 basis points. So if you add those two together, you’re low over 130 basis points of pressure, and that is partially offset by some improvement in gross margin in the organic business. Operator: Our next question comes from Laura Champine with Loop. Laura Champine: Thanks for taking my question. And I know you’ve already spoken to wholesale footwear, sort of returning to growth. The mix in the wholesale segment was interesting in Q4 with extremely strong growth on easy compares and accessories and kind of flat footwear. Does that normalize in Q1 or will it take longer than that? Edward Rosenfeld : I still expect the wholesale accessories to be growing faster than wholesale footwear in Q1 even on an organic basis. And then it should normalize after that. Operator: Our next question comes from Samuel Poser with Williams Trading. Samuel Poser: Good morning. Thank you for taking my question. I guess I’d like to just dig into wholesale footwear and how you’re thinking about that. We can sort of back into handbags. It’s going to grow faster. Are we looking at like low to mid on the footwear side of things on the wholesale business? Edward Rosenfeld : Yes, that’s the right way to think about it, Sam. Samuel Poser: And probably a little, I mean from the initial guidance, a little stronger in the first half of the year and just because the compare to it little easier and the visibility is better. Is that? Edward Rosenfeld : I think that’s right. A little bit stronger, but not a big difference. Samuel Poser: And then I’m just going to dig in. What gross margin and operating margin are you expecting that is built in to the full year guidance? Zine Mazouzi: Well, I’ll tell you, I’ll start with gross margin. We expect, as I said earlier, that we’ll have that 140 basis points combined between Almost Famous and free. And we probably think that we’ll have about 70 basis points pressure on the gross margin compared to this year. On the up margin, if you just think of Almost Famous alone, that’s roughly about 40 basis points, 50 basis points pressure on the up margin. Edward Rosenfeld : And that’s where we think, and just to elaborate, that’s where we think that’s what’s built in. And it’s about 11% operating margin for the year, which is down 50, which is essentially attributable, almost all attributable to the Almost Famous pressure. Samuel Poser: And when there’s Almost Famous, I mean, it’s driving a good amount of revenue, how long does it take to get Almost Famous margins to where you want them to be? Edward Rosenfeld : Well, I think we’re, certainly, we should start seeing improvement even in the back half here. And we think we see a path to improving those operating margins, but we’ve always been clear that because of the nature of this business, it’s obviously done largely in the mass channel and there’s a big private label component, that this business will be a lower operating margin business. As we articulated when we announced it, their operating margins the year before we bought them were about 7%. We think we see a path to getting them into the high singles and over time potentially into the low doubles. But that’s you shouldn’t expect this to be a mid-teen operating margin business based on the distribution and the nature of the sales breakdown. Samuel Poser: Okay, and then lastly, within the overall revenue, actually I’ll leave it out, within the footwear revenue guidance or the organic revenue guidance, how do you break out international or EMEA versus US versus Canada and so on and so forth? How does that balance? Like sort of we got that mid-single digit growth organically. Is that high single digit? Edward Rosenfeld : Yes, no, international is a little faster than that and domestic is a little slow. Operator: Our next question comes from Jay Sol with UBS. Jay Sole: Great, thank you. And my question about the leverage point for SG&A. What is the leverage point for SG&A in fiscal ‘24? And as you look beyond that change and has the leverage point changed with the acquisition? Zine Mazouzi: Yes, so we have some modest leverage built into the 2024 budget in the guide. And the reason I’m saying it’s modest is because, as we always said, we’ll continue to invest in the business. We invest in marketing. And we also invest in infrastructure internationally. As Ed mentioned, we grew 11%. We expect double-digit growth to continue for the next couple of years. So there is some investment that we’re doing to fuel the growth in the upcoming years in international, both from a people perspective and also from a technology perspective. Edward Rosenfeld : And just to elaborate on that, keep in mind that the organic top line growth is mid singles, right? So you’re looking at a consolidated 11% to 13%, but that includes Almost Famous. Jay Sole: Got it. Okay. And then I’m going to just add one more. Just any color on how we should think about gross profit margin for Q1. Edward Rosenfeld : You guys are getting granular here. Look, there’s going to be — there will be pressure in Q1 for the reasons that Zine already articulated. I don’t think we’re going to start, prefer not to get start guiding by margin by quarter. Operator: Our next question comes from Abbie Zvejnieks with Piper Sandler. Abbie Zvejnieks: Great. Thanks so much for taking my question. Can you just give us some color on what gives you confidence in the high single digit direct-to-consumer growth, any color on e-commerce versus stores, and then I guess what you’re seeing and expecting in terms of promotions in that direct-to- consumer channel. Thank you. Edward Rosenfeld : Yes, we’ve seen a nice improvement in that business over the last few months. Even in Q4, we saw a significant improvement in November and December relative to the trend in October. And we’ve seen an additional step up in January and February compared to where we were in November and December. So we’re running very nice, solidly positive comps and seeing that in both brick-and- mortar and digital year-to-date. And so that is part of what gives us confidence in the DTC revenue guide. We also do have, we’ll probably have 2.5 points of non-comp, growth coming from non-comp stores as well because of some of the new store openings. What was the follow-up question? Abbie Zvejnieks: So I just on promotions in direct-to-consumer. Edward Rosenfeld : Oh, yes. I would say right now, the promotion activity is, I would say, normal. It’s not super happy, but I wouldn’t characterize it as super light either. I think it’s kind of normal activity for this time of year. If we go back to fall, it was a somewhat challenging boot season, and so we did a little bit more promotional activity to move through the boots. But nice thing was, January, we got that cold weather. We really were able to get through a lot of boots and got very clean there. And so we feel good about our inventory position. And in fact, I believe that this year at DTC, there’s opportunity for gross margin improvement in DTC by controlling promotions. Operator: Our next question comes from Tom Nikic with Wedbush. Tom Nikic: Hey, good morning, everyone. Thanks for taking my question. I want to ask about the international business. A lot of other brands have talked about the European consumer becoming a little more cautious. But your optimism around Europe just stems from trying to, your brand is so under-penetrated there that you kind of have growth opportunities, almost regardless of the macro environment. Edward Rosenfeld : Yes, I think that’s right. We have very strong momentum in Europe, and we do feel that we are outperforming our competitors in terms of sell-through and overall performance. That said, the overall macro environment is tough there. The retail environment is challenging there. If it weren’t for those factors, I think we’d be doing even better. But because of the momentum we have, the strong performance that we’ve been seeing, both in wholesale and in our direct-to-consumer channels, and to your point, the fact that we’re just not a mature business there. We’ve still got a lot of runways ahead of us. We still feel we can drive growth in that region. Tom Nikic: Got it. Ed, can you remind us the size of the business in Europe, and maybe ultimately what you think the region can become for you? Edward Rosenfeld : Yes, the EMEA region overall in 2023 was just under $170 million. In terms of what it could be, I mean it could be multiples of that. Operator: Our next question comes from Corey Tarlowe with Jefferies. Corey Tarlowe: Great, thank you. Ed, I was wondering if you could just touch on the inventory balances and how you feel the inventory is positioned into this upcoming year. One of the things you’ve done a nice job of and act almost same as this, inventory is continuing to be down I think for several quarters in a row now. So could you talk about what you think that means for the business and how that all interplays with your ability to chase and be trend focused and drive really productive sales that way? Edward Rosenfeld : Yes, I mean I think that’s, as you know, one of the hallmarks of the company has been our inventory management and our ability to turn our inventory faster than our peers in the industry. And enables us to work close to season, not make big speculative inventory bets upfront and chase goods in season and be very nimble. And that’s been a good formula for us, especially in the fast moving trend business in which we operate. So I do feel we’re really, obviously that whole model was challenged for a period when there was the tremendous supply chain disruption in the wake of COVID. And transit times were so extended, but we’re back to being able to do what we do best. We’ve been able to, as you point out, reduce overall inventory levels, at least on an organic basis. We were flat, including Almost Famous at the end of the year. And so we’re really positioned to run our playbook and do what we do, and we feel good about that. And I think that’s another reason that we do believe that on an organic basis, we can see some gross margin improvement this year. Corey Tarlowe: That’s great. And then just to follow up on, you mentioned remodels. Curious about the potential impact of that on CapEx. And this is traditionally a very capital light business. So curious about what the expectations are for remodels going forward, if that’s something more broad or more specific to a finite number of stores. Zine Mazouzi: Yes, we’ve done some this year, as I mentioned earlier, we end at $19.5 million this year. And we expect next year with what we do with our CapEx in the stores, either opening stores, remodels, our investment in IT and infrastructure that we would be probably about $5 million above this year. Operator: Our next question comes from Dana Telsey with Telsey Advisory Group. Dana Telsey: Hi, good morning, everyone. Ed, as you think about the wholesale channel distribution and the buckets of it, whether it’s off-price, department stores, discounters with private label, how are each performing and how do you expect them to be different in 2024 versus ‘23? And on the retail component, what are you seeing in terms of differences in outlets versus street locations or malls? Thank you. Edward Rosenfeld : Sure. In terms of the wholesale channels, look, I think the one I’m the most bullish about in terms of top line growth is probably the mass channel because as we point out, we did take a big hit there as they pulled back the reins really dramatically to get their inventories in line and we’re starting to see that business recover and we’re already, as I pointed out, expecting to see a nice year-over-year improvement beginning in Q1. So I think that kind of bounce back should be a nice benefit for us in 2024. Kind of moving up to the channels like off price, that’s clearly still a channel that’s performing. Taking share, there’s still a very healthy demand for our product there. We are obviously controlling how much distribution we have in that channel, but certainly there’s healthy demand there. And then as you move into the department stores, I would say overall, the sentiment there remains cautious, but as I pointed out earlier, the inventory in the channel is much healthier than it was a year ago. And obviously those customers are important to us and we’ve got indications from them that they’re planning our business in excess of how they’re planning their overall department. And so we’ll look for a better year with them as well in 2024. I think the second part was outlets versus full price stores. The big call out there is that we continue to see outlet outperforming full price stores in the US by a pretty significant margin. In Q4, it was about 1, 000 basis points again in comp. And even coming into Q1, we continue to see significant outperformance in the outlet channel versus the full price channel in the United States. I think indicative of a customer that is still price conscious and gravitating towards value. Operator: Our next question comes from Janine Stichter with BTIG. Janine Stichter: Hi, good morning. I had a couple of questions around margins. So for gross margin, what are you assuming for freight? The Red Sea situation aside, we’ve seen the rates pick up a bit. And I think your contracts are for renewal soon. So just how to think about what you’re assuming for freight for the rest of the year. And then on the SG&A, I think you pointed to a bit of SG&A deleveraged in the guide, sorry, a bit of leverage built into the guide. But how are you thinking about marketing spend? I know you’ve been investing there, had to think about the overall investment in marketing spend and then maybe the split between brand spend and other marketing spend. Thank you. Zine Mazouzi: Yes, I’ll take the first part on the gross margin and Ed can elaborate in marketing. On the gross margin, Janine, we mentioned that we have built in based on certain assumptions around Red Sea and everything else around freight, 20 to 25 bps impact to gross margin. On the marketing side, we’re continuing to invest, but Ed can actually give you a little more color on that. Edward Rosenfeld : Yes, I mean, I think that, look, as you know, that’s been an area of continued investment for us over the last several years, and we’ve moved up our marketing percentage of revenue pretty significantly from 2% or sub 2% to about 4.5% in 2023. As we go into 2024, we’re going to continue to increase the investment in marketing. We think that’s important to drive growth in the future. If we, I think it’s easiest to sort of look at it backing out Almost Famous. If you back out Almost Famous, there is, we’re still looking to increase marketing kind of high single digits in dollars, which is obviously faster than the mid-single digit top line growth on an organic basis that we forecasted. So a little bit of deleverage there. In terms of the mix, as we talked about, the big focus there is really optimizing our marketing spend throughout the funnel. And that means, we believe at this point, pushing more marketing spend up the funnel. So making sure we’re doing that top of funnel brand awareness work, as well as the mid funnel sort of consideration, and of course not forgetting the bottom of the funnel for conversion. I think a few years ago, like many folks in the industry, we’d gotten into a situation where we were very heavily penetrated in the lower part of the funnel, and that was working for a while there. We’re getting great returns on that performance marketing, but we do think that there needs to be a better balance now, and that’s what we’re focused on......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

AAON, Inc. (NASDAQ:AAON) Q4 2023 Earnings Call Transcript

AAON, Inc. (NASDAQ:AAON) Q4 2023 Earnings Call Transcript February 28, 2024 AAON, Inc. beats earnings expectations. Reported EPS is $0.56, expectations were $0.53. AAON, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, ladies and gentlemen, and welcome […] AAON, Inc. (NASDAQ:AAON) Q4 2023 Earnings Call Transcript February 28, 2024 AAON, Inc. beats earnings expectations. Reported EPS is $0.56, expectations were $0.53. AAON, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, ladies and gentlemen, and welcome to the AAON, Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, February 29, 2024. I would now like to turn the conference over to Joe Mondillo. Thank you. Please go ahead. Joseph Mondillo: Thank you, operator, and good afternoon, everyone. The press release announcing our fourth quarter financial results was issued after market close today and can be found on our corporate website, aaon.com. The call today is accompanied with a presentation that you can also find on our website as well as on the listen-only webcast. Please turn to Slide 2. We begin with our customary forward-looking statement policy. During the call, any statement presented dealing with information that is not historical is considered forward-looking and made pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995, Securities Act of 1933, and the Securities and Exchange Act of 1934, each as amended. As such, it is subject to the occurrence of many events outside of AAON’s control that could cause AAON’s results to differ materially from those anticipated. You are all aware of the inherent difficulties, risks, and uncertainties in making predictive statements. Our press release and Form 10-K that we filed this afternoon detail some of the important risk factors that may cause our actual results to differ from those in our predictions. Please note that we do not have the duty to update our forward-looking statements. Our press release and portions of today’s call use non-GAAP financial measures as defined in Regulation G. You can find the related reconciliations to GAAP measures in our press release and presentation. Joining me on today’s call is Gary Fields, CEO; Matt Tobolski, President and COO; and Rebecca Thompson, CFO and Treasurer. Gary will start the call off with some opening remarks. Matt will then provide some details about our operations and market trends. Rebecca will follow with a walk-through of the quarterly results. And before taking questions, Gary will finish with our 2024 outlook and closing remarks. With that, I will turn over the call to Gary. Gary Fields: Thanks, Joe. Thank you, everyone, for joining us on our call today. If you will, please turn with me to Slide 3. Overall, we’re very pleased with our 2023 results. 2023 marked our 35th anniversary as a company and it lined up with some outstanding achievements. Most notably, we surpassed a $1 billion of sales for the first time in Company history. Net sales in the year grew 31.5%, which followed a year in 2022 when we recorded organic growth of 46.8%. Over the last two years, organic volume was up 46.6%, including being up 14.5% in 2023. This is incredible performance for this industry. Along with the strong sales growth, we recognized solid margin expansion in 2023, reflecting not only the operating leverage from the increased volume, but also significant enhancements in operational efficiencies. Net income for the year grew over 75%, resulting in a second straight year of record earnings. Since 2021, we have more than tripled net income. Altogether, I am very proud of how our team performed in the last calendar year. Please turn to Slide 4. We finished the year with strong results. Organic net sales in the fourth quarter was up 20.4%, and gross profit was up 42.3%. Our BASX segment realized a record quarter, both in sales and profits. Net sales in the segment were up 33.6%, and gross profit was up 70.3%. AAON Oklahoma also performed very well. Net sales in this segment were up 23.4%, and gross profit was up 45.3%. Gross profit margin for the Company came in at 36.4%, up year-over-year nearly 560 basis points, and down only modestly from the seasonally strong third quarter. Despite the impact that holidays had on productivity in the fourth quarter, we were able to further improve operational efficiencies on top of the gains we recognized in the third quarter. This resulted in our strongest fourth quarter of earnings in Company history. Bookings and backlog also trended positively in the quarter. Bookings were up quarter-over-quarter for the second straight quarter and were the strongest since the first quarter of 2022. Bookings also outpaced production, resulting in a quarter-over-quarter increase in backlog. All around, it was a strong finish to the year. Please turn to Slide 5. 35 years ago, our founder, Norm Asbjornson, created AAON with one mission to manufacture the best HVAC equipment in the world for the best value. At the time, the total addressable market for premium semi-custom equipment was very small, as much of the market consisted of basic equipment. This wasn’t because the commercial real estate market was not interested in more sophisticated equipment. It was because of the exorbitant price that premium equipment carried. To be competitive, Norm determined it required a revolutionary engineering and manufacturing process compared to common industry practices at the time. It has taken the Company decades to perfect this unique way of manufacturing. Currently, our equipment is the most price competitive than it’s ever been. At the same time, we continue to lead in innovation, performance, and quality. This progression has expanded our total addressable market across the HVAC industry immensely. Secular trends, such as decarbonization, electrification, driven by market demand shifts and new regulations, has expanded our total addressable market even more. Not too long ago, AAON was known as a niche player in this industry. Being competitive on price has led to us being a mainstream solution. As I previously mentioned, Norm’s mission 35 years ago was to provide the best HVAC equipment in the world for the best value. That mission remains true today, and the value of the equipment has never been more compelling. I’ll now hand over the call to Matt Tobolski, who will speak more in depth about our operational strategy. Matt Tobolski: Thank you, Gary. If you turn to Slide 6, last November, we issued a press release announcing several changes to the management structure of the Company. It’s been a couple of months since making those changes, and I wanted to start off by providing you with an update. Historically, AAON has had two locations, with the vast majority of sales being generated out of our flagship Tulsa location. We now have a location in Parkville, Missouri, and with the acquisition of BASX, a location in Redmond, Oregon. Over the last year or so, we began integrating common departments across all locations. The goal was to promote collaboration and the sharing of best practices with the intent of maximizing the operational sophistication of the Company. These recent organizational changes will accelerate this integration process, as well as improve our ability to manage the overall enterprise. Furthermore, the locations are beginning to overlap operationally. One notable example of this is allocating some BASX production to our Longview, Texas facility. This began last year, but it will escalate upon the completion of our Longview manufacturing expansion project, which is expected to be complete by the end of this year. These leadership changes will be a huge benefit as production across the locations further emerge. Two months into the change, I could not be more pleased with how things have progressed. In a short period of time, the teams have never been more collaborative and more energized. I’m confident that these changes will have a meaningful impact in the near-term under our current footprint. Although just as important, you should be aware that the intent of this is with long-term in mind. These changes will better position us in the future to grow out of the current footprint in the most efficient way possible. If you will, please turn to Slide 7. I want to touch on some of the main tranches of our operational strategy. As you can see, we have a multifaceted approach when it comes to driving growth. This includes investing profits back into the business, incrementally providing support to our sales channel, developing market-leading products, leveraging secular market trends, and focusing on expanding our parts business. We have several large capital outlays that we are currently in the process of making. Capacity is being increased across all four of our locations. The two main projects are at our Longview, Texas, and Redmond, Oregon facilities. In Longview, we’re increasing manufacturing square footage by roughly 50%. This is slated to be finished by the end of this year. And at Redmond, square footage will increase by approximately 15%, with this expected to be finished by the end of third quarter. Both projects will yield much larger percentage increases in sales capacity due to expected increases in productivity. We have several other ongoing projects, and one that I’d like to highlight is the fact that we’re building an additional training academy at our Tulsa location. This will be a state-of-the-art facility that will be utilized to train and certify our reps. This is expected to be finished in early 2025. Now, let’s transition to our sales channel. As we’ve spoken to in the past, we have never been more aligned with our channel partners and have never provided them with as much support and resources as we do today. Building this new academy in Tulsa is a perfect example. Likewise, last year, we hosted the grand opening of our Exploration Center, a one-of-a-kind facility at our headquarters that showcases our products alongside market alternative equipment. This is a powerful resource for our sales reps to utilize to help sell the value proposition of AAON equipment, a value proposition that is apparent once a customer walks through that facility. Something that we’ve also beginning to focus on much more is what we call the complete customer experience. Historically, AAON was primarily a product development company solely focused on designing and manufacturing some of the best HVAC equipment in the world. We want to continue to hold true to that reputation, but we want to also be known for providing a premium customer experience from day one of the sales process through the entire lifecycle of the equipment, including installation, operation, and maintenance. This is an opportunity and one that we’re now addressing and adding resources to take advantage of. We’re also investing in sales and marketing. Marketing is something that AAON hasn’t previously spent a lot of resources on. Although our premium equipment now offers the most compelling value than ever, AAON is still a small company in an industry with much larger players and brands. We think that small investments in marketing will go a long way for us. By getting our name and brand out there more and educating the market about the attractive value proposition of our premium equipment, we expect it will assist our sales rep’s success in penetrating the market quicker. This is just another example of how we’re incrementally providing support to our sales channel partners. Earlier, Gary mentioned that one of our core missions is to design and manufacture the best HVAC equipment in the world. As we enter 2024, we are leading the industry with two product developments. First, we have been accepting orders for new 454B refrigerant equipment since January 1. Most of the industry won’t be offering new refrigerant equipment until the second half of this calendar year. Second, last year, we introduced our newly branded Alpha Class equipment. The Alpha Class is an air-source heat pump powered rooftop unit that is operable down to zero degrees Fahrenheit. No other competitor in the marketplace has such an offering. Most other air-source heat pumps on the market today are operable just down to 25 degrees Fahrenheit to 30 degrees Fahrenheit, giving us an advantage in this ever-increasing part of the market. Sales of this equipment still make up a small percentage of the total sales, but bookings in the second half of 2023 have nearly doubled when compared to the first half of the year for Alpha products, so there is solid momentum thus far. We expect our Alpha Class to fully leverage several secular trends that AAON has already been benefiting from. Again, with an increased focus on decarbonization, electrification, and energy efficiency, as well as the accelerated impact from government regulations, AAON’s superior-performing, highly energy efficient equipment is well-positioned to take advantage of such trends. Lastly, I want to touch on AAON’s parts and service. Normally, we don’t talk much about service because AAON doesn’t have a direct service business. However, our reps do provide service that we indirectly benefit from. As we touch on parts, our parts business will be one of AAON’s fastest-growing business segments going forward. It will also be our most profitable business. Part sales grew 26.3% in 2023, and we anticipate a strong double-digit growth rate in 2024. We are making several investments to help support this growth. In 2023, parts made up 5.8% of total sales, and we think that we can double this portion of the business in three to four years, at which time it should represent closer to 10% of sales. Now, as we touch on service, as part of our initiative of improving the all-around customer experience, we intend to be much more focused on making sure our reps are providing a premium level of service to our customers. Like most OEM rep firms in any other industry, our reps know the equipment and their customer more than anyone else in the field. As such, to provide the best customer experience, we will instill upon them to provide the best service possible in this offering. In the end, our customers and reps, as well as our business and brand, will benefit substantially. Before handing it off to Rebecca, I will close with this. I’m extremely proud to be part of and help lead this organization. While the growth we’ve realized over the last two years has been incredible, there is still a lot of work to be done to realize the full potential of this organization. The team has never been more energized, and I look forward to continuing to build upon what we’ve already accomplished. And with that, I will hand it off to Rebecca, who will walk through financials. Rebecca Thompson: Thank you, Matt. I’d like to begin by discussing the comparative results of the three months ended December 31, 2023, versus December 31, 2022. Please turn to Slide 8. Net sales were up 20.4% to $306.6 million from $254.6 million. Along with the healthy backlog that we entered the quarter with, increased productivity resulted in volume growth of 9.3%. Adjusting total sales for inflation on a per-day, per-production employee basis, sales in the fourth quarter were the best in over two years, reflecting the recognized productivity gains. Pricing was largely the other contributor to growth. On a per-segment basis, BASX net sales in the quarter grew 33.6%, AAON Oklahoma grew 23.4%, while AAON Coil Products declined 17.9%. Moving to Slide 9. Our gross profit increased 42.3% to $111.7 million from $78.5 million. As a percentage of sales, gross profit margin was 36.4% compared to 30.8% in 2022. The year-over-year improvement in gross profit margin was driven by incremental pricing, improved productivity, and higher volumes leveraging our fixed costs. Please turn to Slide 10. Selling, general, and administrative expenses increased 49.8% to $47.9 million from $31.9 million in 2022. As a percentage of sales, SG&A increased to 15.6% of total sales compared to 12.5% in the same period in 2022. The increase in SG&A was due to higher warranty expense and profit-sharing expenses from our increased sales and earnings. Other increases are a result of increased depreciation and amortization and consulting expenses related to investments we’re making in back-office technology. Moving to Slide 11. Diluted earnings per share increased 19.1% to $0.56 per share from $0.47 per share. This marked the strongest fourth quarter of EPS in the Company’s history. Turning to Slide 12. You’ll see our balance sheet remains strong. Cash, cash equivalents, and restricted cash totaled $9 million at December 31, 2023, and outstanding debt on our revolver at the end of the quarter was $38.3 million. Within the quarter, we paid down approximately $40.1 million on our line of credit, lowering our leverage ratio to 0.15 from 0.33 at the end of the third quarter and down from 0.46 at the end of 2022. We had a working capital balance of $282.2 million at December 31, 2023 versus $203.5 million at December 31, 2022. Capital expenditures in 2023 were $104.3 million, up 93.1% from a year ago. As Matt addressed, we have several large capital projects that will increase production capacity, improve productivity, and support future growth. Several of the projects from 2023 will carry over into 2024. This will make for another heavy CapEx year. In 2024, we anticipate capital expenditures to be approximately $125 million. We consistently engage in a rigorous analysis of our capital projects. All the projects included in the budget will help our growth and generate very compelling returns. With that, I’d now like to turn the call back over to Gary. Gary Fields: As I stated in my opening remarks, bookings in the fourth quarter improved sequentially for a second straight quarter and outpaced production in the fourth quarter. As a result, we realized a modest quarter-over-quarter increase in the backlog. Year-over-year, backlog was down modestly, but this was intentional to right-size lead times. For several months now, our lead times have been back to normal. Conversely, much of the industry still seems to be focused on bringing lead times down from elevated levels. Overall, the market environment seems to be resilient, despite what the headlines and some of the macroeconomic indicators have been signaling for some time now. Month-to-month, bookings have been steady, and sentiment amongst our sales channel remains positive. Furthermore, the pipeline of large projects, particularly at our BASX and AAON Coil Products segments is robust. Certain verticals, such as data centers, manufacturing, and education remain strong, while some of our traditional markets, such as office buildings and retail, are soft. The non-residential construction market seems to be slowing as a whole, but it’s definitely bifurcated. In addition to a slowing construction market, there’s the uncertainty of how the market, especially the replacement market, will behave related to the refrigerant transition. So far, two months into this year, this doesn’t seem to have had an impact yet. That said, we still anticipate, for at least a short period of time in the middle part of the year, that some customers may choose to delay replacing their units, waiting for new refrigerant equipment. If this does happen, it will be a much bigger impact to the overall market than to us, as most of our equipment has been configurable with the new refrigerant since January 1 of this year. Given that, we are in an advantageous position if the market chooses to shift to new refrigerant equipment early in the year. There’s also a possibility that much of that market overlooks the long-term maintenance cost of buying equipment with the old refrigerant, and we see a much more muted effect. Either way, we’re prepared with respect to manufacturing capabilities and with respect to our supply chain of the new refrigerant components. All considered, we anticipate 2024 will be a slower growth year than we’ve experienced in the last couple of years. Not only do we have tougher comps that we are facing, but the economy and the non-residential construction sector is softer than a year ago. Turning to the outlook. Please turn to Slide 14. For 2024, we anticipate pricing will be a mid-single-digit contributor to sales growth, and we look for volume growth to be in the low single digits. We’d expect gross margin will be up year-over-year, mainly due to the favorable comp in the first quarter. For SG&A, as a percentage of sales, we look for these expenses to be modestly up compared to 2023. As Rebecca stated, CapEx will be in the $125 million range. I would also like to remind you of the seasonality that we typically see in the first quarter. We expect both sales and earnings in the first quarter will be down when compared to the fourth quarter of 2023. Year-over-year, we expect both sales and earnings in the first quarter to be up modestly. In closing, I want to finish by thanking all of our employees, sales channel partners, and customers. I also want to announce that we will be attending Sidoti & Company’s Virtual Small-Cap Conference on March 13, Wolf Research’s Small and Mid-Cap Conference in New York on June 4, and Wells Fargo’s Industrials Conference in Chicago on June 12. I hope to see some of you at these events. Thank you, and I will now open up for Q&A. See also 25 Companies with the Best Benefits and Perks and 18 of the Easiest Languages for English Speakers to Learn. Q&A Session Follow Aaon Inc. (NASDAQ:AAON) Follow Aaon Inc. (NASDAQ:AAON) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Your first question comes from the line of Chris Moore from CJS Securities. Please go ahead. Chris Moore: Hi, good afternoon, guys. Congratulations on another incredible quarter. Gary Fields: Thank you. Chris Moore: It looks like BASX is really hitting on all cylinders. I wonder if maybe we can focus on the data center market a little bit. So I know you had — in the past, you had broken out addressable market, roughly $30 billion data center cooling being about $6.5 billion of that. AI is driving data center growth rapidly over the next five, 10 years. I wonder if Matt could just talk about — a little bit about what you’re seeing from — on the AI front and what areas that you are especially well positioned for right now? Matt Tobolski: It’s a fantastic question, Chris. And certainly data centers as a whole market is certainly driving a tremendous amount of growth within AAON. Just as a data point, just above 10% of our revenue in 2023 came from the data center market, where in that same period over 20% of our bookings for new orders came out of data centers. So strong demand being pushed from that marketplace within our business. And as we look forward, we’re well-positioned from a product perspective and relationship perspective to really support the broad data center market. So we are actively involved in more traditional airside cooling solutions, but are also very, very actively engaged in liquid cooling applications, being driven by that high-density AI application. So as we look forward, a lot of the capital investment we talk about, a lot of the growth we talk about within the AAON Coil Products Group out of Longview is actually going to materialize in the midterm. It’s going to materialize being primarily data center products. So we’re making the investments across the fleet to really support this marketplace, as well as the product development efforts to really be well positioned from a solutions perspective. Chris Moore: Got it. Very helpful. And just — I think Gary hit on this, but from just a general visibility standpoint, when you see where you are today versus this time last year, significantly different or similar and anything that has changed over the last three to four months that you’re seeing now you might not have seen then? Gary Fields: Go ahead, Matt. Matt Tobolski: Yes. I was going to say just for me, what’s changed over the last three to four months, the market dynamics, we certainly had plenty of conversation and macroeconomic indicators. And we’ve talked about in the last three to four months and really still see it today that a lot of the trends that some of the indicators are putting out there. Really, the market is a little bit stronger and basically resilient against some of those indicators. So we continue seeing — we don’t see the slowdown that some of those indicators are alluding to. We certainly see some softness in the marketplace, but really over the last three to four months compared to today, we’re still seeing that kind of strength in the market. I would say, certainly as we talk about the data center market in particular, we certainly three to four months ago and really this compared to this time last year for sure are seeing an acceleration of investment. We definitely are seeing the amount of investment being made in that sector continuing to accelerate and really driving a lot of growth in the overall HVAC market as a whole, which, again, we’re making the investments and ensuring that we have the products that really properly position us to be successful there. But I’d say no real major changes in the overall landscape in that last three to four month timeframe. Gary Fields: I’d like to add just one thing. AHRI furnishes data to us indicating what the overall market is and then what our market share is. The overall market has continued to soften just a little bit, but our market share continues to increase, and this has been many quarters in a row now. Chris Moore: That is terrific. Any specifics that you could add there or… Gary Fields: Well, I would say that they’re in the mid-sized tonnages and larger for unit sizes. The two ton through five ton units is preponderance of all rooftop units manufactured as far as number of units. And we have a small percentage in that. Once you get up in above five tons, but particularly 20 tons to 40 tons, our market share becomes very, very substantial. Chris Moore: Terrific. I will leave it there. I really appreciate it, guys. Operator: Thank you. And your next question comes from the line of Julio Romero from Sidoti & Company. Please proceed. Julio Romero: Hi, good afternoon, everyone. You mentioned you’ve already begun accepting orders for equipment that can use the new refrigerant as of January 1, I believe. Can you — when do you expect to begin delivering those orders and how much of the sales guidance is driven by that new equipment that uses the new refrigerant? Matt Tobolski: Yes, from a quantity of orders received. We just opened up the opportunity to place orders at the beginning of January. So we have certainly started to see orders being placed with the new refrigerant. Those from a delivery perspective are going to be more in the end of Q2 timeframe, just from a component availability perspective. It’s a little bit more extended lead time compared to 410A products, but those will start converting to shipments in that Q2 timeframe. Gary mentioned in the main narrative, the — there’s certainly a lot of uncertainty around exactly how the adoption or timing of adoption of the new refrigerant equipment is going to come into play throughout the calendar year. I think, though, again, to the point, we certainly see ourselves best positioned from an ability to deliver both the 410A and 454B products within that, I’ll say, noisy period of middle of the year. And so while we do see potential for some noise to be in that midyear order trend driven by the changeover, we certainly have the product portfolio to support it. And we expect to see increasing sales conversion, obviously, as we progress through the year. But definitely in the latter half of the year, expect to see a substantial contribution from new refrigerant equipment orders. Gary Fields: I want to add just a little to that. Our extremely close relationship with our sales channel allows us a lot better view of what the customer is looking to do with regards to this refrigerant change. And so I feel like that we can pivot and respond very, very quickly and have the appropriate inventory of these components ready to go as a result of that. Julio Romero: Okay. Understood. So deliveries begin to Q — the guide is expecting some delayed replacement happening in the back half of maybe orders accelerating. But that would benefit ’25 from a delivery standpoint. Matt Tobolski: Yes. Certainly, ’25 is — it’s that kind of lead-up in the second half. But to your point, we do expect to see that velocity really accelerating in the second half of the year from orders and really conversion to sales as well. Julio Romero: Okay. Got it. That’s helpful. And Matt, you talked about the capital investments into Longview and Redmond. It should be finished by 4Q and 3Q of this year. Any way to help us conceptualize how much increased capacity results from those investments? Matt Tobolski: That’s a great question, Julio. And I’ll say it’s a very product mix dependent answer to that. But the investments that are being made are being made with the ability to really capitalize on the large volume growth within data center sales. And so I would just leave it at with the product mix potential. In other words, low variability, high volume data center solutions. There is a substantial upside potential relative to the investment costs or relative to the capacity increase from a square footage perspective, given that product mix potential. Julio Romero: Got it. Very helpful. I’ll pass it on. Thanks very much. Operator: Thank you. And your next question comes from the line of Brent Thielman from D.A. Davidson. Please go ahead. Brent Thielman: Hi, great. Thanks. Gary or Matt, can you just update us on the pricing strategy? I think you were out with 1% increases a month. Where you’re at today and where you plan to go going forward? Gary Fields: Sure. I’ll take that one real quick. So we began those — let’s see. I think it was October, October, November, December, January, February. Yes, we began those October 1 and we continued through February 1. And at this point in time, we don’t have any direct intent of continuing. Now, we reserve the right to change our minds should something change in the world. But as we see it right now, we’ve secured the gross margin targets that we intend to maintain. And while our gross margin might vary a little because of volume and absorption of fixed cost, it’s not — we’re not having any problems with labor or material costs beyond what we had already estimated recovering with those [5.1 per centers]. So at this point in time, I think we’re good to go for a while. Brent Thielman: Okay. Gary, any rough sense of where that kind of bridge is relative to the industry from a pricing perspective? I know you’ve talked about that in the past, but where does that sit today from where you can see? Gary Fields: Well, I don’t have anything different than what I’ve been saying, that we used to be around 15%. As a result of the 2023 energy standard, everybody had to come up closer to us. We were still above that standard, but they had to come up very close to us. And there was cost associated with that. So that narrowed the gap to somewhere around 8% to 10%, probably closer to 10%. Now, we’ll have some empirical evidence of that here very, very soon, because a lot of school districts will position their bid documents such that they’ll say, Basis of Design, Base Bid is AAON. Give us an add or deduct for these other manufacturers. And that’s one of the primary places that we pick up real empirical data on that. We get some other more subjective data from our reps. They’ll say, well, we got this job, and the best that anybody could align with us was X. And this looks like what our premium was. But oftentimes, the bill of materials doesn’t match really well. So, like I say, it’s a bit subjective. But we’re still thinking we’re around 8% to 10%. Now, with the conversion to R-454B, or call it the new refrigerant, because Daikins use an R32 is my understanding. There are some manufacturers that have been very open about the fact that they’re going to have to charge more money for that. We’ve been equally open about it that we don’t see that in our materials cost or development cost or anything like that. So, at this point in time, we don’t have any change in price to go from 410A to 454B. So, if these other manufacturers have additional cost to do that, that could narrow this gap just a bit more. Brent Thielman: Okay. The mid-single-digit price expectation for this year is reflective of what you’ve done to date? Gary Fields: Yes. Brent Thielman: Maybe there’s upside if you decide to resume. Got it. Okay. Gary Fields: Yes. Brent Thielman: And then back on BASX. Data centers looks like it’s growing very nicely. It looks like the clean room system is a little slower, just parsing through the different product lines. Is that a function of you allocating more resources to the data center market right now, just given how strong it is? Is it just timing? And I guess, is there any line of sight with the CHIPS Act to see that part of the business accelerate? Matt Tobolski: Yes. We certainly saw the semiconductor clean room market conversion of the new facility construction be slower than was originally expected. So we’ve definitely seen that investment be a little bit slower out of the gate. But certainly, on the data center side, one of the advantages of data centers’ ability to grow from a revenue perspective is the single design high repetition that allows us to really scale that production up faster. And so we’re really able to optimize manufacturing processes and really drive efficiency and productivity with that product type. So that has really helped –the combination of those two factors has really helped the data center market really outpace the clean room market within the BASX segment from a growth perspective. Brent Thielman: Got it. Thanks, Matt. And then just the last one, the Coil Products division or Longview, I think you’ve had maybe some inefficiencies there just as you’re sort of implementing BASX. Obviously, you’ve got a huge expansion you’re working on. I’m sure that’s created a few things to work through. What’s embedded in this outlook for this year just in terms of that division? Matt Tobolski: Yes. Just from a very valid point, from a standpoint of there’s a lot of stuff going on down within the Longview facility itself, as we look at converting a lot of these investment efforts, they’re definitely not a flip of switch. And so as we look at bringing online the new facility expansion and moving some more BASX production lines down to that facility, that really, from a 2024 perspective, is not going to materialize huge impacts in the numbers. That investment and that real growth is going to really materialize in 2025 revenue and sales. And so, really, the 2024 outlook, or at least the expectation out of Longview, is growth, but definitely not the dynamic growth we expect when a lot of that capacity comes online. And we can really start bringing some more production capacity in the data center market and meaningfully impact the results there. Brent Thielman: Got it. Understood. Thank you. Operator: Thank you. [Operator Instructions] There are no further questions at this time. Mr. Mondillo, please proceed. Joseph Mondillo: All right. Thank you, everyone, for joining on today’s call. If anyone has any questions over the coming days and weeks, please feel free to reach out to myself. Have a great rest of the day, and we look forward to speaking with you in the future. Thank you. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you all for participating. You may all disconnect. Follow Aaon Inc. (NASDAQ:AAON) Follow Aaon Inc. (NASDAQ:AAON) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

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Shoals Technologies Group, Inc. (NASDAQ:SHLS) Q4 2023 Earnings Call Transcript

Shoals Technologies Group, Inc. (NASDAQ:SHLS) Q4 2023 Earnings Call Transcript February 28, 2024 Shoals Technologies Group, Inc. misses on earnings expectations. Reported EPS is $0.12 EPS, expectations were $0.17. Shoals Technologies Group, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). […] Shoals Technologies Group, Inc. (NASDAQ:SHLS) Q4 2023 Earnings Call Transcript February 28, 2024 Shoals Technologies Group, Inc. misses on earnings expectations. Reported EPS is $0.12 EPS, expectations were $0.17. Shoals Technologies Group, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon and welcome to Shoals Technologies Group Fourth Quarter 2023 Earnings Conference Call. Today’s call is being recorded and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Mehgan Peetz, Chief Legal Officer for Shoals Technologies Group. Thank you. You may begin. Mehgan Peetz: Thank you, operator and thank you everyone for joining us today. Hosting the call with me are CEO, Brandon Moss; and CFO, Dominic Bardos. On this call, management will be making projections or other forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. As you listen and consider these comments, you should understand that these statements, including the guidance regarding first quarter and full year 2024, are not guarantees of performance or results. Actual results could differ materially from our forward-looking statements, if any of our assumptions are incorrect or because of other factors. These factors include, among other things, the risk factors described in our filings with the Securities and Exchange Commission, including economic, market and industry conditions, defects or performance problems in our products or their parts, including those related wire inflation shrinkback matter, failure to accurately estimate the potential losses related to such matter and failure to recover those losses from the manufacturer, decrease demand for our products, policy and regulatory changes, supply chain disruptions and availability and price of our components and materials. Although we may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. We caution that any forward-looking statement included in this discussion is made as of the date of this discussion and we do not undertake any duty to update any forward-looking statements. Today’s presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the company’s fourth quarter press release for definitional information and reconciliations of historical non-GAAP measures to the comparable financial measures. With that, let me turn the call over to Shoals CEO, Brandon Moss. Brandon Moss: Thank you very much, Mehgan, and good afternoon, everyone. I’ll start today’s call with some key highlights from the full year 2023 and the fourth quarter. I will follow with an overview of solar market conditions and then discuss our plan to expand and relocate operations to a new facility in Portland, Tennessee. I will then provide an update on the wire insulation shrinkback warranty investigation and remediation, and finally, wrap up with a discussion of our strategic priorities before turning it over to Dominic, who will review our financial results and discuss our outlook for 2024. 2023 was another year of tremendous execution for Shoals, with revenue growing approximately 50% for the second consecutive year. In fact, Shoals has grown revenue at 41% CAGR since 2020, significantly outpacing the industry’s growth of 17% over the same period. Our ability to drive operational leverage as we grew revenue contributed to full year adjusted gross profit increasing 75% compared to the prior year. Adjusted EBITDA was up 86% year-over-year, while full year adjusted gross margin and adjusted EBITDA margin both expanded almost 700 basis points compared to the prior year. Notably, with full year 2023 adjusted EBITDA of $173.4 million, we achieved the high end of our outlook for 2023 adjusted EBITDA, which was raised when we reported third quarter earnings. And as Dominic will discuss in greater detail, cash flow from operations was $92 million, up 133% from 2022. We are pleased that Shoals has transitioned into a company with strong cash flow generation. Turning to fourth quarter highlights. Shoals had another strong quarter with revenue growing 38% year-over-year to $130.4 million. Backlog and awarded orders were $631.3 million, up 47% year-over-year, and approximately flat sequentially, reflecting continued strong demand for our products. The company added over $128 million in orders in the quarter, which was an increase of 147% year-over-year. Further, our quote volumes remained very strong, growing 154% year-over-year. In addition, the number of quotes is also growing while the size of the jobs continues to rise. Subsequent to quarter end, we bolstered our domestic leadership position after entering into a master supply agreement with a new top solar EPC. And international markets continue to develop as a growth driver, representing more than 13% of our backlog and awarded orders. Moving now to the solar market landscape. The long-term fundamentals for solar are incredibly strong. Demand for energy is steadily rising according to the EIA. Analysts expect U.S. demand for electric power to continue growing through 2050, driven by sustained economic growth and the shift toward electrification. Solar offers the lowest levelized cost of energy because it requires zero fuel costs. We expect the price of solar will continue decreasing due to reduced cost of solar panels, battery storage, and additional scale. We believe this trend will drive solar market growth in the coming decades. In fact, U.S. solar generation capacity is expected to double by 2030 and nearly double again by 2050. In addition, according to the EIA’s short-term energy outlook published in January, solar is expected to be the leading source of new electricity generation over the next two years, with 36 gigawatts of new solar capacity across all solar segments coming online in 2024 and an additional 43 gigawatts in 2025. This incremental capacity is expected to boost the solar share of total generation, the 6% in 2024 and 7% in 2025, up from the 4% in 2023. Shoals is excited to be a leader in the energy transition space with our market leading solutions in electrical balance of systems. While the long-term solar market outlook is very strong, in our core utility scale segment, project delays have contributed to slowdowns reported by our utility scale peers in Q2 and Q3 of last year. Higher financing costs, extended equipment lead times, particularly for transformers and switchgear, and long interconnection queues are all exacerbating industry weakness. The industry slowdown is significant and will impact our results in the first half of 2024, but we expect this trend to reverse over time. When you look at the EIA data on project delays, there’s been a significant increase over the course of the last two years, with delayed projects increasing from 36% in the first quarter of 2022 to 62% in the fourth quarter of 2023. As Dominic will discuss, we’re providing first quarter guidance to assist analysts with modeling. While short-term hurdles exist, we remain confident in the long-term fundamentals. The undeniable ongoing shift toward renewables, driven by cost competitiveness and sustainability goals, creates a significant growth opportunity for the industry. We believe we’re well-positioned to capitalize on this trend through our focus on utility scale projects and proactive approach to mitigating near-term challenges. Further, as we discussed on our last call, we see a compelling opportunity in the community scale commercial and industrial segment. Though these projects are smaller than utility scale, they share many of the same challenges, including high labor costs for deployment and supply chain challenges that our technology was developed to address. We believe our value proposition will remain attractive even in the context of smaller projects. To that end, we’re excited about the Department of Energy’s recent pledge to meet the National Community Solar Partnership target of 20 gigawatts of community solar by 2025, which is almost triple today’s 7 gigawatts. Though it’s still early days, we think this could provide an exciting opportunity to offset the delays and push-outs in utility scale with projects that have a faster turnaround. We are currently building out focused teams to take advantage of this opportunity. Moving to international. The landscape is evolving. Following COP28, there’s been a fresh push for renewables as nations have realized they are not on target to meet emissions goals. This has resulted in some nations tripling their commitments by 2030. While the outlook for global growth in 2024 is more muted, primarily due to China’s expected slowdown and a stabilizing European market post-energy crisis, we see bright spots. Specifically, Middle East and Africa are showcasing significant growth potential. We’re actively exploring opportunities in these emerging markets, confident that our expertise translates well to new geographies. As we have discussed, international markets have the potential to be a major growth driver. In fact, as of year-end, international represented more than 13% of our backlog in awarded orders. We remain largely focused on specific higher growth markets within Europe, Africa, Latin America, and Australia, which combined are more than double the size of the U.S. market in growing at a 9% CAGR through 2026. We are pleased to report our sales team is making significant progress, recently securing projects in Angola, Colombia, Nigeria, Peru, and Serbia. We expect growth to accelerate as international EPCs begin to appreciate the value proposition of our entire product suite. Looking ahead, we will continue strategically growing our international team and investing to support growth and further customer traction. Turning now to our recent announcement to invest in a new facility in Portland, Tennessee. Over the next five years, Shoals is committed to invest a total of $80 million to expand and centralize our existing manufacturing and distribution operations into a new 638,000 square foot state-of-the-art facility near our existing facilities. Since the beginning of last year, we have been focused on increasing production capacity and enhancing operational efficiencies to meet the growing demand for our products. We believe that the new plant will allow us to achieve these objectives and marks a critical milestone in our journey. We are confident that it will pave the way for the company’s continued long-term growth. We are also thrilled to be investing in our workforce, becoming an employer of choice in the region, and further contributing to the thriving economic landscape of Tennessee. We are grateful for the support of Governor Lee and the Tennessee Department of Economic and Community Development and look forward to a strong partnership in the years ahead. It’s important to note that while this is our most significant capital investment, once complete, we expect the new plant will ultimately drive operational efficiencies. In addition, we are committed to keeping Shoals asset-light. I will now provide an update on where we stand with our investigation and remediation of the wire insulation shrinkback warranty issue. As disclosed in our third quarter earnings call, we filed a complaint to recover damages caused by defective wire that Prysmian Cables and Systems USA LLC sold to Shoals between 2020 and approximately 2022. Through December 31, 2023, Shoals had already expended $4.7 million of cash in the identification, repair and replacement of defective wire and is seeking full recovery from Prysmian for those as well as future expenses related to the issue. Because of the pending litigation, we are limited to what we can discuss publicly. However, there are some important updates we can provide. First, initial wire insulation shrinkback issues were found on at least 20 sites of the approximately 300 sites that have had the defective Prysmian red wire. In addition, after we filed our complaint and customer service notices were issued to those approximately 300 sites, we were informed that approximately 10 incremental sites experienced shrinkback. Second, of those approximately 30 sites, 4 sites did not display insulation shrinkback upon inspection. In situations where there was shrinkback, we are working to remediate the issue as quickly as possible. Finally, as we continue to analyze all of the incoming information and remediation projections, we have determined that the range of expense we communicated last quarter is still appropriate. Dominic will cover in further detail. Shoals is committed to quality. As we work to remedy the Prysmian defective wire issue, our top priority is taking care of our customers. We are working to remedy the issue as efficiently as possible and seek to accelerate remediation where we can. As highlighted by our new top EPC engagement, we want to emphasize that our underlying business remains very strong and we expect it to continue to flourish through the resolution of this issue. Moving to the patent infringement complaints filed by Shoals with the ITC in May of 2023, the evidentiary hearing is scheduled in March with a final ruling expected in November. Our district court cases would resume after that time. As previously stated, we remain committed to vigorously defending and protecting our intellectual property rights. I’ll now wrap up by highlighting our strategic priorities for 2024. We will continue to pursue markets that support global electrification and are impacted by skilled labor needs and supply chain constraints. Our core competency of engineering prefabricated plug-and-play solutions at scale align well with market needs. By delivering these high-value prefabricated solutions, we can protect our margins while providing a much higher quality product. Shoals will continue to protect and grow our core utility scale solar business. This includes growing share within our domestic solar base and accelerating growth in international markets. We also expect to accelerate our diversification into new markets that support electrification. This includes leveraging our very strong balance sheet and cash flows by investing for both organic and inorganic growth. In fact, despite accelerating remediation efforts for the defective Prysmian wire for which we plan to spend $31.1 million in 2024, we still expect to increase our cash from operations by 20%. As we make these investments, we will continue to drive operational excellence and build our organizational capacity to maintain our leadership position in domestic utility scale solar and grow to a leadership position in newer market segments. Growth in new markets will require some reinvestment of profits from our core business, which we will do prudently as we strive to generate an attractive return on our investments for our shareholders. Shoals is an innovation leader with strong product development capability. While the industry is going through a period of transition, our long-term future is bright with record-quoting activity and strong orders. As market conditions improve, we expect Shoals will continue to take share and outgrow the market for many years to come. I’ll now turn it over to Dominic, who will discuss fourth quarter 2023 financial results. Dominic Bardos: Thanks, Brandon, and good afternoon to everyone on the call. Turning to our results. Fourth quarter net revenue grew 38% to $130.4 million versus the same period in 2022. Our higher sales were driven by increased demand for our products in domestic utility scale solar projects. Gross profit increased to $55.4 million compared to $40.4 million in the prior year period. Gross profit as a percentage of net revenue was 42.5% compared to 42.7% in the prior year period, primarily due to higher labor costs. The increase in labor was slightly offset by increased leverage on fixed costs. During the quarter, we did not incur wire inflation shrinkback warranty liability expenses and our cost of goods sold, so there was no adjustment to GAAP gross profit necessary during the period. I would like to point out that we have added a quarterly reconciliation of 2023 adjusted EBITDA to the appendix of our investor presentation. This reconciliation of adjusted EBITDA illustrates the quarterly impact of the shrinkback expenses. As you may recall, we disclosed the Q3 and full year-to-date impact through Q3 last quarter, but we did not individually break out the elements incurred in the first and second quarters of 2023. I hope you find this additional information helpful. Further, as Brandon mentioned earlier, we continue to analyze all new information regarding the potential loss related to the defective Prysmian wire. While we investigated approximately 10 additional sites during the quarter, findings were consistent with assumptions incorporated in the remediation range we communicated last quarter, which is $59.7 million at the low end and $184.9 million at the high end. During the quarter, you will see that we incurred an additional $0.7 million of litigation expenses associated with this issue in the SG&A section of our income statement. That is why our adjusted EBITDA reconciliation indicates $0.7 million associated with the installation shrinkback issue in the fourth quarter. Also, during the quarter, we did expend $1.7 million in cash as we ramped up remediation efforts. You will see that the remaining warranty liability on our balance sheet is now $54.9 million. We believe we are positioned to move faster on remediation efforts in 2024, so we have reflected a current portion of the remaining liability at $31.1 million. This represents the amount of cash we estimate we will consume during the next four quarters to continue remediation efforts. Shifting to selling, general and administrative expenses for the fourth quarter. We incurred $21.5 million of SG&A expense compared to $14.9 million during the same period in the prior year. The year-over-year increase in general and administrative expenses was primarily related to higher non-cash stock-based compensation, legal fees related to the patent infringement and wire installation shrinkback complaints, and planned increases in payroll expense due to higher headcount supporting growth. As I mentioned earlier, $0.7 million of this expense was specifically related to the wire installation shrinkback litigation. Net income was $16.6 million in the fourth quarter compared to $118.3 million during the same period in the prior year. The prior year period benefited from a $110.9 million gain on the termination of the tax receivable agreement. On a related note, we completed the simplification of our legal structure in Q4, transitioning from the prior up C structure to a traditional C corp. Adjusted EBITDA in the fourth quarter increased 30% to $39.1 million compared to $30.1 million in the prior year period. Adjusted EBITDA margin was 30% compared to 31.8% a year ago, reflecting lower gross margin partially offset by operating expense leverage. I want to take a moment to clarify that when we raised our outlook for 2023 adjusted EBITDA to $165 million to $175 million during the third quarter earnings, we did so on the basis that year-to-date adjusted EBITDA was $134.3 million, implying a range for fourth quarter adjusted EBITDA of $30.7 million to $40.7 million. Said another way, fourth quarter adjusted EBITDA of $39.1 million came in at the high end of the implied fourth quarter range of $30.7 million to $40.7 million. I hope this and the additional detail in the investor deck materials assist you in tying out the numbers. Adjusted net income was $21.3 million in the fourth quarter compared to $25.0 million in the prior year period. Cash flow remained strong in the fourth quarter with $26.4 million of cash flow from operations offset by $2.9 million of investment in capital expenditures. For the full year, cash flow from operations grew 133% to $92.0 million. After capital expenditures of $10.6 million, we used the majority of the remaining cash to paydown our revolver and term loan facilities. We are pleased to have continued our trend of improving our leverage ratio again during the period. As of December 31st, 2023, we had $631.3 million in backlog and awarded orders, an increase of 47% year-over-year as the company added over $128 million in orders during the period. It’s important to note that some international orders have longer lead times than domestic orders and we are also winning domestic jobs that extend beyond our historical revenue cycle of nine to 13 months to realize revenue from awarded orders. Approximately $175 million of our backlog and awarded orders at year-end have delivery dates beyond 2024. Turning now to the outlook. Given the current headwinds in the utility scale solar market, some of our customers have experienced project delays. As a result of the current slowdown, we are providing an outlook for the first quarter to help set expectations, but note that it is not our intention to provide quarterly guidance on an ongoing basis. Based on current business conditions, business trends, and other factors, for the quarter ending March 31st, 2024, the company expects revenue to be in the range of $90 million to $100 million and adjusted EBITDA to be in the range of $15 million to $20 million. Based on current business conditions, business trends, and other factors, for the full year 2024, the company expects revenue to be in the range of $480 million to $520 million; adjusted EBITDA to be in the range of $150 million to $170 million; adjusted net income to be in the range of $90 million to $110 million; cash flow from operations to be in the range of $100 million to $120 million; capital expenditures to be in the range of $15 million to $20 million; and interest expense to also be in the range of $15 million to $20 million. Further, in thinking about the cadence of the year, we expect second quarter revenue to see modest improvement over the first quarter, but still have an adjusted EBITDA decline year-over-year, prior to achieving operating leverage in the second half of the year. While it is always our goal to grow profitably, we will continue to invest in the business to maintain our leadership and position Shoals to take advantage of long-term opportunities to create shareholder value. To that end, we are continuing to invest to scale the business. Finally, with the significant cash flow we expect to generate in 2024 and beyond, Shoals has new balance sheet optionality to further drive shareholder value. Specifically, with 2024 cash flow from operations of $100 million to $120 million, up 20% at the midpoint, our capital deployment will continue to emphasize further deleveraging of the balance sheet and growing the business both organically and inorganically. With that, I’ll turn it back over to Brandon for closing remarks. Brandon Moss: Thanks, Dominic. I’d like to close by thanking all of our customers for their confidence in Shoals, our employees for enabling us to effectively serve our customers, and our shareholders for their continuous support. And with that, thank you, everyone. I appreciate your time today. We will now open the line for questions. Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Mark Strouse with JPMorgan Chase & Company. Please proceed with your question. See also 20 Countries With the Longest Coastlines in the World and 15 Countries with the Most Beautiful Castles in the World. Q&A Session Follow Shoals Technologies Group Inc. Follow Shoals Technologies Group Inc. or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Mark Strouse: Yes, good evening. Thank you very much for taking our questions. Wanted to start with the 2024 guide. Can you just talk about the visibility that you have into the backend loaded year? And the cancellation — or I’m sorry, are there any cancellations, first of all? And then the delays that you’re seeing, are they kind of indefinite delays? Or do you have kind of fixed start dates in mind? Brandon Moss: Mark, hey, it’s Brandon. Thank you for the question. I’ll start maybe in reverse order of your questions. I guess, look, first and foremost, want to be — want to first congratulate the team for a fantastic year. Revenue up 50%. Earnings up 86%. Another significant year improvement in operating cash. So, fantastic year to build from into 2024. As far as project delays go, look, we see an industry-wide issue. We’re seeing it across market. We believe it’s transitory. The issues are the same as we’ve heard here in recent quarters. Project financing, supply chain, interconnections, IRA confusion. Because of this, we’ve seen some reductions to multi-year growth rates in industry publications. We’ve also looked into EIA data specifically. We’re seeing project delays going from 36% in early Q1 of 2022 to 62% in the backend. So, really, what is happening for us is you’re seeing a longer time from quote to purchase order. As we talked about in the prepared earnings, our order book is still robust. But we did see signs of slowdowns with project push-outs in late fourth quarter and in January. Maybe important to say we have seen improvement in our quote to order conversion in February. It’s too soon to call this a definitive recovery. But we have seen some improvement in February. So to the question, not necessarily order cancellations. It is just taking us longer to move from a quote stage to an actual purchase order. Dominic, maybe I’ll kick it to you to answer the first part of the question. Dominic Bardos: Yeah. With regards to the guide, one of the things that we take pride on is being able to build a bottoms-up guide as we look at our business. In 2023, I’m really pleased that the guide that we issued at the beginning of the year we achieved within that range on every metric or exceeded. So as we look at our project-by-project workload, some of the push-outs that we’ve referred to have perhaps shifted quarters. We normally would have projects move in and out of quarters, but we did see some heavier movement out of Qs 1 and 2. With regards to our backlog and book of business and our awarded orders at the end of the year, we always enter every year with some go-get. We feel like we have an opportunity to go chase additional revenue where we can book and build within a year. So we still have an opportunity from a sales standpoint. As Brandon mentioned, we’ve seen some improvements here recently in the quarter that we wanted to call out where our activity in February was doing really well. And so I think the shorter answer would be we do look at our projects, we look at our book of business, and we look at those jobs that are available to us in our pipeline that have not yet been awarded. We take all that into consideration as we issue our guide. Mark Strouse: Okay. And then — that was helpful. Thank you. I think the order activity speaks for itself, but I just want to get your latest thoughts on market share dynamics. Is this maybe a temporary pullback in the market here? Is it creating any aggressive pricing or anything like that from your competitors? Thank you. Brandon Moss: No, I appreciate the question. The issue is market-driven, not market-share driven. Our value proposition remains extremely strong. And I think we’ve shown a great example of that by adding another top EPC here after the first of the year. Our solutions of being more cost-efficient to reduce capital spend, reducing operating costs by delivering higher quality and durability after install, and our ability to be more sustainable on projects because we reduced the need of trenching. I think all holds very strong still in the marketplace. Our current customer base understands that value proposition and remains committed to us. Mark Strouse: Thank you. Operator: Thank you. Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question. Brian Lee: Hey, guys. Good afternoon. Thanks for taking the questions. Maybe just a quick follow-up to Mark’s. Can you — Dominic or Brandon, can you quantify what you’re seeing? It sounded like two quarters, like first quarter, second quarter stuff moving heavier out to the right. What’s the typical backlog conversion, and cycle time prior to this year? And then kind of what you’re seeing out there and embedding based on how you set up guidance for ’24? And then, Dominic, you also mentioned the book and burn business or get-go business. I think in the past it’s been 15% plus or minus each year. So the guidance baseline you’re given today that would imply $75 million. Or is that different this year in terms of what you’re seeing or embedding into the numbers? Dominic Bardos: Sure, Brian. So there’s a couple things to unpack in there. I think from the project standpoint and the timelines it’s taking, we have seen an increase. I think Brandon mentioned the EIA data that has project delays. Projects that are out there had 36% of them in Q1 of 2022 were experiencing delays. That number is up to 62% at the end of the year. So our timeline has extended. In the past we would have said awarded orders become revenue within nine to 13 months. That has definitely — we’ve seen some extension on that. The number of days that it takes us to go from the quotes to the actual purchase orders and revenue has increased as a result of that. So when we look at Q1 and Q2 when we initially got these awarded orders and the delivery dates were expected to have delivery in the first half of the year and now some of those projects may be in Q2 and Q3 or Q3 and Q4. We are seeing some push-outs of projects. They haven’t canceled. They’re still in the book of business, but there are some delays in there. That’s one of the reasons why in the backlog to your question about the go-gets, I don’t want to always think about it in terms of a percentage. I think there’s a fair amount of projects that we can win every year. As projects get larger, then yes, naturally that number will go up. But as our denominator gets larger, it’s harder to keep getting 15% or 20% go-gets every year. So we ended the year — as I mentioned, we had $631 million of backlog. $175 million of that is beyond 2024. So we do have some go-get to go finish out this year. And we believe that’s one of the reasons why the second half is going to be the opportunity to have the increased lift because our normal sales cycle, it does take some time to secure the job, work with the EPCs, get it designed, get the purchase orders, get the materials and build it. So it does take a little bit of time. We still have the opportunity to do that in the first half and that’s why we issued the guide that we did. Brandon Moss: Brian, probably also may be worth mentioning, just the international business with backlog and orders growing to 13%, the cycle times on those projects tend to be longer as well. So I think you’ve summed it up well of this project push-out moving to the right approximately two quarters. Brian Lee: Okay. That’s super helpful, guys. Maybe also on the guidance, just looking at the EBITDA, if we strip out Q1, it seems like the guidance for 2024 implies you’ll be doing EBITDA margins well north of 35%, maybe even 40% range in the second half of the year. That’s like 500 basis points higher than 2023 levels. Is that fair, first off? And then, I guess, what’s sort of the driver there? Is it just gross margin expansion? Is it the OpEx leverage? Maybe speak to some of the drivers and moving parts because it seems like the background implied margins are quite uniquely higher than what you saw for most of 2023. Dominic Bardos: Yeah. So the operating leverage is first and foremost going to be critical. In the first half of the year, we are experiencing with the lower revenue, perhaps even negative growth year-over-year in the first half of the year, we are definitely going to be losing some leverage. We always look at all of our SG&A expense and where the investments are going to be made from that point down the line. And so it’s a little bit of both. We’re really gaining the leverage. There were some unusual, I would say, SG&A things that we had put into place last year. We completed some projects. We’re not going to repeat those things. We’ve simplified our legal structure. We’ve gone through the filings and the secondary offerings that were necessary in the first half of the year. We’re securing, we’re reviewing all of our external spend and look at SG&A to make sure it’s as efficient as possible to drive value. So we do believe that the EBITDA margins that we’re projecting that are implied for the back half are achievable. That’s what we’re going after. Brian Lee: All right. Great. Last one for me, if I could squeeze it in. The shrinkback issue, you took the charge in Q2, you took the bigger charge in Q3, and then no charge here in Q4. I guess — and you’re keeping the overall liability range unchanged. So how should we interpret that? Does that mean you feel like you’ve got this under control? We shouldn’t see outside of some of the cash flow that you have to spend to remediate accruals on the P&L going forward? Is it sort of more ring-fenced at this point, just based on the results you saw here in the quarter? Any kind of interpretation would be helpful there. Brandon Moss: Yeah, Brian, I would say because of our litigation we’re always limited in what we can say here. We are trying to disclose some more information here than I think we have in previous quarters. What I think is important to note when we originally notified customers, we disclosed approximately 20 sites out of 300 sites that had the Prysmian red wire on it were displaying shrinkback. Since we notified the customers, we’ve had an additional 10 sites that required some sort of additional inspection, and four of those sites displayed no evidence of shrinkback wire. So we continue to work on our remediation effort of known sites. We are working with customers, their timelines, and obviously our internal production timelines. And we’ve got the opportunity this year to pull some remediation efforts forward a bit. I think as we’ve disclosed in the prepared remarks, we plan to spend $31.1 million this year on that remediation efforts. So that’s where things stand today. Dominic Bardos: And the final question that you had about where does it reside, that’s the point. We have assumptions in the remediation range. And the results that we have thus far were consistent with those assumptions. That’s why there was no charge necessary on the income statement. And to your point, it would just play out on the balance sheet. The liability would come down as we expend the cash. That’s where we stand at the end of ’23. Brian Lee: All right. Thanks, guys. I’ll pass it on. Brandon Moss: Thanks, Brian. Operator: Thank you. Our next question comes from the line of Philip Shen with ROTH Capital Partners, LLC. Please proceed with your question. Philip Shen: Hi, everyone. Thanks for taking my questions. The first one is on the cadence of quarterly revenue. You’ve given us the Q1 guide. You said, I think, that the Q2 revenue might be a modest improvement over Q1. Do you anticipate Q1 to be the bottom? And do you — right now you expect things to accelerate in the back half. I guess the question there is, do you see these headwinds relieving or being relieved in back half of this year? If so, what’s the basis of that thinking and what is the risk that you think that these challenges could extend through into back half or even beyond? What’s the confidence level that things really improve in the back half? Thanks, guys. Dominic Bardos: Yeah. Let me start and unpack some of that, Phil. I think in terms of our cadence, we typically, as we’ve been growing the business, have seen about 40% of the revenues occur in the first half of the year, 60% back half. So it’s typically, as we’ve been growing and ramping, kind of a natural. A lot of orders get placed in the first quarter. As we mentioned, some of the signs that we had of slowdown in Q4 into January, we’ve seen some improvement in quote-unquote order conversion here in February. So as we look at the normal pacing of this, the first quarter would naturally be a lower quarter for us. So in terms of the bottom of our forecast for the year, I think that’s a fair characterization from a quarterly revenue perspective. Clearly we expect jobs to continue to close. We’ve seen some push-outs that were expected to be in the first half. As we’ve mentioned, move to the back half. We do not have any reason to believe those jobs will cancel. So in terms of prognostication about how the industry recovers, there’s a number of factors that Brandon mentioned. There was some wishful thinking on perhaps some of the interest rates or the financing cost rate. Did folks have to go and chase down some new financing and power purchase agreements? The interconnection things, I think, are pretty much just there. People know that. I don’t think that’s driving immediate corrections or slowdown in the space. With the project delays themselves, like I said, there’s a number of reasons, a number of factors, but we are always going to work with our customers on their timelines. If they ask us to push a quarter out, we’ll absolutely do that for them. Philip Shen: Great. Thanks, Dominic. The second topic here is on the new top EPC. I was wondering if you could share a little bit more specifically. Is there any way you can quantify the size of the order and what percentage of their business do you think you won? And it sounds like because of the timing, it sounds like you won that in Q1 this quarter. So, is it fair to say that it’s not in year-end ’23 backlog and it wasn’t including the order book or the bookings for Q4? And then, are the MSA terms similar to normal orders? And then final — I think that’s the last one. So I know it’s a lot of questions, but they’re all tied together. Brandon Moss: Phil, that’s probably pushing into a realm that we really can’t disclose publicly. We’re very optimistic. It is a top EPC. And I think some of your questions might logically make sense. We are not in a position to comment specifically about terms, about what was in, what’s not. We just are very pleased that they recognize the quality Shoals can bring and we’re very pleased to be a part of their family going forward. As I mentioned last call, we still believe there’s room to grow here in the domestic market, both with new customers and to gain additional wallet share with current customers. And this is great evidence of it. We’re very excited as a team and a big win for Shoals. Philip Shen: Great. One follow-up there. From a timing standpoint, is it fair to say that this bookings number will be in the Q1 period when you guys report next? Dominic Bardos: Phil, we’re not going to comment on the timing of when those specific projects go forward with that EPC. Philip Shen: Got it. Okay. Thanks, guys. I’ll pass it on. Dominic Bardos: All right. You got it. Operator: Thank you. Our next question comes from the line of Andrew Percoco with Morgan Stanley. Please proceed with your question. Andrew Percoco: Great. Thanks so much for taking the questions. Maybe just to start out continuing with the revenue conversation for 2024. Totally understand that you’re calling for a back half inflection in growth, but I was just curious if you could elaborate on potential retrofit opportunities. I think you have some interesting products that you guys have highlighted from time to time in terms of potentially going to existing assets to deploy some of those products. What’s the opportunity there? Is it meaningful enough to maybe drive additional revenue growth? If you can also maybe elaborate on what you’re seeing on the EV charging and battery storage side of the business in terms of what’s embedded in the 2024 guide. Thank you. Brandon Moss: Yeah. I’ll comment on that. This is Brandon. Great questions. I would say on our product base that things have been launched like Snapshot in particular that can be deployed post installation. We are still very early launch with that product today. I would not expect that to be a huge factor in driving our back half growth. It is going to come from our core — mainly domestic utility scale solar business. As it relates to EV, a lot of strong interest in that product today. Last call we announced a partnership with Leidos. We are in the process of deploying that now going well. But again, the back end growth of this year will come from our domestic solar business. Andrew Percoco: Got it. That’s super helpful. Maybe this is my follow up on the manufacturing expansion. Can you just maybe remind us where your capacity stands today, the utilization rate on some of those facilities, and where this additional facility will bring you in terms of a total revenue or megawatt number in terms of total capacity once this facility is up and running? Brandon Moss: Yeah. As we disclosed last quarter, we took our production capacity from 20 gigawatts to approximately 35 with the ability to scale up to 42. This new facility, the reason that we are investing in it and we are excited about this investment both for the local area of Portland and our employees is really to have a purpose built facility which enables us to consolidate our operations in Tennessee. We have three plants today in the Tennessee area that are within probably five miles apart. This will enable us to have, again, a purpose built facility that is self-sustaining. We have also recently announced the closure of our California location, manufacturing location and that production will be moving into this new site. So we will provide more specific details as we build out this facility in the coming quarters. Andrew Percoco: Great. Thank you. Operator: Thank you. Our next question comes from the line of Jordan Levy with Truist Securities. Please proceed with your question. Jordan Levy: Afternoon all. I appreciate all the details. I think you may have mentioned customer procurement as one of the challenges driving some delays here. I just wanted to get some color on where you are seeing the biggest pain points for customers on procurement, and is this consistent across the customer base or maybe limited to a select few? Brandon Moss: Yeah. I think, look, like probably everybody else in the industry has mentioned, the supply chain issues mostly center around transformers and switchgear products. So we hear that from many customers. But look, we also hear delays due to permitting, due to labor challenges and due to long interconnection queue lead time. So again, I think it’s an industry-wide phenomenon. Hopefully, we’ll solve over the coming quarters, but a mixed bag across our customer base of what we’re hearing and why. Jordan Levy: Appreciate that. Maybe just as a follow-up, even sort of in a transitory year for the industry, you have some strong guidance on cash flows and free cash flows. I’m sure a part of that you’d like to retain against the warranty potential. But I just want to get your thoughts on utilization of cash flows at this point. Dominic Bardos: Yeah. So a couple things. First and foremost, I think you’ll see that we’ve made another quarter improvement in our leverage ratios as we paydown and continue to retire some expensive debt. The term loan, if you recall, had an interest rate north of 11%. And at the end of the quarter, you’ll see on our balance sheet that we actually started doing a little interest rate arbitrage and utilizing our revolving line of credit to pay down our term loan once the prepayment penalties were gone. We have an opportunity to invest in this industry. We are a company that is innovative and well-respected in our space. And so we’ll always be looking for ways to invest and grow the business both organically and inorganically. As we mentioned, yeah, this is a year when the revenues are a little softer across the marketplace, and we see that. And we believe that we’re going to continue to generate significant cash flows, grow the business, and be in the position to invest. We are positioning our balance sheet to be flexible. And if we see the right opportunity for an acquisition, that is not something we’re going to rule out. And at this point in time, we do not have a plan for dividends or share repurchase, but we’re always talking with our Board about those options as well. So right now, the priority is probably going to be continue to invest in the business, paydown some debt, and be ready to strike if some opportunity comes forward. Jordan Levy: Thanks so much. Appreciate it. Dominic Bardos: You got it, Jordan. Operator: Thank you. Our next question comes from the line of Joseph Osha with Guggenheim Partners. Please proceed with your question. Joseph Osha: Hello there, team. Two questions. First, there’s been a lot of talk recently around data centers, data center resiliency, on-site storage, stuff like that. I’m wondering, looking at that end market, whether you all perceive any opportunities. And then I have one other question. Brandon Moss: Joe, thanks. Good to hear from you. Look, I guess first and foremost, the growth in data centers impacts our business because of power consumption, which is a good thing. And I think we’ll see consumption grow in the coming years at a faster rate than maybe what was previously modeled. So it’s a positive thing for our core business in Shoals. As it relates specific to our interest in data centers, look, we are interested in markets that enable electrification and data centers would be part of those markets. I believe that we’ve got a pretty unique value proposition to be able to build plug-and-play systems at scale and reduce labor costs in the field, also aggregating supply chain issues. So I do believe that our value proposition translates and like any large markets in the electrification space, Shoals is looking at data centers, among others. Joseph Osha: Okay. All right. That’s good. And then second question, I think as everyone on this call knows, there’s a place in service requirement for solar modules brought into the country under the tariff moratorium that ends at the end of this year, which may or may not create some pull forward as developers and owners try and hit that target. I’m wondering as you look at your order book and timing and so forth, are you seeing any evidence that that place in service requirement is influencing project timing at all? Thank you. Brandon Moss: Look, I think that could have an impact on the growth that we’re seeing in the back half of the year, certainly. So I think your intuition is correct there. So my feel is on the market hopefully there’s not a labor constraint there as maybe that unfolds. If it does, we offer a unique opportunity to reduce labor costs. I think it bodes well for Shoals. Joseph Osha: Thank you very much. Operator: Thank you. Our next question comes from the line of Donovan Schafer with Northland Capital Markets. Please proceed with your question. Donovan Schafer: Hey, guys. Thanks for taking the questions. So my first question is just kind of, I guess I don’t know if you can say maybe technical, but getting at the shrinkback. The nature of a shrinkback issue, is that something where — I think like when a new home gets built, there’s usually like in the first few months it kind of settles or something. You might get some cracks, but then it stabilizes. Like a shrinkback like that where the stuff gets deployed in the field, maybe it’s exposed to the elements or whatever, and there’s sort of an initial 12 to 24-month period like adjustment. And so either you see the shrinkback in that first period or you don’t and you’re basically good for the life of that deployment. Is that kind of the nature of it or can shrinkback issues, rear their ugly head five years, 10 years later? Brandon Moss: Dominic, or I’m sorry, Donovan, I think the way that you’ve explained that is accurate. We think about shrinkback occurring after a number of thermal cycles. So as, power on, power off, and then also there’s a climate element that relates to that. I think we’ve outlined that really in our complaint. So you are correct in your assumption there. Donovan Schafer: Okay. And then for the backlog, at Intersolar in January talking to some of your peers, there was — because there’s this awareness of the long lead time items on transformers and high voltage breakers and switchgear that in some cases companies aren’t — they’re more reluctant to maybe engage with a customer or prospect or try to kind of win that business and add it into their schedule unless they can get some kind of proof or demonstrated, some kind of evidence or something from the customer that shows that the customer has done what it needs to do, whether it’s getting in the queue or placing the orders for the right pieces of equipment. So in your case for adding orders to the backlog, when you get a new purchase order and you’re adding it to your backlog, are you applying some discretion in terms of deciding, do we add this to the backlog?.....»»

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Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript

Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript February 28, 2024 Editas Medicine, Inc. beats earnings expectations. Reported EPS is $-0.23, expectations were $-0.52. EDIT isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Editas […] Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript February 28, 2024 Editas Medicine, Inc. beats earnings expectations. Reported EPS is $-0.23, expectations were $-0.52. EDIT isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Editas Medicine’s Fourth Quarter and Full Year 2023 Conference Call. All participants are now in listen-only mode. There will be a question-and-answer session at the end of this call. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to Cristi Barnett, Corporate Communications and Investor Relations at Editas Medicine. Cristi Barnett: Thank you, Maria. Good morning, everyone, and welcome to our fourth quarter and full year 2023 conference call. Earlier this morning, we issued a press release providing our financial results and recent corporate updates. A replay of today’s call will be available in the Investors section of our website approximately two hours after its completion. After our prepared remarks, we will open the call for Q&A. As a reminder, various remarks that we make during this call about the company’s future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, which is on file with the SEC as updated by our subsequent filings. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Except as required by law, we specifically disclaim any obligation to update or revise any forward-looking statements, even if our views change. Now, I will turn the call over to our CEO, Gilmore O’Neill. Gilmore O’Neill: Thanks, Cristi, and good morning, everyone. Thank you for joining us today on Editas’s fourth quarter and full year 2023 earnings call. I am joined today by four other members of the Editas executive team, our Chief Medical Officer, Baisong Mei; our Chief Financial Officer, Erick Lucera; our Chief Scientific Officer, Linda Burkly; and our Chief Commercial and Strategy Officer, Caren Deardorf. We are pleased with Editas’ momentum and progress in the fourth quarter and all of 2023. In early 2023, we shared our vision and the three pillars of our strategy to position Editas as a leader in in vivo program for gene editing and hemoglobinopathies. The first of these pillars, to drive reni-cel, formerly known as EDIT-301, toward BLA and commercialization. The second, to strengthen, reorganize, and focus our discovery organization to build an in vivo editing pipeline. And the third, to increase business development activities with a particular focus on monetizing our very strong IP. So how did we do last year? Well, we achieved a lot. First, we accelerated the clinical development of Reni-cel, exceeding our enrollment goal of 20 patients and sharing clinical updates from our RUBY and EdiTHAL studies in June and in December of 2023. And those accumulating data have strengthened our belief that reni-cel is a competitive potential medicine with a differentiated profile characterized by correction of anemia at normal physiologic ranges of hemoglobin. Second, we strengthened our in vivo discovery capabilities and organization and hired a new Chief Scientific Officer, Linda Burkly, who brings three decades of experience in successfully inventing, developing, and moving new human medicine forward. And third, we increased our business development activities and monetized our IP, leveraging our robust IP portfolio. A critic example was our granting Vertex a non-exclusive license for our Cas9 IP in a focused way to enable the [XSL] launch. Finally, we strengthened our senior leadership team with people who have a proven track record in bringing new medicine through development to approval and commercialization. So how are we executed against these strategies and these objectives? Well, let’s start with Reni-cel. First, on enrollment, we have now enrolled 40 sickle cell and 9 beta thalassemia patients in our RUBY and EdiTHAL studies respectively, and enrollment continues at a good pace. Second, on dosing, we have dosed 18 RUBY patients and 7 EdiTHAL patients, and we have multiple patients scheduled for dosing in the coming month. Patient screening and demand in both studies continue to remain robust. Third, on clinical data, we remain on track to present a substantive clinical data set of sickle cell patients with considerable clinical follow-up in the RUBY study in the middle of 2024, with a further update by year-end 2024. On the regulatory front, we have engaged with the FDA regarding the RUBY sickle cell trial. The FDA agrees that RUBY is a single Phase 1, 2, 3 study and has aligned with us on the study design. Our discussions with the FDA will continue as RUBY and EdiTHAL progress and will be enhanced by our RMAT designation for severe sickle cell disease. Baisong will share further details regarding the development of reni-cel in his remarks, as well as recap the RUBY and EdiTHAL takeaways and clinical data that we provided in December and share more information on the adolescent cohort. Now, let’s turn to in vivo and our pipeline development, where we strengthened our in vivo discovery capabilities in 2023 and began lead discovery work on in vivo therapeutic targets in hematopoietic stem cells and other tissues. As we announced earlier this year, we aim to establish in vivo preclinical proof-of-concept for an undisclosed indication this year. Linda and her team are leveraging key capabilities that we have in-house and she looks forward to sharing more at a future date. Regarding our hemoglobinopathies focus, after a thorough evaluation of the development landscape, we have decided not to pursue internal development of a milder conditioning regime. We believe standalone milder conditioning regimens will be widely available once FDA approves and therefore we have determined that research, clinical development and regulatory investment in hemoglobinopathies can be better deployed for our continued development of in vivo HSE medicines. Turning to business development. In the fourth quarter, we announced a licensed agreement with Vertex Pharmaceuticals. Editas provided Vertex a non-exclusive license for Editas Medicine’s Cas9 gene editing technology for ex vivo gene editing medicines targeting the BCL11A gene in the field of sickle cell disease and beta thalassemia, including Vertex’s CASGEVY. And the upfront and contingent payments pursuant to this agreement extended our cash runway into 2026. This and other agreements, the strength of our patents and the number of companies developing CRISPR/Cas9 medicine reaffirm our confidence that our IP portfolio of foundational U.S. and international patents covering Cas9 use in human medicine are a source of meaningful value. So what are our objectives for 2024? For reni-cel, we will provide a clinical update from the RUBY trial for severe sickle cell disease and the EdiTHAL trial for transfusion-dependent beta thalassemia in mid-2024 and by year-end 2024. We will complete adult cohort enrollment and initiate the adolescent cohort in RUBY, which we’ve already initiated, and continue enrollment in EdiTHAL. For our in vivo pipeline, we will establish in vivo preclinical proof-of-concept for an undisclosed indication, and for PD, we will leverage our robust IP portfolio and business development to drive value and complement core gene editing technology capabilities. We are energized by our progress and execution in 2023. With our sharpened strategic focus, our world-class scientists and employees, and our keen drive in execution, we continue to build momentum to progress our strategy to deliver differentiated editing medicines to patients with serious genetic diseases. Now, I will turn the call over to Baisong, our Chief Medical Officer. Baisong Mei: Thank you, Gilmore. Good morning, everyone. Let’s talk about reni-cel, which is on the clinical development for severe sickle cell disease and transfusion-dependent beta thalassemia. As of today, in the RUBY trial for sickle cell disease, we have enrolled 40 patients and dosed18 patients. We have multiple patients scheduled for dosing in the coming month. We’re also pleased to announce that we have initiated adolescent cohort in the RUBY study, which is one of our 2024 objectives. The interest and demand are high, and adolescent patients have already started screening. In the EdiTHAL trial for transfusion-dependent beta thalassemia, to date, we have enrolled nine patients and dosed seven patients. As I shared earlier, I continue to visit our RUBY and EdiTHAL clinical trial sites and continuously speak with investigators. I appreciate the enthusiasm and support from the investigators and study size. I’m pleased with the momentum of reni-cel in patient recruitment, apheresis, editing, and dosing in both studies. I’m excited to hear from the investigators that patients dosed with reni-cel have already seen positive changes in their lives. As Gilmore mentioned, we have aligned with FDA that RUBY clinical trial is now considered a Phase 1, 2, 3 trial for BLA finding. We have also aligned with FDA on the study design and endpoints, and the FDA has agreed to our activation of adolescent cohort. We look forward to future discussion with FDA and continued collaboration. Turning to clinical data, in December 2023, we shared safety and efficacy data from 17 patients, 11 RUBY patients, 6 EdiTHAL patients. Once again, the data confirmed observation from our prior clinical readouts, including reni-cel driving early and robust correction of anemia to a normal physiological range of total hemoglobin in sickle cell patients. Reni-cel drove robust and sustained increase in fetal hemoglobin in excess of 40%. All RUBY sickle cell patients have remained free of vaso-occlusive events following reni-cel treatment. Reni-cel treated sickle cell and beta-thalassemia patients have shown successful engraftment, have stopped red blood cell transfusion. And the safety profile of reni-cel observed today is consistent with myeloablative busulfan conditioning and autologous hemopoetic stem cell transplant. In addition, the trajectory of the correction of anemia and expression of fetal hemoglobin is consistent across reni-cel treated sickle cell disease patients and beta-thalassemia patients at the same follow-up time points. These data reinforce our belief that we have a competitive product and the product potentially differentiated from other treatments with rapid correction of anemia. Thanks to the deliberate choice that our discovery group has made early in the program. As we have previously stated, the choice of CRISPR enzyme and the target to edit for increased hemoglobin, fetal hemoglobin expression matters. Reni-cel uses our proprietary AsCas12a enzyme to edit HBG12 promoter. AsCas12a increases efficiency of editing and significantly reduced off-target editing when compared to other CRISPR nucleus, including Cas9. Editing HBG12 promoter in human CD34 positive cells, resulting in greater red blood cell protection, normal proliferative capacity and improved red blood cell health when compared to editing of BCL11A. We look for differentiation in three categories of outcome in clinical trials. Hematological parameter and organ function and patient reported outcome or quality of life. Based on the clinical data thus far, we believe that sustained normal level of total hemoglobin could be a potential point of differentiation for reni-cel. As a reminder, a sustained normal total hemoglobin level is an important clinical outcome for patients. As the correction of anemia can significantly improve quality of life and ameliorate organ damage. We look forward to sharing additional updates, including RUBY and EdiTHAL clinical trial data with more patients and longer follow-up period in mid-year and additional data by year-end. Now I will turn the call over to Erick, our Chief Financial Officer. Erick Lucera: Thank you, Baisong, and good morning, everyone. I’m happy to be speaking with you and I’d like to refer you to our press release issued earlier today for a summary of financial results for the fourth quarter and full year 2023, and I’ll take this opportunity to briefly review a few items for the fourth quarter. Our cash, cash equivalents, and marketable securities as of December 31 were $427 million compared to $446 million as of September 30, 2023. We expect our existing cash, cash equivalents, and marketable securities together with the near-term annual license fees and contingent up-front payment payable under our license agreement with Vertex to fund our operating expenses and capital expenditures into 2026. Revenue for the fourth quarter of 2023 was $60 million, which primarily relates to revenue recognized under our license agreement with Vertex, which as Gilmore referenced earlier on this call, we announced in December of 2023. R&D expenses this quarter increased by $18 million to $70 million from the fourth quarter of 2022. The increase reflects additional sub-license expenses offset by the decrease in R&D spend resulting from our reprioritization and targeted focus on our reni-cel program. G&A expenses for the fourth quarter of 2023 were $14 million, which decreased from $18 million for the fourth quarter of 2022. The decrease in expense is primarily attributable to reduced patent and legal costs. Overall, Editas remains in a strong financial position bolstered by our sharpened discovery focus, June capital rates, and our recent out-licensing deals. Our cash runway into 2026 provides ample resources to support our continued progress in the RUBY and EdiTHAL clinical trials at reni-cel, continued commercial manufacturing preparation, and the advancement of our discovery and research efforts. With that, I’ll hand the call back to Gilmore. Gilmore O’Neill: Thank you, Erikc. We are very proud of our progress in 2023 and look forward to accelerating the momentum into 2024 as we continue to evolve from a development-stage technology platform company into a commercial state gene editing company. We look forward to continuing our transformation and sharing our progress with you. As a reminder, our 2024 strategic objectives include, for reni-cel, we will provide a clinical update from the reni-cel RUBY trial for severe sickle cell disease and the EdiTHAL trial for transfusion-dependent beta thalassemia in mid-2024 and year-end 2024. We will complete adult cohort enrollment, and we already initiated the adolescent cohort in RUBY, and will continue enrollment in EdiTHAL. For our in vivo pipeline, we will establish in vivo preclinical proof-of-concept for an undisclosed indication. And for PD, we will leverage our robust IP portfolio and business development to drive value and complement core gene editing technology capabilities. As always, it must be said that we could not achieve our objectives without the support of our patients, caregivers, investigators, employees, corporate partners, and you. Thanks very much for your interest in Editas, and we’re happy to answer questions. Thank you. Operator: [Operator Instructions] Our first question comes from Joon Lee with Truist Securities. Please proceed with your question. See also 25 Easiest and Best Paying Jobs of 2024 and 22 Careers with the Best Job Security. Q&A Session Follow Editas Medicine Inc. Follow Editas Medicine Inc. or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Joon Lee: Hi. Good morning, and congrats on the quarter. I’m sorry for my voice. My question is that, could you please elaborate on the hemolysis markers that you’re tracking and tell us how they will relate to patient-reported outcomes such as quality of life? Thank you. Gilmore O’Neill: Thanks very much, Joon. I hope that your voice gets better. I’m going to pass that question over to Baisong. Baisong Mei: Thanks for the question, Joon. For the hemolysis marker, we look into multiple markers for indicating for hemolysis including reticulocyte, LDH, bilirubin, among others. For the patient-reported outcome, we use several instruments to measure that clinical outcome and quality of life. They’re related to the general PRO instrument as well as sickle cell specific instrument. Joon Lee: Thank you. Operator: Our next question comes from Samantha Semenkow with Citi. Please proceed with your question. Samantha Semenkow: Hi. Good morning. Thanks very much for taking the question. Can you share just any additional insights into your FDA conversation as you aligned on the RUBY trial specifically in terms of the number of patients you’ll need and the amount of follow-up you’ll need to file a potential BLA? Gilmore O’Neill: I’m going to have Baisong to address that question. Baisong Mei: Thank you for the question. We aligned with the FDA about the RUBY trial to be a Phase 1, 2, 3 trial to support BLA including endpoint, sample size, and study design. We are continuing to have engagement with the FDA about the BOA data package and the follow-up. We’ll have a further discussion with the FDA. Samantha Semenkow: Got it. Thank you. Operator: Our next question comes from Brian Cheng with JPMorgan. Please proceed with your question. Brian Cheng: Hi, guys. Thanks for taking our questions this morning. Can you just give us a sense of what does a Phase 1, 2, 3 designation for RUBY really mean from a timeline perspective? And on the potential differentiation, I think based on your talk about investigators’ feedback so far, I’m curious if you can also talk about just feedback that you’ve been hearing from investigators. Are they seeing potential differentiation this early on? Thank you. Gilmore O’Neill: Thanks very much, Brian. I think there were three parts to your question. What is a Phase 1, 2, 3 and its impact on the BLA path? What was the investigator feedback on differentiation? And were they seeing signs or what were the things that they might be seeing in patients at this point? What I’ll do is just address the first part and then ask Baisong to follow-up on the other two. So with regard to Phase 1, 2, 3, I think the key point here is that it is a single. We’ve agreed that there’s a single Phase 1, 2, 3 study. We have important agreement on what the outcomes are and the size of the study. And what that basically means is that we remain on track and are more confident about being on track to a BLA. I think it’s worth calling out that the Vertex study was also the study that was used for their BLA application was designated a Phase 1, 2, 3 before or prior to that BLA. So I hope that actually helps from the point of view of our path to BLA. And I think just mentioning Vertex, it’s just worth calling out that we sort of have a benchmark based on the BLA filing from last year with regard to the size of the filing that was originally used for that approval. Baisong? Baisong Mei: So Brian, for the differentiation and investigator feedback wise, so we actually have quite a bit of engagement with the investigator and from their own observation of their patients as well as to see the data, they’re very pleased to see the correction of anemia. And the hematologist that very much appreciate that the level of total hemoglobin be able to correct the anemia and they see their patient is less fatigued and they have more energy and they just, they’re direct observation. And then also they told us that total globulin level as published also impacted the end organ function. So those are the direction that we’re also looking for. Gilmore O’Neill: And one other thing I’d just like to quote just with regard to the Phase 1, 2, 3, I think the important thing is that the RUBY study has been, we’ve agreed with the FDA it’s converted from a Phase 1 to a Phase 1, 2 , 3 which allows, because it’s a single study, a seamless transition to that study to support BLA. I hope that’s helpful. Baisong Mei: Just to add on Gilmore’s point, what Gilmore means is also to say we’d be able to use all the patient data from the study to support the BLA. Brian Cheng: Great, thanks guys. Operator: Our next question comes from Greg Harrison with Bank of America. Please proceed with your question. Greg Harrison: Hi, good morning. Thanks for taking the question. Now that there is a gene editing treatment approved in sickle cell, what are your latest thoughts on how reni-cel would fit in the space? And what have you learned from the early launch by the competitor? Baisong Mei: Thanks very much, Greg. I’m going to ask Caren to address that question. Caren Deardorf: Yes, great. Thanks for your question. What we’ve been hearing from the various stakeholders in this space is a lot of interest and some really good initial momentum. I think we are also hearing that across all of the groups so your stakeholders, your patients, families, your centers which are transplant, maybe gene therapy centers, your qualified centers as well as your payers. There’s just a lot of work that needs to happen and I think you all are picking up on that. But it’s starting and it’s happening. So I think it’s the balance of saying there’s tremendous interest even from the government in the CMMI pilot that CMS has kicked off. So the way we see it as it is very encouraging. It’s going to take time and we really believe that the fast follower of reni-cel is going to be timed very well......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Daktronics, Inc. (NASDAQ:DAKT) Q3 2024 Earnings Call Transcript

Daktronics, Inc. (NASDAQ:DAKT) Q3 2024 Earnings Call Transcript February 28, 2024 Daktronics, Inc. beats earnings expectations. Reported EPS is $0.2113, expectations were $0.17. Daktronics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day, ladies and gentlemen, and welcome […] Daktronics, Inc. (NASDAQ:DAKT) Q3 2024 Earnings Call Transcript February 28, 2024 Daktronics, Inc. beats earnings expectations. Reported EPS is $0.2113, expectations were $0.17. Daktronics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day, ladies and gentlemen, and welcome to the Daktronics’ Fiscal Year 2024 Third Quarter Earnings Results Conference Call. As a reminder, this conference is being recorded, Wednesday, February 28, 2024, and is available on the company’s website at www.daktronics.com. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Ms. Carla Gatzke, Corporate Secretary for Daktronics, for some introductory remarks. Please go ahead, Carla. Carla Gatzke: Thank you, Kevin. Good morning, everyone. Thank you for participating in our third quarter earnings conference call. I would like to review our disclosure cautioning investors and participants that in addition to statements of historical facts, we will be discussing forward-looking statements reflecting our expectations and plans, about our future financial performance and future business opportunities. These forward-looking statements reflect the company’s expectations, or beliefs concerning future events. All forward-looking statements involve risks, and opportunities that could cause actual results, to differ materially from our expectations. Such risks include, but are not limited to, changes in economic and market conditions, management of growth, timing and magnitude of future contracts and orders, fluctuations in margins, the introduction of new products and technology, availability of raw materials, components and shipping services, and other important factors. These identify factors could cause actual results, to differ materially from those discussed in this call in the company’s 2024 quarterly earnings release, and in its most recent annual report on Form 10-K. Our second quarterly 2024 earnings release, contains certain non-GAAP financial measures and was furnished to the SEC on a Form 8-K this morning — clarify, third quarter 2024 earnings release. We also made slides available for today’s call. All of these documents are available on the Investors section at Daktronics website, www.daktronics.com. I’ll turn the call over to our CEO, Reece Kurtenbach. Reece Kurtenbach: Thank you, Carla. Good morning, everyone. Thank you all for joining us today. Our third quarter and year-to-date results reflect our team’s strong execution of our strategies across all our business areas. These strategies have raised the bar for execution and expectations of profitability in our operating model. As a result, we have delivered record sales and operating income to-date in fiscal 2024, and drove robust operating cash generation in the third quarter. These results serve as evidence, of the success of our past decisive, and deliberate actions taken, to adapt to challenging business conditions, and to improve our customers’ experience, while increasing our profitability, and working capital levels. The results also testify, to the resiliency and strength, of our teams within Daktronics and to our strategy, of capturing demand in diversified markets, and innovating across technology platforms. If you have opened the slide deck, I invite you to turn to Slide 3 titled Fiscal Third Quarter 2024 Highlights and to follow the financial outcomes for the quarter. To put our fiscal 2024 results delivery into perspective, our third quarter is historically a seasonally low volume quarter, for revenue and therefore, historically could result in a breakeven, or even a loss-making quarter. However, reflecting back to fiscal 2023 third quarter, we fulfilled back-ordered work, as we had new designs available, to take advantage of the available parts in our supply chain, and as other supply chain-related pressures were resolving. This resulted in extraordinarily high volume, and high profit for the third and fourth quarters of fiscal 2023, a unique time for us. During this fiscal year’s third quarter, despite a return to more traditional seasonality, and fulfilling a lower volume of orders, as compared to last year’s surge, we drove an $8 million profit – operating profit and generated $9 million in operating cash flow. During fiscal Q3, we experienced robust order volume, of $192 million. Live Events in the Commercial business unit, orders strengthened in the quarter, and all domestic markets saw growth. Third quarter orders grew, 29% more than last year’s third quarter, bringing year-to-date order growth, to 6.6% for the year. These increases reflect our focus on profitable order generation in our serviceable address available markets or SAM. Backlog continues to decrease from last year’s built-up levels, as we recognize the anniversary of the resolution, of supply chain challenges and utilize our capacity, to deliver customer orders at market-expected lead times. With respect to sourcing, our revamped and more diversified supply chains, are functioning well, across our suppliers. As we primarily compete, with companies that obtain their products, from China and compete on price, we continue to evaluate our price position in the market, and are adjusting our prices, to achieve our order attainment goals, at profitable levels. Given our results to-date this year, and the momentum in our order flow, we feel good about our positioning, to drive profitable growth and cash flow generation into the fourth quarter, and beyond. For additional details on the financial results for the quarter, I’ll now turn it over to Sheila. Sheila Anderson: Thank you, Reece. Please turn your attention to Slide 4 titled F Q3, FY 2024 Financial Highlights for the quarterly overview. Orders for the third quarter of fiscal 2024, increased by 29.4%, from the third quarter of fiscal 2023, through strong demand in the Live Events business unit, returning demand in the spectacular and out-of-home markets in our Commercial business unit and solid growth in High School Park and Recreation and Transportation business units. These higher orders, offset the decline in the International business unit orders, as compared to last year’s third quarter. We believe international demand softness, relates to the economic, and geopolitical conditions. We generated sales of $170 million, for the third quarter of fiscal 2024, as compared to $185 million of sales, for the third quarter of fiscal 2023. This 7.9% sales volume declined, as the industry is returning to more traditional seasonal trends, and because during last year’s back half of the second quarter, and during the third quarter, the supply chain stabilization, allowed us to physically finish a high volume of orders and deliver, for revenue recognition in those quarters. As Reece highlighted, the third quarter is our historically low sales volume quarter, because of sport seasonality, outdoor construction lulls in the winter months, and fewer workdays due to the holiday breaks. This year’s third quarter volume, was as expected. Supply chains, also continued to flow generally as expected. Gross margin as a percentage of net sales, increased to 24.5% for the third quarter, of fiscal 2024, as compared to 22.6% in the third quarter of fiscal 2023. The 190 basis point increase in gross profit percentage, is attributable to strategic pricing actions, and stability in our diversified supply chains. Operating margin, was 4.7% of sales, during the third quarter of fiscal 2024, as compared to last year’s 3.8%, or adjusted to 6.3% without the noncash goodwill impairment charge, recorded in last year’s quarter three. Fiscal 2024 third quarter’s positive operating margin rate, is attributable to our continued careful management of operating expenses. Again, it’s notable that we delivered, an $8 million third quarter fiscal 2024, operating profit in our seasonally lowest volume, quarter of the year. Please turn to Slide 5, as I highlight year-to-date performance. Orders for the first nine months of fiscal 2024, increased by 6.6%, as compared to the first nine months, of fiscal 2023, through strong demand in Live Events, Transportation and High School Park and Recreation business units. Commercial orders are down, for the nine months from last year, due to a lack of large project bookings and the reduction in order spend by the out-of-home segment customers in the first six months of the year, partially offset by the third quarter improvement in order placements. International also is down slightly on a nine-month basis. Sales grew 10.6%, for the first nine months, which aligns to the order volume and built up backlog, coming into the first part of the fiscal year. Gross margin as a percent of net sales, increased to 27.7%, for the first nine months of fiscal 2024, as compared to 18.2% in the first nine months of fiscal 2023. The 950 basis point increase in gross profit percentage, is attributable to our strategic pricing actions, our investments in factory automation, our focus on cost-effective and high-quality product designs, and the stability of our diversified supply chain. After investments in operational areas and organic growth, the resulting operating margin was 11.2% of sales during the third quarter of fiscal 2024, as compared to last year’s 0.6%, or 1.4% if that goodwill impairment, was removed from the calculation of non-GAAP calculation, but helpful to compare the improvement. The balance sheet – from a balance sheet perspective, our cash position net of debt increased, due to cash generation from the profitable quarter, and management of working capital. Cash net of debt was $27.2 million, and we generated $53.8 million, of operating cash flow, during the first nine months, because of our profitability and our ability to lower investments in inventory levels, from the height of the supply chain challenges. Our working capital ratio at quarter end, was 2.2, compared to 1.6 at the same time last year. For an update on the market verticals, I’ll turn it back over to you, Reece. Reece Kurtenbach: Thank you, Sheila. Please reference Slide 6 titled Market Verticals Update. Our mission is to support our customers to inform, entertain and persuade their audiences, and their customers. Let’s look more specifically into our business areas. In Live Events, we again partnered with the Detroit Tigers, to deliver the second largest main video display in baseball’s major leagues at Comerica Park, updating and upgrading our previous installation from 2012. Five additional displays will be installed along the fascia, dug out and line score locations ahead of the 2024 baseball season. Moving forward, we expect Live Events demand, to remain strong as there are a number of projects being bid, as venues enhance facilities, to entertain fans and attract athletes. We see this trend continuing, and more focus being placed on entertainment areas, and the experience outside the bowl, in places like entryways, atriums, concourses and adjacent entertainment areas. Commercial orders, especially from customers in the out-of-home advertising space, can be sensitive to economic conditions, and they can rebound quickly as conditions improve. This market is also sensitive, to the large national advertiser spending decisions, which is why we also focus, on winning other independent billboard sales. We saw a nice order rebound in Q3 in both national and local out-of-home customers. However, large national out-of-home companies, are noting plans to continue, to constrain spending in the coming calendar year. We continue to innovate, and provide competitive differentiation in the marketplace, to reach the needs of our customers. For example, we are seeing interest in our light direct digital billboards. Light direct, narrows the viewing cone of the display, preventing light emissions from spilling into surrounding areas, and targeting only the intended audience in urban and rural environments. We continue to build out our AV integrator network, to market our narrow pixel product lines, especially in control room applications used by military, utility and transportation agencies. Transportation, our teams are focused in winning projects for intelligent transportation systems, as highlighted by fiscal Q3 wins, on projects in Arkansas and Tennessee. International, during the quarter, we won a stadium project and orders for transportation areas, yet orders have been slow this year, which we believe is, due to the economic and geopolitical uncertainty. Customers continue to demonstrate interest in projects, but are delaying buying decisions. Our sales teams, continue to be responsive to customers and are actively quoting opportunities. In high schools, the trend going forward continues to be, conversion to full video. We are well positioned, to meet this demand and believe, we are in the early stages of this transition. We are looking to speed up, and simplify the sales processes, and increase our market reach process, by deploying sales strategies to make certain items available, to be purchased online. We also continue to develop our e-sales channel, and these efforts are going well. We are continuing, to offer more products through these online and partner channels and have improved processes to make the buying process more efficient. From a big picture perspective, our customers use our control capabilities to create, manage and schedule content, for engagement with fans and audiences. We continue to make progress on our multiyear strategy, to create more capabilities, to aid in the service and maintenance of our systems, as well as continually add to the feature set of our cloud-based and locally hosted systems. These capabilities, are increasingly offered through software as a service, and we are investing in people and capabilities to grow these higher margin opportunities. If you would focus on Slide 7, titled Strategic Focus. Overall, our target markets are large, and growing with resilient demand driven, by our customers’ desire to improve their audience experience in sports, commercial and transportation environments. More specifically, we are focused on profitable growth, by capturing more of our serviceable available market, or SAM. By expanding the share of customer spend, adding new customers, developing control options, and expanding the services we offer, driving increases in monthly recurring revenues. For example, we are offering frameworks, a content design platform that enables students and staff, the ability to access top-level content, to elevate their brand, for event production and promotions. We’re also working, to capture new ways to use in-demand products, such as expanding applications using our indoor narrow pixel pitch product, which are applicable across all of our businesses. For example, we sold additional concourse displays from our NPP product line, to the Green Bay Packers at Lambeau Field, an existing customer using our traditional products. Internationally, we are driving Live Events, commercial, and transportation opportunities, as the economic conditions continue to improve. And we are focused on developing, and marketing to the military, by attending trade shows, specific to the industry, and growing relationships with AV integrators focused on this market. As we grow revenues, we are working to further increase our nimbleness and flexibility in capacity allocation and utilization. We are investing over the coming fiscal years, and improvements in our demand planning tools and alignment to capacity, for integrated business planning and our expanding factory qualifications to have flexibility for where a product is built, to maximize the use of our infrastructure. And dynamically aligning capacity, to adjust to seasonality, and varying order flow by market. Turning to Slide 8 on Slide 9, we are – we appreciate the feedback and questions that we received from our shareholders and wanted to take this opportunity to address some of the questions most frequently asked. First, we are often asked why we don’t give guidance today. As you know, our demand is project driven and therefore, can be lumpy. Demand is also highly seasonal, and additionally, demand can be impacted by customers and construction schedules, all making it difficult to give precise estimates for the future. What we can say today is that, over the next three to five years, we are working to drive sales growth, with our sights on $1 billion of annual revenue, and operating margin sustainability in the mid to upper end of the 5% to 10% range as we move forward. We are investing in processes and systems to increase our level of control, over the controllable elements of our business. This work is expected, to increase our ability to be responsive, to changing conditions, as we grow in an increasingly complex global marketplace. By taking these actions, our goal is to raise our visibility in, as I mentioned, a lumpy seasonal business and enhance our internal planning capabilities. It is important to note – that as we look more on an annual perspective, in order to identify prevailing trends in our businesses, and plan accordingly while maintaining, as much flexibility as possible. We will continue to reevaluate, our guidance practices over time to help our investors understand our outlook. Investors also ask, what is our capital allocation strategy? We historically plan around 5% of sales in research, and development expenses, and roughly 3% of sales, on average in capital spending, to maintain our technology leadership, manage and maintain our manufacturing capacity, information system infrastructure, and sales demonstration equipment. We also look for opportunistic acquisitions that, can help us advance our technologies, penetrate new geographies, or help expand our serviceable addressable market. Going forward, as we increase our sustainability and cash flow generation, we could consider repayment of our debt, and we may also consider the resumption of quarterly dividends and/or share repurchases. Turning to Slide 9. Finally, we want to reiterate that our Board has aligned management’s compensation structure with investors’ priorities for profitable growth. Specifically, the incentive compensation program is based on operating income as our key metric with targets of 10%. The strategies we described previously, are designed to help us move towards that achievement, capturing profitable SAM, developing best-in-class solutions and managing expenses. Maximizing our utilization and increasingly – increasing the agility of our manufacturing capacity and automation, through our systems and processes, are keys to managing expenses. Turning to fiscal Q4, 2024 qualitative outlook. I encourage you to reference Slide 10. Given what we see in our businesses today, we anticipate our fiscal fourth quarter seasonality, to be similar to pre-pandemic patterns, which is historically an increase in revenue and profitability, as compared to the third quarter. While we are not offering a quantitative outlook, qualitatively, we look for fiscal 2024 fourth quarter net sales to increase sequentially, and decrease from the year ago period, which was again a high-volume period in, which we were fulfilling back orders, related to the pandemic recovery. We are positioned for continued sequential margin and cash flow generation. In conclusion, our summary on Slide 11 recaps our key highlights. Our year-to-date results, offer evidence that we have overcome the challenges caused, by the constrained supply chain, and pandemic implications of recent years. We enjoy our position, as a global industry leader in best-in-class video communication systems. We are the technology leader in our industry and are the only U.S. manufacturer of scale, with a global footprint. What differentiates us from our competitors is our U.S. base, our technology leadership, the high quality of our solutions, our high-touch service and our large entrenched customer base. Our target markets, are large and growing, with resilient demand driven, by audience experience, sports fan engagement, and customer success with our systems. We are focused on a multiyear journey, to capture the growth in existing SAM, and in other areas. This poises us for sustainable revenue, earnings and cash flows. We are very proud of, our results and grateful to our teams, who work together to deliver them, and we look forward, to a solid end to the year. With that, I would ask the operator, to please open the line for questions. See also 25 Companies with the Best Benefits and Perks and 20 Countries With Worst Vision Problems. Q&A Session Follow Daktronics Inc (NASDAQ:DAKT) Follow Daktronics Inc (NASDAQ:DAKT) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Our first question comes from BJ Cook with Singular Research. Your line is open. BJ Cook: Hi, thanks for taking my question, guys. New order growth was quite a bright spot for the quarter. Interestingly, last quarter, there were higher orders in International and Transportation, decrease in Commercial. This quarter was quite the opposite. I know results can kind of be choppy, but is there anything unique that you’re seeing in those segments, given the jump in new orders? Reece Kurtenbach: BJ, first of all, I appreciate the question. Thanks for joining us this morning. And I think what you’re seeing is, as we described here, lumpiness, we – International and Transportation tends to be large order based and that order books in a certain period, and then it fulfills in the subsequent periods. And so, I think what you’re seeing, is a normal kind of impact of our business, which is why we tend to look, over larger periods, to kind of smooth some of that out. BJ Cook: Great. Thanks. You guys mentioned in your remarks, some new sources of revenue and SaaS, or recurring revenue in military as well. Can you expand on those? Or how far along in the sales process, are you in those different opportunities? Reece Kurtenbach: Certainly, our – what we call our narrow pixel pitch product, has really matured into a nice line of different pixel pitches in different ways that our customers can use them. And the AP integrator reseller chain that we sell a lot of that through, continues to grow and be developed. Some of – but there’s still room to continue to add AV integrators and build our visibility in that market space. On the software as a system and some of these other content services, we see great potential in those areas, but relatively new. We’re adding customers in those areas, but really in the past 12 to 18 months that has started. BJ Cook: Thanks, guys. Appreciate it Reece Kurtenbach: Thanks, BJ. Operator: [Operator Instructions] Our next question comes from Anja Soderstrom with Sidoti. Your line is open. Anja Soderstrom: Hi, and thank you for taking my question. Congratulations on the good progress here. I’m just curious with the backlog declining. I understand that’s, due to catch-up from last year a supply chain. But when do you think that will revert, to seeing growth again? Reece Kurtenbach: Our backlog is going to fluctuate from quarter-to-quarter, Anja, as we book these large orders and then kind of work them off. We believe, though, that our – a year ago, our backlog was too large. We had a lot of product in there, and we weren’t able to meet market lead times. And so, we see the reduction year-over-year in backlog as a positive as we’ve got our delivery more into market lead times. But I would also say that as we talked about seasonality, our fiscal Q1 and Q2, tend to be our largest revenue quarters. And so, we would expect backlog to grow, somewhat as we go into that period, and then shrink as we go into Q3. And then grow again, as we would come back into the next fiscal year, as we’ve – just over time, experienced that seasonality in and out. Is that helpful Anja? Anja Soderstrom: Yes, that was helpful. Thank you. And then in terms of the gross margin is fluctuating quite a bit as well. What is sort of a sensible one to use going forward for projections? Reece Kurtenbach: Revenue growth is the… Anja Soderstrom: The gross margins? Reece Kurtenbach: Gross margins. I think we’re going to see a stabilization in our gross margins as the business environment just isn’t as volatile, as it was a year or so ago. Where does that all settle out is a good question, Anja. We believe that we certainly are enjoying these gross margins, and we’re very sensitive to pricing adjustments and cost increases. And we’re fighting, to hold those gross margins quarter-after-quarter. As far as guidance on what gross margins would, or could be, I don’t think we’re ready, to give that at this time. Anja Soderstrom: Okay. Thank you. That was all from me. Reece Kurtenbach: Thank you, Anja Operator: [Operator Instructions] And I’m not showing any further questions at this time. I’d like to turn the call back over to Reece for any closing remarks. Reece Kurtenbach: Thank you, Kevin. I’d like to thank everyone for attending our conference call today. I would like to let you know that, we are appearing at the Sidoti Small Cap Conference in March, and we often have one-on-ones following the conference call. And we’ll host the next earnings call likely in June, as we release our annual results. I hope you all have a great day, and a great week, and thanks again for joining us. Operator: Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect, and have a wonderful day. Follow Daktronics Inc (NASDAQ:DAKT) Follow Daktronics Inc (NASDAQ:DAKT) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Everspin Technologies, Inc. (NASDAQ:MRAM) Q4 2023 Earnings Call Transcript

Everspin Technologies, Inc. (NASDAQ:MRAM) Q4 2023 Earnings Call Transcript February 28, 2024 Everspin Technologies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, and welcome to the conference call to discuss Everspin Technologies Fourth Quarter and Full Year […] Everspin Technologies, Inc. (NASDAQ:MRAM) Q4 2023 Earnings Call Transcript February 28, 2024 Everspin Technologies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, and welcome to the conference call to discuss Everspin Technologies Fourth Quarter and Full Year 2023 Financial Results. At this time, all participants are in a listen-only mode. At the conclusion of today’s conference call instructions will be given for the question-and-answer session. As a reminder this conference call is being recorded today Wednesday, February 28, 2024. I would now like to turn the conference over to Cassidy Fuller [ph], Investor Relations for Everspin. Unidentified Company Representative: Thank you operator, and good afternoon everyone. Everspin released results for the fourth quarter and full year 2023 ended December 31, 2023 this afternoon after the market closed. I’m Cassidy Fuller, Investor Relations for Everspin. And with me on today’s call are Sanjeev Aggarwal President and Chief Executive Officer; and Anuj Aggarwal, Chief Financial Officer. Before we begin the call, I want to remind you that this conference call contains forward-looking statements regarding future events, including but not limited to the company’s expectations for Everspin’s future business, financial performance and goals, customer and industry adoption of MRAM technology, successful bringing to the market and manufacturing products in Everspin’s design pipeline and executing on its business plan. These forward-looking statements are based on estimates, judgments, current trends and market conditions and involve risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. We would encourage you to review the company’s SEC filings including the annual report on Form 10-K and other SEC filings made from time to time, in which the company may discuss risk factors associated with investing in Everspin. All forward-looking statements are made as of the date of this call and except as required by law, the company undertakes no obligation to update or alter any forward-looking statements made on this call, whether as a result of new information, future events or otherwise. The financial results discussed today reflect the company’s preliminary estimates and are based on the information available as of the date hereof and are subject to further review by Everspin and its external auditors. The company’s actual results may differ materially from these estimates as a result of the completion of financial closing procedures, final adjustments and other developments arising between now and the time that the financial results for this period are finalized. Additionally the company’s press release and statements made during this conference call will include discussions of certain measures and financial information in GAAP and non-GAAP terms. Included in the company’s press release are definitions and reconciliations of GAAP net income to adjusted EBITDA, which provide additional details. A copy of the press release is posted on the Investor Relations section of Everspin’s website at www.everspin.com. And now I’d like to turn the call over to Everspin’s President and CEO, Sanjeev Aggarwal. Sanjeev please go ahead. Sanjeev Aggarwal: Thank you, Cassidy, and thanks everyone for joining us on the call today. We are pleased to report record annual revenue and profitability for 2023 with a strong gross margin, a solid balance sheet with no debt and the highest cash balance in our company’s history. During the fourth quarter, we delivered revenue of $16.7 million above the high end of our guidance range of $15.4 million to $16.4 million. This led to a record full year revenue of $63.8 million, which was up 6% year-over-year. We delivered gross margin of 58.1% in the fourth quarter, up from 51.4% in Q4 2022. We recorded our 11th quarter in a row of GAAP profitability, a strong focus for the company. And we ended the year with a cash balance of $36.9 million. On the product side, we had a total of 217 design wins in 2023, up 3% year-over-year. Our pipeline of new design wins for our MRAM products remain strong and exceeded our internal expectations. We expect our existing Toggle MRAM product customers will qualify our new industrial STT-MRAM products this year, while our newer MRAM customers will qualify later in 2025. Additionally, our new industrial STT-MRAM product line has continued to gain momentum in terms of design wins, showcasing the importance of ramping technology from the last few quarters. Looking ahead, we expect to begin translating these design wins into revenue in the second half of 2024. We remain committed to preserving Everspin’s position as a leader in MRAM technology and this is reflected in our extensive intellectual property portfolio and the successful licensing of our technologies. As we discussed on our last earnings call, we entered into two new radiation hard program agreements, the first related to Toggle MRAM to develop reliability models for strategic radiation-hard Toggle MRAM applications. The second agreement was to license our STT-MRAM technology to build a strategic radiation hardened FPGA. This second project remains ongoing into the first quarter of this year. As the project progresses, we anticipate additional government funding to help support the build of this FPGA device. We anticipate this project to continue progressing this year. We also want to provide an update on our existing adhoc 64-megabit STT-MRAM project that we started in early 2022. We expect to receive additional silicon from our supplier, which we will use to create a demonstration of working silicon. This will be a higher-margin, lower-volume product and we expect to recognize revenue from this project throughout 2024. As we mentioned on our previous call, a new key focus for us is distributed MRAM or DMRAM. As discussed, we believe our DMRAM approach is revolutionary and will give us an edge on energy efficiency and scaling, as we deploy the solution in FPGAs and AI inference engines. We look forward to updating you on our progress here over the coming quarters. Turning to our outlook for 2024. We continue to have good visibility and a strong pipeline driven by solid product backlog. We expect the first half of the year to be more muted given economic weakness in China and softness in industrial and automotive sectors in part due to inventory digestion and rebalance. However, we expect a ramp in the second half of 2024 as we begin to recognize revenue from our design wins for our STT-MRAM products that we have discussed over the past two years. Moreover we expect to see continued growth in our Toggle MRAM products, as well as additional design wins. I will now turn it over to our CFO, Anuj Aggarwal, who will take you through our fourth quarter financials and first quarter 2024 guidance. Anuj? Anuj Aggarwal: Thank you, Sanjeev, and good afternoon everyone. As part of our fourth quarter and full year 2023 financial results, we are pleased to announce that we have achieved record annual revenue of $63.8 million and record profitability with net income of $9.1 million in 2023. Q4 2023 also marks our 11th consecutive quarter of positive net income. In addition, we generated positive cash flow from operations resulting in the highest cash balance of our company’s history of $36.9 million. We delivered strong quarterly results above the high end of our guidance range of $15.4 million to $16.4 million, with revenue of $16.7 million and diluted earnings per share of $0.09. We also recorded positive cash flow from operations of $2 million. Our revenue outperformance was preliminarily driven by the success we have seen in our RAD-Hard deals, which have continued to progress well from a technology standpoint. MRAM product sales in the fourth quarter, which includes both Toggle and STT-MRAM revenue were $12.4 million compared to $14.6 million in Q4 2022. Licensing royalties patents and other revenue in the fourth quarter increased to $4.3 million compared to $1.1 million in Q4 2022. Shipments to suppliers for our high-density STT product for data center applications represented 17.1% of revenue in the fourth quarter versus 4.7% of revenue in Q4 2022. Turning to gross margin. Our GAAP gross margin for the fourth quarter of 2023 was 58.1%, up from 51.4% in Q4 2022. GAAP gross margin for 2023 was 58.4%, an increase from 56.6% in 2022. The year-over-year increase in gross margin is a result of being able to offset increased pricing from suppliers with increased yields on our Toggle products and increased licensing revenue to offset the decrease in product sales. GAAP operating expenses for the fourth quarter of 2023 were $8.1 million compared to $7.5 million in the fourth quarter of 2022. The increase in operating expenses in the quarter compared to Q4 2022 was primarily driven by the development and enhancement of our new X5 family of STT-MRAM products and increased professional service costs. Fourth quarter 2023 net income was $2 million or $0.09 per diluted share based on 21.7 million weighted average fully diluted shares outstanding. This compares to net income of $0.6 million or $0.03 per diluted share in the fourth quarter of 2022. Fully diluted EPS of $0.09 was above the high end of our guidance range reflecting our strategic operational discipline and ability to drive profitability in the face of macroeconomic uncertainties. Fully diluted EPS for 2023 was $0.42 compared to $0.29 in 2022. For Q4 2023 adjusted EBITDA was $3.6 million compared to $2.1 million in Q4 2022. Adjusted EBITDA for 2023 was $15.3 million, which includes the employee retention credit of $2 million compared to $11.8 million in 2022. We ended the quarter with cash and cash equivalents of $36.9 million, up from $34.9 million at the end of the prior quarter. The increase in cash quarter-over-quarter is a result of Everspin’s continued focus on strong cash management while growing cash flow from operations as the company continues to operate debt-free. Cash flow from operations was healthy at $2 million for the fourth quarter. For the full year cash flow from operations was $13.1 million, up from $9.5 million in 2022. Turning to guidance. We anticipate revenue to ramp as we move through the year with the first half a bit lower than our traditional seasonality given ongoing economic weakness in China and softness in the industrial and automotive sectors. We expect growth to accelerate in the second half of 2024 as we begin to recognize revenue from design wins of our STT and Toggle MRAM products. Taking these factors into consideration we expect Q1 total revenue in the range of $13.5 million to $14.5 million and GAAP net income per diluted share to be between breakeven and $0.05. In summary, we are pleased to report another solid year of growth with record annual revenue, profitability and earnings per share. Our financial position remains strong boasting a debt-free balance sheet and the highest cash balance in company’s history. While we expect to experience a slower start to the year, we expect a solid second half of 2024. We also expect to see additional growth in our Toggle MRAM and DRAM products and we expect to begin recognizing revenue for our STT MRAM products. Thank you for joining us today. Operator, you may now open the line for questions. See also 20 Most Trustworthy Cities in the US and 20 Daily Wealth-Building Habits Rich People Swear By. Q&A Session Follow Everspin Technologies Inc (NASDAQ:MRAM) Follow Everspin Technologies Inc (NASDAQ:MRAM) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] One moment for our first question. Our first question comes from the line of Quinn Bolton of Needham & Company. Your line is open. Neil Young: Hey. This is Neil Young on for Quinn Bolton. Thanks for taking my questions. I first wanted to ask about the gross margin number in the fourth quarter. So you gave some color on the year-over-year change. But I was hoping you could share what drove the sequential decline in gross margin considering that the licensing royalties patents and all the revenue appear to be strong? Anuj Aggarwal: Yes. It’s Anuj Aggarwal. Yes. So the gross margin has performed really well over last year right? So we’ve been saying we’d be mid-50s in gross margin. I think what you’re seeing is as the yields kind of tapered off and we had slightly lower licensing revenue compared to the prior quarter you see a decline in the gross margin, but it’s still above our internal model and expectations. Neil Young: Okay. Thanks for that. And then my follow-up is last quarter you talked about some of the weakness in industrial automation in China. It sounds like that continued in the fourth quarter given the quarter-over-quarter decline in product revenues. So did you see that weakness spread across other geographical areas or end markets? And then regarding the first quarter outlook, I was hoping you could share what you’re thinking across the two segments products and licensing. And then maybe within products what you’re thinking separately for Toggle and STT-MRAM? Thanks. Anuj Aggarwal: Sure. Absolutely. So it’s a couple of questions. Let me try to go one-by-one. So I think from a backlog perspective, right? As you look at the backlog you’re seeing challenges within the Industrial and Automotive space. And to your question in terms of geographies, APAC in general has shown some weakness. So Japan and China there’s been some challenges there. So we saw that starting in Q4. And we see that in Q1 as well. And then, from a guidance perspective, — sorry what was the second part of the question for guidance? Neil Young: Yeah. So I was wondering if you could share what you’re thinking across the two segments between products and licensing and then, maybe within the product segment what you’re thinking separately for the two buckets. Thanks. Anuj Aggarwal: Yeah. Absolutely. So for revenue we’re expecting $13.5 million to $14.5 million. We expect Q1 to be strong again from a licensing and royalty perspective. We do see some decline in product revenue. And so that’s why we’re guiding to that number. It’s again mainly because of the APAC challenges and the challenges in China. We’re also seeing customers looking at bleeding down inventory and concern with their inventory. And so because of that we’re conservatively setting guidance at those numbers. Sanjeev Aggarwal: So just to add to that Neil, I think we are still optimistic on the second half of this year are really focusing on a few things. One is the low-density STT-MRAM product that we brought out a couple of years. We are seeing good traction in the industry even in Asia Pac. So we expect that we’ll be able to get some traction in the second half of 2024. And as you know with all the supply chain issues that everybody had last year and the year before Everspin actually managed the supply chain very well. And because of that we have some — earned some goodwill with our customers. So with our Toggle customers so we’re actually going back and talking to our customers to see we can actually precipitate some design wins actually win sockets from some of our customers. And those discussions are going well. And giving you color on the Rad Hard deals basically we do expect the project that we are working on for the FPGA to continue throughout the year. And so we will see some — we expect to see some licensing Rad Hard revenue from there. And then, also our initial project the 64-megabit STT-MRAM will continue through this year. And we will recognize our revenue along the way. Neil Young: Great. Thanks. Sanjeev Aggarwal: Sure. Operator: Thank you. [Operator Instructions] One moment please. I’m showing no further questions at this time. I’d like to turn the call back over to Anuj Aggarwal, for any closing remarks. Anuj Aggarwal: Okay. With that, we conclude today’s call. Thank you all for joining us. And we look forward to updating you on our progress next quarter. Operator, you may now disconnect the call. Thank you. Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day. 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Chart Industries, Inc. (NYSE:GTLS) Q4 2023 Earnings Call Transcript

Chart Industries, Inc. (NYSE:GTLS) Q4 2023 Earnings Call Transcript February 28, 2024 Chart Industries, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning and welcome to Chart Industries, Inc. 2023 Fourth Quarter and Full Year Results Conference Call. […] Chart Industries, Inc. (NYSE:GTLS) Q4 2023 Earnings Call Transcript February 28, 2024 Chart Industries, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning and welcome to Chart Industries, Inc. 2023 Fourth Quarter and Full Year Results Conference Call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. The company’s release and supplemental presentation were issued earlier this morning. If you have not received the release, you may access it by visiting Chart’s website at www.chartindustries.com. A telephone replay of today’s broadcast will be available approximately two hours following the conclusion of the call until Friday, March 29, 2024. The replay information is contained in the company’s press release. Before we begin, the company would like to remind you that statements made during this call that are not historical facts are forward-looking statements. Please refer to the information regarding forward-looking statements and risk factors included in the company’s earnings release and latest filings with the SEC. The company undertakes no obligation to update publicly or revise any forward-looking statements. I would now like to turn the conference call over to Jill Evanko, Chart Industries’ CEO. Please go ahead. Jill Evanko: Thank you, Julie, and good morning, everyone. Thank you for joining Joe Brinkman, our CFO and me to walk through our record fourth quarter and full year 2023 results. Our results shown are from continuing operations. I refer you to our earnings release for reported results. For purposes of our discussion this morning, when referring to the fourth quarter 2022, full year 2022, or any quarter of 2023 comparative period, all metrics are pro forma for continuing operations of the combined business of Chart and Howden. This includes Howden, excludes Roots and excludes November and December of 2022 of the divested American Fan, Cofimco and Cryo Diffusion businesses. Information on divestitures completed in 2023 can be found on Slide 4. Starting on Slide 6, as a reminder, we closed on the acquisition of Howden on March 17, 2023. We have exceeded both our original year one commercial and cost synergy targets ahead of the one-year mark. Commercial synergy awards to date of approximately $530 million also exceeded our year three commercial synergy target. We have achieved over $181 million of cost synergies to date. The Howden acquisition has also contributed many other benefits, including less reliance on big LNG projects, more aftermarket service and repair, less cyclicality, broader geographic diversity, and less customer concentration. In 2023, our top 10 customers made up about 25% of our sales, whereas in 2021 and 2022, they comprised 39% and 38% on a chart standalone basis. In the Q4 2023, we had record orders, backlog, sales, gross profit, gross profit margin, operating income, operating income margin, EBITDA, EBITDA margin, adjusted EPS and reported an adjusted free cash flow. Our highest reported gross margin quarter ever in the fourth quarter of 32.9% contributed to our reported Q4 operating margin of 21% and EBITDA margin of 21.7%. When adjusting for primarily Howden related integration and deal associated costs, adjusted EBITDA margin was 24.2%. Sales of $1.02 billion was a record quarter as well, the only quarter to date that we have exceeded $1 billion, and in a few minutes, Joe will talk about other throughput activities that we have underway to further drive this ahead. Q4 sales were up sequentially 13% and 12.5% compared to Q4 2022. While we surpassed the $1 billion mark and set numerous profitability records as I just described, we had anticipated higher revenues related to revenue recognition timing in the quarter. Our year end net leverage ratio of 3.35 was supported by an increase in cash on hand and debt pay down totalling approximately $291 million in Q4. As part of our Howden integration, we executed a plan to align our legal entity structure with our integrated operations. This resulted in a positive impact on our effective tax rate and sets us up for future back-office synergies, efficient and flexible cash management and an anticipated future steadier sustainable tax rate. Our fourth quarter of 2023 results compared to pro forma Q4 of 2022 and sequentially to the third quarter of 2023 can be seen on Slide 7. The far righthand column shows the changes in each metric year-over-year. Orders are up over 28%, reported gross margin increased 540 basis points, adjusted EBITDA increased by 64% and adjusted EBITDA margin by 760 bps. Q4 2023 adjusted earnings per diluted share were $2.25. Fourth quarter free cash flow was $110 million and adjusted was $120 million. Joe will speak to the details in a moment. The middle column on Slide 7 shows that every metric increased sequentially in the fourth quarter compared to the third quarter of 2023, even when considering that the third quarter included an entire quarter of Cofimco, American Fans and Cryo Diffusion results, whereas the fourth quarter only included one month of these as they were divested the last week of October 2023. Q4 also contributed to a record full year, as you can see on Slide 8. Including the Howden stub period, pro forma full year 2023 sales were $3.66 billion. Strong operational margins throughout the year, including all of our Howden ownership quarters being above 30% reported gross margin contributed to full year 2023 gross margin as 31%. As we look to 2024 and we’ll have a section on this coming up here, in summary, we anticipate that each of our segments and each of our regions, which are Americas, Europe, Middle East, Africa, APAC, India and China will each grow sales compared to 2023. Our fourth quarter was our highest ever order quarter in our pro forma history with over $1.2 billion of awards received. Slide 9 shows pro forma orders and backlog trends. The fourth quarter was the highest order quarter of the year for both Cryo tank solutions and heat transfer systems. Repair service and leasing orders were over $328 million marking our three full quarters of Howden ownership having RSL orders each above $315 million. This reflects the growing adoption of our aftermarket programs to both Howden and Chart legacy installed bases and the increasing pull through of our original equipment customers to aftermarket. In 2023, RSL orders for the full year were up 25% and our long-term service agreements and framework agreements increased more than 4% year-over-year. Just a few comments about the diversity of our 2023 year-end backlog. Space exploration, carbon capture, hydrogen and helium, brazed aluminium heat exchangers, and HTS systems all have record backlog as of the end of the year. Combined, these end markets account for approximately half of our total backlog. RSL is just under 14% of total backlog and CTS just under 9%. The remaining approximately 27% comprised of the rest of specialty products as well as HTS air coolers and VRV heat exchangers. We have seen a surge in demand for Howden screw compressors driven by food and beverage refrigeration, emissions reduction via flare gas recovery and expansion of methane compression. The year end 2023 backlog for this particular product is two times prior year, contributing to our higher than historically typical backlog coverage for the year. As we have shared, we have a significantly below 1% cancellation rate of backlog. There’s a theme that we’re seeing across many of our markets of increasing project size and engineering content. A few comments by end markets of what we’re seeing to start 2024, starting with industrial gas. In EMEA, our pipeline is strong, we had an excellent January of orders and project sizes are increasing. For industrial gas in the U.S. and the rest of the world, the commercial pipeline remains strong, inclusive of hydrogen opportunities. While we expect a “strong quarter” for CTS orders compared to other first quarters in prior years, Q1 is typically and still expected for this end market to be our lowest quarter of the year. In energy markets, we are seeing moderating North American demand, which is offset by increasing international inbound since the beginning of the year. The global market for LNG continues unabated. As the United States pauses, the rest of the world accelerates. This is evident in our commercial pipelines for Big LNG and small scale and floating LNG, which can be seen in the appendix on Slide 28. As of now, we have 30 potential Big LNG projects in our pipeline, including 15 international opportunities for potential IPSMR usage. Both of these metrics increased from Q3 year end 2023. Similarly, since the beginning of this year of 2024, small and floating potential projects in our commercial pipeline increased about 4.5%, mainly driven by additional international opportunities. In the case of Qatar, we do have potential opportunities to participate, including with cryogenic equipment, compression, debottlenecking and process technologies. Our near-term prospects, we believe are on heat rejection optimization on existing facilities and potential pretreatment heat exchangers for expansion plants. Specialty products demand is consistently strong and we’re also seeing increasing potential project sizes as a theme in many of these end markets as well. Marine has an increasing commercial pipeline, in part due to our upcoming jumbo tank capacity at Teddy 2 as well as multiple Howden air lubrication opportunities. SpaceX market remains robust. HLNG over the road vehicle tank activity is increasing, albeit not at prior levels, but certainly, outlook is better than the past two years’ actual activity. As of yesterday, Q1 2024 quarter to date, we’ve booked orders for HLNG vehicle tanks that equate to more than 50% of last year’s full year HLNG vehicle tank sales. Mining and metals markets remain very strong, driven by global demand for electrification and a push to reduce carbon footprints using DRI processes, hydrogen and metals and other solutions such as our VentSim offering. Our mining and metals pipeline of opportunities identified has increased approximately 10% pro forma year-over-year. CCUS activity is also increasing with our small-scale Earthly Labs offering going international and again, in this end market, project sizes for potential Chart content are getting larger. Hydrogen pipeline remains active. We’re paying close attention to U.S. Timing specifically related to hydrogen hubs and IRA clarifications. Internationally, there’s also increasing traction, including the recent European Commission approval of €6.9 billion in state aid for development of the hydrogen value chain. We are excited to announce that last week, we were awarded a significant hydrogen compression solution within the renewable hydrogen industry. Using Howden’s reciprocating compression technology, this is the largest single compressor award in dollars in Howden’s 167-year history. It’s also a synergy win as the solution includes Chart legacy pressure vessel equipment and finally, as we like to see, it brings with it the future opportunity for installation and post installation monitoring. Aftermarket service and repair is off to a consistent start quarter-to-date with multiple customers across end markets, in particular in Europe. In the Americas, we entered 2024 with RSL backlog a bit better than normal and quoting activity remains strong. You can see our increasing operational margin metrics, including the sequential increase in reported gross profit margin on the left-hand side of Slide 10. The same up into the right trend applies for EBITDA and adjusted EBITDA margin on the right-hand side, reflective of our full solution mix, aftermarket service and repair over 30% of our business, productivity actions, cost synergies and additional volume throughput. Moving to Slide 11, this shows sequential segment reported results for sales, gross and operating margins for Q3 and Q4 of 2023. CTS, HTS and RSL segments all had record sales in the fourth quarter. CTS and RSL sales were up over 29% and 25% sequentially compared to Q3. Specialty sales did decline sequentially, which was driven by the marine end market, had a full quarter of American Fans in Q3 and not in Q4 due to divestiture, as well as from revenue timing for hydrogen metals and space exploration. We expect all of these to be strong contributors to 2024 sales as we had full year record orders in hydrogen, metals and space. Each segment did have its highest reported gross margin quarter of the year in the Q4 2023. And finally, we’re focused on cost control with the strength in gross margin dropping through to operating margin results in each segment. Joe Brinkman: Slide 12 shows our cash generated from operations in the Q4 2023 of $130 million netted with $20 million of CapEx, our adjusted Q4 free cash flow is 12% of sales. Our priority has been and continues to be debt pay down and leverage reduction. Our net leverage ratio went from 4.08 in Q1 of 2023 to 3.35 as we exited the year, a meaningful step towards our anticipated and reiterated mid 2024target of 2.5 to 2. 9 and overall target net leverage ratio range of 2 to 2.5. There were specific outflows of cash in the Q4 2023 that we did not adjust shown on the right-hand side of slide 13. We ended the year with $814 million of liquidity in addition to paying down over $150 million of our Term Loan B in the year. Our weighted average interest rate of 7.8% was down approximately 25 basis points from the end of Q3. In addition to operational cash focus from our entire organization on our cash culture, we continue to work additional cash generation activities, whether evaluating potential minority investment exits, sale of underutilized real estate and cash repatriation. We reiterate our financial policy and commitment to debt pay down as shown on the bottom right-hand side of Slide 13. Slide 15 shows our main material cost input trends. They remain stable and in some cases are trending down. Looking at the lower right hand freight chart, the trend has been up the past few months, yet we have seen pricing levelling in recent weeks and in many of our customer agreements, we passed the freight costs through to them. We are carefully monitoring the Red Sea situation. As of now, we have not seen any major impacts material availability into the plants. We are experiencing approximately 2-to-3-week delay on certain routes. We have three main categories of pricing project pricing, price lists for component sales and price mechanisms and long-term agreements. Over the past three years, we have incorporated price increases to adapt to the increasing cost environment and we have held this pricing. The continuous part of our business is ongoing new certifications, customer site approvals, productivity, automation and what we call Chart Business Excellence or CBE. This year is no different and includes our Lean Six Sigma training program for our internal team members as well as approximately $115 million to $125 million of capital spend expected in 2024. The CapEx spend includes capacity expansions as shown on the top of Slide 16. We actively manage our cost structure and see further synergies ahead this year inclusive of in sourcing and localization for compressor and Fan products. Over the next few slides starting on Slide 18, we will walk through the elements of our 2024 outlook range. We anticipate our full 2024 sales to be in the range of $4.7 billion to $5 billion dollars with forecasted full year 2024 adjusted EBITDA in the range of $1.175 billion to $1.3 billion. Free cash flow guidance of $575 million to $625 million is defined as operating cash flow less capital expenditures. Jill Evanko: Slide 19 shows the sales bridge from 2023 to 2024. The main drivers of the anticipated increase are incremental Big LNG, Teddy 2 backlog converting to sales, stronger than typical backlog coverage as we entered the year and commercial synergies flowing through our shops. Book and ship represents approximately 40% of our 2024 outlook, lower than normal due to the strong backlog coverage, which brings us to our three main potential drivers to the higher end of our range. Higher book and ship activity throughout the year, large project awards in the first half that begin to generate revenue in the second half and more achievement of additional backlog conversion. The adjusted EBITDA bridge is shown on Slide 20. The elements of our EPS outlook for 2024 of $12 to $14 per diluted share are shown on Slide 27 of the appendix. We anticipate our tax rate to be approximately 20% and a diluted share count of 47 million to 48 million. Slide 21 is intended to give you our perspective toward each of our segments end market activity. The transfer system had strong order years in both 2022 and 2023 in the base business as well as with Big LNG activity. We had approximately $385 million of Big LNG related awards in 2023, contributing to year-end HTS record backlog. The U.S. Biden Administration Department of Energy moratorium on LNG export approvals announced in January of 2024 has begged numerous questions. Let me reiterate a few things. We are molecule agnostic and our technology and equipment service multiple end markets, including traditional energy, LNG, hydrogen and other new energies. Earlier in the presentation, we discussed international macro activity in global energy, so I won’t reiterate that here. Although I will remind you about our IPSMR process and associated equipment being chosen for a large IOC’s international LNG project. This award is not yet in our backlog and we anticipate the booking to be later this year or in the first part of 2025. IPSMR international margins are extremely similar to North American IPSMR margins as a clarifying point. Cryo Tank Solutions not only has Teddy 1 and 2 additional capacity coming online in the near term, CTS also ended 2023 with the highest order in sales quarter of the year. Engineering projects and service opportunities with our main CTS customers have been picking up since the beginning of the year and some of our industrial gas customers have shared with us that they are looking at their 2024 standard equipment forecast more optimistically than they were last summer. Specialty Products end markets have momentum from macro tailwinds as well as chart specific activities. Examples of this include recent growing interest in deploying hydrogen at much larger scale than we have seen in the past few years. We are now speaking with Japanese, Middle East and European companies looking to build larger production facilities than ever discussed before for hydrogen, inclusive of potentially 300 ton per day liquefaction. Specific to us, we have received multiple certifications for our products in specialty applications, giving us first mover and only approved supplier advantages in some cases, such as with our liquid hydrogen trailer certification in South Korea. Additionally, via our Howden integration, we are taking existing products into new geographies, including just recently executing our first MOU for Earthly Labs small scale carbon capture with UK based CO2 hub. We’re also taking our existing products into new applications, including a recent win where we re-engineered an industrial refrigeration compressor for a vapor recovery application to reduce emissions associated with upstream, onshore oil and gas. And we shared information earlier about aftermarket. We’ve already discussed what’s shown on Slide 22 throughout our remarks today and we’ve worked to have balanced these considerations in our 2024 outlook. A few considerations for our first quarter of 2024 are on slide 23, given that it is the first quarter of the combined business. Similar to prior years in both the Chart and Howden businesses, as we move from the last quarter to year to first quarter, we anticipate our general trend of seasonality. This expectation is furthered by the timing capacity productivity that Joe talked about earlier. We have our semi-annual interest payments for our long-term debt in the first and third quarter of 2024 and this is estimated to be approximately $73 million in the first quarter. Q1 has other specific cash uses including CapEx related to the completion of Teddy 2, timing of bonus and tax payments as well as our annual insurance premium payment. We’re reiterating our medium-term financial targets on Slide 24. As a reminder, our outlook in the medium term does not include any additional Big LNG projects that were not included in our September 30, 2023 backlog nor awards related to the U.S. DOE’s $7 billion hydrogen hub investment that lies ahead. To conclude on Slide 25, we spent less time today than in the past on new customers, first of a kind and other chart differentiators. Yet these metrics are as strong as ever, including booking orders with 322 new customers in 2023, receiving 54 patents, logging 106 new first of the kinds and booking orders with over 67% of our partners that we executed MOUs with in 2022 and 2023. We continue to partner via new MOUs and one such in Q4 was with Coca-Cola to improve their ESG goals by evaluating our carbon capture technology at their bottling facilities. We have exceeded our own greenhouse gas emission reduction target this past year and have received numerous new certifications for our products and facilities. None of this would have been accomplished without the mighty focused and positive efforts of our OneChart Global team members. So thank you to each of you. And now Julie, please open it up for Q&A. See also 14 Stocks With Heavy Insider Buying In 2024 and 20 Countries That Read the Most in the World. Q&A Session Follow Chart Industries Inc (NASDAQ:GTLS) Follow Chart Industries Inc (NASDAQ:GTLS) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you [Operator Instructions]. Our first question comes from Rob Brown from Lake Street Capital Markets. Please go ahead. Rob Brown: First question is on the commercial synergies. You’ve seen some pretty strong momentum there. How much sort of can you see that momentum continue? I assume it can add other segments, but just how much more room is there in commercial synergies? Jill Evanko: Thanks for the question, Rob. I would say first of all, we’ve been very pleasantly surprised at which the continued momentum of commercial synergies has occurred across the last 11 months. Certainly, earlier and more often than what we had originally anticipated, which is shown in the fact that we exceeded our year three original commercial synergy target. The nice part of the commercial synergies is that they’re coming from multiple different avenues. So that ranges from Chart legacy customer relationships where we’re pulling through Howden equipment, vice versa and some of the things that I described on taking existing products into new geographies and applications just to name a few. I think there’s a lot of runway ahead, for us and we’re seeing that pipeline remain above $1 billion of potential commercial synergy awards here in the coming few years. And so, I think that combined with the fact that we’re seeing larger engineering and project sizes as a whole and having this full solution of all of our mission critical equipment under our own umbrella really stands to serve us well here in the coming years as well as the coming decades. Rob Brown: Okay, great. And then just a little bit of detail on carbon capture, you mentioned some momentum there. Are you sort of — are you seeing larger activity there or is still relatively small? And when do you see that sort of expanding? Jill Evanko: Yes. What I would say on that is we’re seeing increasing size of the awards that we’re getting for our small-scale carbon capture. So that sounds a little bit paradoxical when you say that, but we’re getting more content and some of the smaller scale is going into more facilities or a little bit larger in size. Our original Earthly Labs CCUS offering was the OAK which was very small scale and now we have the ELM. So, we’re kind of moving up and trying to meet our CCC SES technology somewhere in the middle between the large scale small, small scale. On the larger scale which I think is really what your question is around, the technology for larger industrial applications, I would say that we’re seeing an increasing pipeline of opportunities and an increasing number of pre-FEED and FEED studies, yet we haven’t yet seen, a full level of kind of commercialization and consistent activity in that larger scale industrial. A lot of conversations happening in that realm, whether that’s ranging from the MOU I just described with Coca-Cola or through to quite a bit of commercial pipe on the larger end in the Middle East areas in Saudi. So opportunities, but definitely not on the large scale seeing that consistently flowing into the order book yet. Operator: Your next question comes from Marc Bianchi from TD Cowen. Please go ahead. Marc Bianchi: Hey, thanks. I wanted to see if we could get any more precision on the expectation for first quarter. If I look back at the pro forma decline, EBITDA was down about 7% in the first quarter of 2023. Is that the right range? And then similarly with free cash flow, you called out a couple of incremental headwinds that are unique to the first quarter. Would you expect free cash flow to still be positive in the Q1? Jill Evanko: Hey, Mark. Good morning. So let me take the back end of your question first. We specifically called those out because we certainly got feedback in, I think it was summer of last year that people were surprised at the timing of the semi-annual interest rates, interest notes and things like that where it was kind of the first time we were going through year one related to these particular timings of cash outflows. So, we wanted to give specificity there. We’re not going to give a specific number, but what we would say is there’s plenty of items that we called out that are in Q1 that won’t repeat in Q2 and going forward, as well as I think your point on the first part of your question kind of normal seasonality. I would say normal seasonality is a bit moderated now given the over 30% of our aftermarket service repair being part of the business. So, Howden kind of has mitigated it, but it hasn’t eliminated it. Marc Bianchi: Got it. Okay. Well, thanks. I’ll leave it there. Operator: Your next question comes from Roger Read from Wells Fargo. Please go ahead. Roger Read: I think what I’d like to dig into just a little bit, you went through some of the details of it on the 2024 outlook in terms of the revenue. So, if we look at the $5 billion sort of expectation for revenue, we’d be looking at backlog covering a little over 50% depending on kind of the range of 4.7 to 5. You mentioned half one, 2024 four orders could help and greater backlog conversion. I’m just curious book and ship as well, but of those three, like which of the three is most likely to help you out? And at what point do you think you have enough visibility on bids that are out there right now to feel good about that half one 2024 orders potentially helping you out on the higher side? Jill Evanko: Roger, you gave me a tough one there. So, I’m going to take it apart a little bit. Roger Read: I’m going to ask that question because there’s a lot of pieces in it. So I’ll leave it there afterwards. Jill Evanko: Okay. All right. So, let me answer part one of the question around kind of which of those three do I see as the most likely to help toward the higher end of the range and what I’d say is, it’s always easy to answer the what’s in our kind of in our backlog today, so existing backlog converting through the shops. The other part — so that would be my number one answer. My number two answer would be, around the larger projects that we could book in the first half, especially as we see more engineering content on that and so that would be my number two. And then my number three would be more book and ship just because it’s harder to have visibility till it actually comes in the door. So, the positive there and why we called it out specifically was we’ve built the walk in certainly high growth in that range, but we’ve built the walk with lower book and ship than typical, but that’s really because we’ve got so much backlog going through our shops. So, there’s a balance there and a trade there. And then to answer the question on visibility to kind of those first half category two questions that could convert in the second half. So given the larger and increasing project size in our pipeline of commercial identified opportunities, it is hard say, we are going to definitely this $50 million, $75 million order within the next two weeks, although the commercial team should be listening and they have a target in a bogey. With that said, I think we’ll have pretty good visibility to that by the time we report our first quarter earnings kind of what we’re seeing there in those types of projects, so end of April. I think you have one more piece of your question, Roger, that of kind of coverage going forward needed on bookings. And we’ve shared before, but I think it’s worth noting again that on average across the year we expect to be above 1 on book to bill. Roger Read: Okay. Yeah, that’s helpful. And my apologies to putting a target on the back of the commercial guys there. Jill Evanko: Hey, nice work. I appreciate you. Operator: Your next question comes from Arun Jayaram from J.P. Morgan. Please go ahead. Arun Jayaram: I want to focus on Slide 8 and help us think about the different trends between pro forma orders and backlog. Your pro forma orders were down 2.8%, but backlog grew a lot 24%, which gives you more visibility on 2024. Help us think about the dynamics of what the delta between those two trends, so to speak? Jill Evanko: Yes. Thanks, Arun, for your question. So, I’d point you also on the slide to row two of orders ex-Big LNG year-over-year pro forma that grew in the low single digits. So that’s one of the dynamics there where in 2022 I think we had about $620 million of Big LNG related orders and 2023 it was $385 million in that range. So that’s one dynamic contributing there. The other is around kind of as these project sizes into backlog get larger and with more engineering content that gives us more visibility, but yet it also has the dynamic of kind of the timing of when things go through the shops after engineering releases occur, if there’s design changes in that engineering phase, that really kind of contributes to the timing of the flow through. And we’ve attempted here today in the bridges and in the frameworks that we’ve included in the deck to give you the elements of the law to the low and high end of the range. And we also have worked really, as I said, on balance to incorporate those 2024 considerations that are shown later in the deck, in particular as we have had revenue move between quarters and years. So we’re really working to kind of give that visibility, so everybody can make really educated decisions on they want to model this. Arun Jayaram: Great. My follow-up is on the bridge, you expect a $230 million revenue uplift from Big LNG in the Teddy 2 facility. Can you help us think about because I don’t think Teddy 2 will be operational until 2Q if I’m not mistaken. Can you help us think about the revenue potential from those two? Just trying to think about the trajectory of revenue growth as Teddy 2 comes online, I think in 2Q. Jill Evanko: Yes, Joe Teddy 2 is coming online early Q2. Joe Brinkman: Yes, early Q2 certificate of occupancy imminently. But yes, we’ll be operating early very, very early Q2. Jill Evanko: And we have good backlog coverage there for 2024 already. I think the other couple of points that are incorporated in that figure are around I don’t think we called it out of Teddy 1, but Teddy 1 got certified by one of our major customers to do bulk tanks. Joe Brinkman: Yes. And cryogenic railcars as well. Jill Evanko: And that’s in backlog? Joe Brinkman: In backlog. Jill Evanko: And then lastly, the Big LNG, we didn’t give a specific year-end backlog, but this is just a portion of our year end 2023 Big LNG backlog that we expect to flow through in 2024. I do think that to one of your colleagues’ questions earlier that this is an area that if we can get more throughput through the shops, has certainly the availability of backlog to benefit 2024. And maybe the heart of your question is that how do we think about the year unfolding from Q1 to Q4? And while we don’t give quarterly guidance, we certainly expect that Q1 will be the lowest quarter of the year and sequentially rolling out as the year goes on with the brunt of Teddy 2 revenue rec in the second half of this year, whereas Big LNG is a little more balanced now till the end of the year. Operator: Your next question comes from Craig Shere from Tuohy Brothers. Please go ahead. Craig Shere: So first, the fourth quarter was very strong on the margin side. And while revenues into this year are softer than originally guided, margin or the margin percent looks stronger and free cash flow is effectively unchanged. Can you provide more color around this margin and cash flow strength? Jill Evanko: Yeah. Thanks for the questions, Craig. What I would say is that, we definitely expected higher revenue rec in Q4 yet. We’re pretty pleased with 13% sequential growth Q3 to Q4, the first time the pro forma business being over $1 billion. Actually, it’s the first time the pro forma business being over I think $910 million or something like that. So, all in all, we’ve attempted to in the range for 2024 account for the fact that we do have timing shifts between quarters, especially as these projects get larger and larger. In terms of the margin strength, very pleased with the performance. That’s really reflective of in no particular order, our repair service and leasing business, not only the profile of the gross margin, but also the consistency of it being a grower in the business. That was something that originally there were skepticism — there was skepticism around whether that business could grow 10% and given the year-over-year pro forma order growth in RSL of 25% plus, we have good visibility to that kind of margin profile continuing in 2024. The other elements of the margin profile contributions are really around the larger project mix and we see that continuing to be consistent. And more and more of the annualized cost synergies that have been achieved to date, flowing through the actuals and the reported. And then your question about free cash flow, I will point you to the starting point of the EBITDA outlook that we provided and then we’ve in the appendix have a slide that walks you through the elements of our framework for the other pieces and parts that walk down to the free cash flow inclusive of the $115 million to $125 million of anticipated CapEx. Craig Shere: Great. Thanks. And my second question is around LNG. On Slide 28, are you basically saying that there is a bit of a falloff in the domestic opportunities as long as this pause is sustained. But international is more than filling in for that. So, you’re kind of pulling in on what you anticipate as opportunities in the U.S, but globally you’re as strong or stronger than before. And finally, in that, is anything in your Big LNG order book, maybe a one-off order, still exposed to any final regulatory certification, export authorization? And if you do have a straggler like that, can you describe any kind of order cancellation protection you’d have? Jill Evanko: All right. Let me unpack that one. So, what I would say is that since the announcement of the LNG export moratorium that we have seen a meaningful increase in international inbounds. I would say that that didn’t actually mitigate anything on the domestic side, although we’re saying demand moderating because of the uncertainty around the timing of the pause in the analysis. So let me — I’ve addressed the international piece. Let me talk about the domestic piece of the pipeline there. First of all, you’ve heard the extension of Tellurian’s permit to 2029. Cheniere last week discussed that they didn’t anticipate trains 8 and 9 be impacted by the LNG moratorium. And then, you go into the international side where Woodside just recently said they expect a 53% increase in global LNG demand in the next decade. Shell just put their LNG outlook out with continuing growth into the 2040s with the specificity that that was expected in APAC. So, I think on balance the U.S. pause timing uncertainty doesn’t necessarily change our outlook for domestic in the medium term, but the international inbound since late January have given us confidence that that pipeline is going to continue the way we had seen it prior to the pause. In terms of the Big LNG backlog. So let me reiterate my thanks to Craig for hosting a call with us on January 28th or 29th after this pause was announced because it allowed us to really discuss the composition of our backlog. And I’m going to wing it on my memory on from Q1 2019 to Q3 of 2023, we had announced $1.055 million in Big LNG related orders and we were privileged to be able to announce all but one of those in terms of the project itself. And so the only one that we hadn’t given a specific project to was Q2 of 2023. And we haven’t commented on its permitting. But it’s all of those projects, including that one, we have received our full and final notes to proceed from our customer. And then lastly, there are, in the Big LNG contracts specifically, I don’t want to answer like the total backlog because you got to get into specific customers and projects and all that, but to the Big LNG backlog there are specific cancellation charges, in particular as, again, we have our FNTPs with all of them as of September 30, which I think was the question. Operator: Your next question comes from Graham Price from Raymond James. Please go ahead. Graham Price: Just one from my end and a follow-up prior question. Just thinking about the project delays that were visible in 2023 and then heading into 2024. Of those that you foresee, are they all encompassed in the $200 million customer timing and supply chain number that you quote in the bridge? And just how should we think about kind of air bands around that? Jill Evanko: Yeah. So, we again, looking back at history and taking all of the considerations on balance, we felt like we should put the low end of the range where it is at the $4.7 billion which the specific project timing is there’s a few different components that go into the reasons for those timing shifts. First being — and these are in no particular order, but they’re fairly equally weighted. The first being customer timing or change orders where a design change comes in and so then you can’t release it to the shop floor because you got to incorporate the design change. Typically, those actually result in change orders for us. It’s just timing of the rev rec associated with it. The second category, which we’ve experienced and I would say are learning to incorporate into this outlook is around quarter end vendor progress as we have the business has shifted to that more full-solution business model. So, we have more percent of completion revenue rec, which relies on vendor progress as well. And then the third is around how we think about timing of new orders coming in the engineering related work associated with that. So, as the projects get larger there’s more engineering and that’s what I would say is the three that encompass what we mean when we say timing of revenue recognition. And we’ve attempted to incorporate that in that $200 million-ish bar. It’s hard to kind of risk adjust that and say like, okay, plus or minus to put a band around it. That’s what we’ve attempted to do with this range. Graham Price: Okay, understood. And if we think about that range, is there a particular quarter during the year that would be more susceptible, to seeing those delays? Jill Evanko: Not specific to this item, this topic. I would just reiterate the consideration of our normal seasonality from the Q4 to the Q1, but that’s less attributed to this than it is just, the normal business model and our customers’ behaviors. Graham Price: Okay, got it. Thank you. That’s it for me. I’ll jump back in the queue. Operator: Your next question comes from Eric Stine from Craig-Hallum. Please go ahead......»»

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Nutanix, Inc. (NASDAQ:NTNX) Q2 2024 Earnings Call Transcript

Nutanix, Inc. (NASDAQ:NTNX) Q2 2024 Earnings Call Transcript February 28, 2024 Nutanix, Inc. misses on earnings expectations. Reported EPS is $0.1099 EPS, expectations were $0.29. Nutanix, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and thank you […] Nutanix, Inc. (NASDAQ:NTNX) Q2 2024 Earnings Call Transcript February 28, 2024 Nutanix, Inc. misses on earnings expectations. Reported EPS is $0.1099 EPS, expectations were $0.29. Nutanix, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and thank you for standing by. Welcome to the Nutanix Second Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there’ll be a question and answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your first speaker today, Rich Valera, Vice President of Investor Relations. Please go ahead. Rich Valera: Good afternoon and welcome to today’s conference call to discuss second quarter fiscal year 2024 financial results. Joining me today are Rajiv Ramaswami, Nutanix’s President and CEO; and Rukmini Sivaraman, Nutanix’s CFO. After the market closed today, Nutanix issued a press release announcing second quarter fiscal year 2024 financial results. If you’d like to read the release, please visit the Press Releases section of our IR website. During today’s call, management will make forward-looking statements, including financial guidance. These forward-looking statements involve risks and uncertainties, some of which are beyond our control which could cause actual results to differ materially and adversely from those anticipated by these statements. For a more detailed description of these and other risks and uncertainties, please refer to our SEC filings including our annual report on Form 10-K for fiscal year ended July 31, 2023 and our subsequent quarterly reports on Form 10-Q, as well as our earnings press release issued today. These forward-looking statements apply as of today and we undertake no obligation to revise these statements after this call. As a result, you should not rely on them as representing our views in the future. Please note, unless otherwise specifically referenced, all financial measures we use on today’s call, except for revenue, are expressed on a non-GAAP basis and have been adjusted to exclude certain charges. We have provided, to the extent available, reconciliations of these non-GAAP financial measures to GAAP financial measures on our IR website and in our earnings press release. Nutanix will be participating in the Morgan Stanley TMT Conference in San Francisco on March 6th. We hope to see some of you there. Finally, our third quarter fiscal 2024 quiet period will begin on Tuesday, April16th. And with that, I’ll turn the call over to Rajiv. Rajiv? Rajiv Ramaswami: Thank you, Rich. And good afternoon, everyone. We’ve delivered a solid second quarter, with results that came in ahead of our guidance. The macro backdrop in our second quarter remain uncertain, but stable relative to the prior quarter. We continue to see steady demand for our solutions driven by businesses prioritizing their digital transformation and infrastructure modernization initiatives and looking to optimize their total cost of ownership or TCO. Taking a closer look at the second quarter, we were happy to have exceeded all of our guided metrics. We delivered record quarterly revenue of $565 million and grew our ARR 26% year-over-year to $1.74 billion. We also had another quarter of strong free cash flow generation. Finally, we achieved quarterly GAAP operating profitability for the first time in Q2, demonstrating the progress we continue to make on driving operating leverage in our subscription model. Overall, our second quarter financial performance reflected continued discipline execution. Our largest wins in the quarter demonstrated the appeal of the Nutanix cloud platform to organizations that are looking to adopt hybrid multi cloud operating models optimize the performance of their workloads and improve their TCO all while managing through some of the disruption from recent industry M&A. A good example is a seven figure win with a global EMEA based provider of automotive technology solutions. This new customer had an existing three tier footprint in need of a refresh, but was frustrated by the recent price increases of their incumbent vendor and was also looking to have the flexibility to potentially move some of their footprint to the public cloud in future. They chose our Nutanix Cloud Platform, including our AHP hypervisor, as well as Nutanix Cloud Management, based on its superior TCO, built-in automation for infrastructure as a service. And its ability to seamlessly transition workloads to public cloud via our NC2 solution. We see this win as a good example of the value customers see in our cloud platform for both, modernization and providing a seamless pathway to the public cloud. A second good example is a win with a large North American based hedge fund, that was looking to mitigate the growing cost of its public cloud hosted virtual desktop infrastructure or VDI. And for a more responsive solution to meet the performance demands of its traders. They chose to repatriate their VDI onto the Nutanix Cloud Platform on GPU based servers. Resulting in a meaningful improvement in performance and an estimated 60% plus TCO savings. We believe this win demonstrates the ability of the Nutanix Cloud Platform to seamlessly run and manage workloads wherever the optimal performance and TCO can be achieved, whether on premise, at the edge or in the public cloud. A final example if one of our largest new customer wins in the quarter, with a global airline based in the EMEA region that was looking to modernize their feature infrastructure, while enabling a hybrid multi cloud environment. This customer chosen Nutanix Cloud Platform, including Nutanix Cloud Management to run their business critical application, leveraging its simplicity and built-in automation for infrastructure as a service. They also adopted Nutanix database service for managing and deploying their databases throughout their organization, and Nutanix unified storage to service their unstructured data needs. We see this win as evidence of the value companies see in adopting our full stack solution. Moving on, adopting and benefiting from generating AI, is top of mind for many of our customers. As such, interest remains high in our GPT in-a-Box offering, which enables our customers to accelerate the use of generative AI across their enterprises, while keeping their data secure. Last quarter, we saw our first win for GPT in-a-Box with a large federal agency. In this quarter, we saw multiple additional wins for a Gen AI ready infrastructure offering. While it’s still early days, and the numbers remain small, I’m excited about the longer term potential for GPT in-a-Box. Finally, on the partner front, I’m happy with the early progress we’re seeing with our Cisco partnership. We continue to see good customer interest in our joint offering and saw additional wins for it in the second quarter. While it’s still early in this partnership, I’m encouraged by what we’ve seen so far. In closing, we are encouraged that the compelling value proposition of our cloud platform and the strength of our business model enable us to increase our top and bottom line outlook for fiscal 2024. We remain focused on delighting our customers while continuing to drive sustainable, profitable growth. And with that, I’ll hand it over to Rukmini Sivaraman. Rukmini? Rukmini Sivaraman: Thank you, Rajiv. I will first review our Q2 fiscal ’24 results, followed by guidance for Q3 fiscal ’24. And finally provide an updated view of our full year fiscal year ’24 guidance. Results in Q2 ’24 came in higher than the high end of our range across all guided metrics. ACV billings in Q2 were $329 million above the guided range of $295 million to $305 million representing year-over-year growth of 23%. The outperformance was driven by better than expected renewal performance due to a combination of good discipline around renewals economics, improved on time renewal performance, as well as early and core term renewals. Revenue in Q2 was $565 million, higher than the guidance range of $545 million to $555 million and the year-over-year growth rate of 16%. ARR at the end of Q2 was $1.737 billion representing year-over-year growth of 26%. In Q2, we continue to see modestly elongated average sales cycles compared to historical levels. Average contract duration in Q2 was 2.8 years, slightly lower than Q1, and more or less in line with our expectations. Non-GAAP gross margin in Q2 was 87.3%. Higher than our guided range of 85% to 86%. Non-GAAP operating margin was 21.9%, higher than our guidance range of 14% to 16%, largely due to higher revenue and lower operating expenses as a result of timing of hiring. Non-GAAP net income was $136 million, or fully diluted EPS of $0.46 per share based on fully diluted weighted average shares outstanding of approximately 299 million shares. Q2 marked our first ever quarter of positive GAAP operating income of $37 million and a positive GAAP net income of $33 million, with fully diluted GAAP EPS of $0.12 per share. Given expected variability in quarterly revenue and timing of expenses, we would not expect to be consistently profitable at the GAAP operating profit level over the near term. DSOs based on revenue and ending accounts receivable were 31 days in Q2. Free cash flow in Q2 was $163 million, representing a free cash flow margin of 29%, higher than our expectations due to higher billings and lower expenses in the quarter. We ended Q2 with cash, cash equivalents and short term investment of $1.644 billion up from $1.571 billion at the end of Q1. We continued repurchasing shares in Q2 under the share repurchase program, previously authorized by our Board of Directors. Our sustainable generation of free cash flow enabled us to transition the net share settlement to pay for employees’ tax liability on RSU Vesting in Q2, and going forward from our previous method of sell to cover. This, along with our share repurchase program will help us continue to manage dilution. Moving to Q3 ’24, our guidance for Q3 is as follows: ACV billings of $265 million to $275 million, revenue of $510 million to $520 million, non-GAAP gross margin of approximately 85%, on-GAAP operating margin of 7.5% to 8.5%. And fully diluted shares outstanding of approximately 301 million shares. The updated guidance for full year fiscal year ’24, which is higher than our previously provided fiscal year ’24 guidance across all metrics is as follows; ACV billings of $1.09 billion to $1.11 billion, representing a year-over-year growth of 15% at the midpoint of the range. Revenue of $2.12 billion to $2.15 billion representing a year-over-year growth of 15% at the midpoint. Non-GAAP gross margin of 85% to 86%. Non-GAAP operating margin of 12.5% to 13.5%. Free cash flow of $420 million to $440 million, representing a free cash flow margin of 20% at the midpoint. I will now provide some commentary regarding our updated fiscal year ’24 guidance. First, we are seeing continued new and expansion opportunities for our solutions despite the uncertain macro environment. However, as we mentioned previously, we have continued to see a modest elongation of average sales cycles relative to historical levels. Our fiscal year ’24 new and expansion ACV performance outlook assume some impact from these macro dynamics. We are also seeing a higher mix of larger deals in our pipeline, which is driving greater variability in the timing of our new and expansion business. Second, the guidance assumes that our renewals business will continue to perform well. Third, the full year guidance continues to assume that average contract duration would be flat to slightly lower compared to fiscal year ’23, as renewals continue to grow as a percent of our total billing. Fourth, a reminder that the full year ACV billing is not the straight sum of the ACV billings of the four quarters due to contracts with duration less than one year. We expect full year ACV billings to be about 5% to 6% lower than the sum of the four quarters ACV billings. In closing, we are pleased that our Q2 results exceeded guidance and to raise our top line and bottom line guidance for the full fiscal year. We remain focused on driving growth to capture the significant opportunity ahead of us and are investing prudently for that growth, consistent with our stated philosophy of sustainable, profitable growth. With that, operator, please open the line for questions. See also 20 Countries With Worst Vision Problems and 20 Countries That Read the Most in the World. Q&A Session Follow Nutanix Inc. (NASDAQ:NTNX) Follow Nutanix Inc. (NASDAQ:NTNX) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Our first question comes from Jim fish from Piper Sandler. Your line is open. Jim Fish: Hey, guys, thanks, thanks for questions. Awesome quarter here. Look, I’m going to ask the obvious, that’s on top of everybody’s mind, and I’m sure you’re totally prepared for. On the VMware opportunity and Rukmini, you even just mentioned, you know, you’re seeing a higher mix of larger deals in the pipeline. So my question to you is, is what sort of pipeline or bookings build Have you seen relative to this stage last year, between either direct customers kind of coming to you or partners coming over to you as well in terms of signups? Rajiv Ramaswami: Yes, why don’t I start Jim, and Rukmini can give you color on the pipeline. So, first of all, I think, as you said, I mean, there are significant concerns from VMware customers regarding the Broadcom acquisition. And we think that this is a significant multi-year opportunity for us to win new customers and to gain share. Now, getting to your question a bit here, the timing and magnitude of these deals is a bit unpredictable. Our pipeline is quite substantial, and growing. Now for a number of reasons, we expect contribution for the opportunity to build gradually, and here are the reasons. First one, Jim is that many customers signed multi-year ELAs enterprise agreements with VMware prior to the deal closing three to five years. So it buys them some time to make decisions. The second, converting from VMware 3-tier accounts or legacy storage accounts, which is a good chunk of VMware footprint, in many cases requires a refresh of their storage and our servers, right, one of the two, which could also impact the timing of the potential software purchases that they would make with us. Okay. And the last piece is like with all these accounts, we typically ever land and expand motion. So the first deal could be followed, and then there’s a lot of potential for expansion further than that. And then Rukmini, you want to take this? Rukmini Sivaraman: Sure. Yes, I’ll add one thing, Jim, to your question is that, I mentioned in my prepared remarks about this. Higher mix of larger deals that we’re seeing in our pipeline and that is driving the greater variability, we believe in the timing of our new and expansion business, as well as potentially contributing to the longer average sales cycles, because larger deals do tend to take longer to close. And we believe that this higher mix of larger deals in the pipeline is driven by, you know, one, our segmentation of market, as we’ve talked about before, and the improved product readiness for those larger customers. And secondly, some of the dynamics that Rajiv talked about already regarding concerns from larger customers, regarding the impacts from Broadcom’s acquisition of VMware. And so we have continued and continue to factor all of the impact of some of these dynamics into our updated fiscal year ’24 outlook. Jim Fish: Make sense. And just a follow up here. You know, there’s a bit of confusion out there, from what I can tell on the conversations with investors between, what VMware can do that Nutanix can’t do. And, so Rajiv, what differences actually exist, if any, or features or functions — exist, what the differences kind of exist, if any, between vSphere, for example, and Acropolis or the VMware platform versus Nutanix platform, or features functions you plan to add in order to make it an apple to apples compare, or is it simply just a legacy market perception thing that you guys can’t address, really what most of VMware could do? And really, why wouldn’t we start to see that Acropolis attach rate get closer to, you know, 100% on every deal that you signed from kind of here on forward. Thanks, guys. Rajiv Ramaswami: Yes. So Jim, I think first of all, if you compare the full stack that Broadcom was offering with VMware Cloud Foundation, that, — and our Nutanix cloud platform pretty much goes head to head against that, and we’ve got all the capabilities. That’s a full stack that includes, the hypervisor, a software defined storage, networking and management. So we compare very well with that full stack and we’re able to go to a very comparable offering. And indeed, as you can see, right our AHP penetration our hypervisor penetration, our install base is about 70%. And we are seeing new customers who adopt a full stack start with our own hypervisor, okay. That part is fair. Now when it comes to the lower tier offering, VMware does have a vSphere and now it’s called I believe VMware Virtual Foundation, VVF. That includes vSphere, some operations management capabilities, et cetera. Now, what you — what I mentioned earlier, in response to the question was that, there is some amount of VMware, in fact a big chunk of VMware it’s only the hypervisor that’s connected to legacy storage, right 3-tier storage arrays. Now, the way we go after the market is not to just simply replace the hypervisor with our hypervisor, because our hypervisor also is part of our complete solution, right, which includes our storage. So customers are actually making a shift from a legacy architecture that say hypervisor plus external storage to a modern HCI architecture that includes our hypervisor, but also the rest of our stack. So there, it’s not just a simple life for life, but it’s a conversion, and modernization of infrastructure as well. So I feel pretty good about what we can do, we can handle all the workloads. We have a hybrid cloud solution, we have a modern app platform that customers can run Kubernetes applications on. We have partnerships with Red Hat for OpenShift. We have partnerships with our cloud partners like Azure and AWS. So from a capability of the portfolio perspective, we’re very much there. Operator: Thank you. One moment for our next question. Our next question comes from the line of Jason Ader from William Blair. Your line is open. Jason Ader: Thank you. Hi, Rajiv, hi Rukmini. I just wanted to ask on that kind of follow up threads on the last question just on the 3-tier architectures out there. And most of those are running VMware today. Does it feel like this change with the Broadcom acquisition actually could accelerate the transition away from 3-tier architectures as customers maybe get a little bit disenfranchised, and are looking for alternatives? And then it’s like, well, we never really looked at HCI that closely. But now, maybe we should. Are those kinds of conversations happening? Rajiv Ramaswami: Very much so, I would say, Jason. So in fact, you’re right. There’s a lot of VMware with what we call 3-tier. And one of the things that Broadcom itself is doing has done by the way is that the VMware Cloud Foundation that includes HCI and that their default offering to a lot of the bigger customers. So effectively now, it’s not just us doing HCI, but they’re also putting, which puts a little bit of pressure on the 3-tier storage piece of it. And so we are clearly focused on that opportunity, in terms of — and we’ve been doing that all day long, right, since we’ve started, migrating, legacy 3-tier over HCI, and potentially that this might help. Now, the other thing we should also keep in mind just so that we don’t lose track of it. There are even easier assertion opportunities now. Because there is a substantial base of vSphere plus VSAN HCI out there. And so that’s almost the like for like. Those customers have already made the HCI decision, and they might be looking at, if they’re looking to migrate away from VMware, we pretty much have a like for like solution that that we can migrate over to. And we are doing, we’re not sitting idle here, right, we are doing a bunch of things to capitalize on the opportunity, I’d say three things that we’re doing. First is that we have been targeting some more advertising dollars to maximize the awareness of Nutanix as the simplest, easiest, viable alternative for these customers. Number two, we’ve also put in place incentives for our partners, who are helping customers get to our platform for new customers, as partners bring new customers to us, we give them more incentives. Number three, we’re also helping end customers with migration. When they have a VMware environment, they’re looking to bring our environment on, there’s a period of time where they might have dual operating costs, and we try to help them out on that front. So we’re also taking some very specific steps to go out for the opportunity. Jason Ader: Great, and then a real quick follow up just on your comments on Cisco, that you’re happy with early progress. When do you think, Rajiv that could start to really be a material contributor to the business? Rajiv Ramaswami: Yes, we factored in a modest contribution this year, Jason, from Cisco. I do expect that the contribution is going to be more significant in FY ’25. And we’ll cover that when we get to, you know, when we are ready to talk about that FY ’25 guide. But, clearly, it takes time to build this up, we focused on enabling the full solution, training that sellers. And we’re happy with the progress we’re making. We are getting new customers through the cloud now. And they are motivated. So I think over time, it will build. Operator: Thank you. One moment for next question. And our next question will come from Wamsi Mohan from Bank of America. Your line is open. Wamsi Mohan : Yes, thank you so much. You drove very strong operating leverage in the quarter. Can you talk about if there were any one time things in there? I think, Rukmini, you mentioned something around hiring I didn’t really catch. But, was there any one time things in there when why is that rewarding lower next fiscal quarter? Then I have a follow-up. Rukmini Sivaraman: Yes. Hi, Wamsi. Thanks for the question. So the reference I made in terms of our operating margin performance in Q2, which was came in strong at 22% and higher than our expectation was, one revenue was higher than we expected. And expenses were a bit lower because of timing of hiring, and just overall good expense management. And we do expect that expenses will go up in the second half. So if you look at half over half operating expenses implied in the guide, that does go up in the second half, one way, and of course, Q3 compared to Q2, seasonally, the revenue is lower in Q3, that it doesn’t in Q2. So those are some of the things that are factoring into the outlook. But overall, you know, I’d say, we have continued to be focused on investing and investing thoughtfully on this growth opportunity that’s ahead of us. And so that’s the approach we’ve taken. And overall, we’ve been pleased to take up our full year outlook on both top and bottom line. Wamsi Mohan : Okay, thanks. Makes a lot of sense. And then, Rajiv, I mean, you made some comments already. But can you perhaps maybe quantitatively talk about the wins that are coming your way because of this M&A? And, and sort of, you know, how many points of growth potentially we should be thinking about? Or how many points of share that you think you could see shift over to Nutanix, given this disruption, or even maybe if you can talk about it in qualitative terms around rate and pace of pipeline build? Just quarter-over-quarter over the last few quarters? That will be helpful. Thank you. Rajiv Ramaswami: Yes, Wamsi first of all, I think it’s going be hard for me to give you some very specific quantitative numbers at this point. But what I’d say is, is for sure, right, if you look at our last Investor Day, we talked about our TAM and the SAM as part of that right the $60 billion $70 billion TAM and SAM. And what we really expect is, I mean, we’ve always been going and continuing to grow market share and eat into that SAM, and what this event creates is an opportunity to speed that up. So it’s the same, the TAM and SAM haven’t really changed. It’s still the same, but now we’re able to get after more of it quicker. Now, the challenge with quantifying it is that it’s very hard to predict right I mean, as we bought that, how much of this is going to come out quickly? And this is what, it’s a little early to, for us to say something there. So we’ve got, like I said, we’ve got customers who want to do something different, but they’ve got these three five year relays. They’re not in a rush. There’s some time it takes to convert customers, and they have to depreciate the hardware that they bought, for example. And then you know, the — you bring us in for a small portion and expand. So all of these things create some unpredictability in terms of timing, and how quickly can we capture it. But, I certainly think that this provides us an opportunity for us to capture more of the market quicker, and we’re trying to move as quickly as we can. I don’t know, Rukmini, if you want to provide any color on the pipeline? Rukmini Sivaraman: Yes, I may add one thing to that, Rajiv, which is that. I think Wamsi your question is specifically around what we can tell about this opportunity as a result of VMware’s acquisition by Broadcom. And I say, I think the other nuance here is we’ve always competed against VMware, right. And so in some cases, it’s quite clear to tell, well, this door wasn’t open to us before. And now it is because of what they may be seeing from our competitor. But in other cases, and we talked about an example on the last earnings call, where existing customers of ours are maybe choosing to invest more than us or go single source with us, a partly influenced by this, right. So this idea of in some cases, it’s clear, in other cases, it’s more of A factor, an important factor, but one factor, and so that those situations, it’s harder for us to attribute specifically, dollars and pipeline and things like that, to this particular disruption in the competitive market. So, all those factors combined, are what makes us, feel good that this is a multi-year and opportunity, as Rajiv has mentioned, but difficult to get precise in terms of magnitude and timing. Operator: Thank you. One moment for our next question. Next question comes from Pinjalim Bora from JPMorgan, your line is open. Pinjalim Bora : Great. Thanks for taking the question. Congrats on the quarter. Rajiv, one of your partners, compare the Nutanix Cisco relationship and the buzz around it to the formative years of VCE and noted how VCE was kind of a game changer for VMware at the time. Do you think the Cisco partnership could be that pivotal for Nutanix? And secondly, do you think there any learnings from the rise and fall of the VCE that you can apply I guess, to this relationship? Rajiv Ramaswami: Yes, I’ve actually there at Cisco at that time, when the VCE partnership and clearly very cyclical initially. Now, I — it’s hard for me to compare VCE back then converged infrastructure with this. But I’ll tell you the, this — I’ll give you the sort of the puts and takes. So clearly, Cisco has huge market leverage and market position, in terms of their sellers, and their access to big accounts, their presence in all these accounts. Now, if you look at this particular space in the market, there are several positions, it’s not that there are small, relatively small market share player when it comes to servers compared to some of their other competitors. So it’s — so they’re not as strong in this segment of the market. However, I mean, they certainly have a big overall market cloud. So now, what could the two of us do together really to go into the market, and that’s really I think, where I do see significant potential here. Over time, again, it has to take time to build up. And it — Cisco also has a complex sell emotion, they have generalists, they have specialists. And right now, we are more focused on the data center specialists as they have and working together with them. So to answer your question, I mean, it’s still early days for us to predict how big this could be for us. And I would say, you know, we, I am optimistic, and I think this opportunity is also going to build up over time. And certainly continuing to — and in fact there’s a lot of cooperation happening between our sellers, and Cisco sellers in the field. So all good, good omens at this point in time, but still very early. Pinjalim Bora : Understood. I guess we’ll stay tuned. One question for you Rukmini, the ACV billings guidance for fiscal Q3. Seems like it calls for maybe a little bit higher sequential drawdown. I want to ask you the sales cycle elongation comment that you have made, was that versus Q1, the elongation in Q2 that you saw, was that sequential and are you assuming kind of a similar sequential? Higher elongation in the Q3 guide as well? Rukmini Sivaraman: Hi, Pinjalim. Thank you for that question. So on this — I think the first part of the question was on seasonality between Q2 and Q3. And so on that front, if you look back to sort of our initial guidance that we gave for Q3 last year, this time, Pinjalim, it was actually quite similar in terms of what we guided for Q3 versus Q2. But we were able to beat Q3 and so the actual I think, is what you’re referring to, was smaller than what we guided to. But the decrease, I would say, is more or less in line with what we’d expect for seasonality and what we expected at this time last year, as well. And then to your point on the average sale cycle, and modest elongation we’re seeing there, it moves around a bit quarter to quarter, Pinjalim, but what I was referring to is that when we look back at to historical levels, it remains somewhat elevated. And so that’s what I was referring to. Operator: Thank you. One moment, our next question. Our next question comes from George Wang from Barclays. Your line is open. George Wang : Hey, guys, congrats on the quarter and the guidance, I have two quick ones. Firstly, you briefly touch on the potential, the discounts and promotions to promote VMware customers. And I just want to kind of see if you can elaborate on the approach for the fiscal partnership, the HyperFlex customers, maybe you can give some color just on the incentives, you guys are providing to kind of further drive the adoption from the older HyperFlex customers? Rajiv Ramaswami: Yes, we have, I think I would say that Cisco, with Cisco, clearly we have a, they are — they’ve end of life HyperFlex, first of all, and there’s a limited time where you know that so – they no longer selling the product, and there’s a limited support window for it. So that by itself, by the way it creates an incentive for HyperFlex customers to migrate. And we through Cisco, of course, as a whole, Cisco has a set of programs for migration. And they’re good at driving those types of migration initiatives. And we are supporting them as they do that. So this is being done largely through Cisco and through the Cisco router market. George Wang: Also Rajiv, quickly, you talked about repatriation in the prepared remarks. I’m just curious, are you seeing a more visible inflection point in terms of the repatriation to the private cloud or is still a continuation of prior trends just besides lower TCO, kind of versus expensive public cloud. Can you can talk about other factors may contribute to continue repatriation to the private cloud? Rajiv Ramaswami: Yes, I’ll give you two-part answer to that, George. So I don’t know if I can call it a point of inflection. But certainly we are seeing more examples of people repatriating but that those are examples. It’s hard for me to say you know that there’s a whole trend here. Yes. But some are certainly repatriating like the example I talked about. But also, I think the other thing that we should keep in mind is that the bulk of enterprise workloads are still not in the public cloud. They’re still sitting in data centers. I’m talking about enterprise workloads, because what has gone to the public cloud largely have been net new applications. So for these workloads are still sitting in the enterprise environment, I think CIOs are being a lot more careful about how much of that do they take to the public cloud? So there’s yes, there’s some repatriation happening from the public cloud back on-prem. But there’s also a lot more scrutiny and forethought being applied to what should I take going forward into the public cloud from where I’m at? Operator: Thank you one moment for next question. Our next question comes from Mike Cikos from Needham. Your line is open. Michael Cikos : Hey, thank you guys. And I, I wanted to eco my comments as well, in addition to the others as far as the great quarter and the results here. I picked a bit of a two parter here. But the first I know coming back to the financials, specifically Rukmini. Can you help us think about the benefit to the quarter from the co-terming that occurred? And if I guess to what degree anything was pulled forward that was expected to land later this year, when we think about the magnitude of the beat and raise for guidance? Rukmini Sivaraman: Sure. Hi, Mike. So yes, I talked about renewals outperformance in Q2, and there were three factors that I highlighted to — the reason for that I performance. One was better renewals economics. And by that, I mean just our team is able to get better pricing at the time of renewal, which is good. Secondly, we talked about better on time renewal performance, which was strong in the quarter as well. And then the third piece, I think, is what you’re referring to Mike, which is around I said that we did do a little better on early and quote on renewal. And those, as we’ve said before, we go out to our customers well in advance of a renewal being due and start that conversation early. And that’s what they prefer, as well. And often, we will be able to transact those renewals earlier than when they are — in an earlier quarter than when they are due. And co-terms similarly, at co-terms are beneficial both for us and for the customer, because it then brings a lot of their licenses that may have been purchased at different times, to all be aligned to the same end date. And so those were generally welcome. As long as they are, you know, coming at a good economics for us, it’s good for the customer, they give us cash up front. And so those are all generally things that we welcome. Now, in terms of the dynamic of the pool forwards, I think was another sort of aspect of your question, Mike, I say, you know, there is normal variation, right, between quarters, and we would expect that to continue going forward. And I would say I think we had also talked about this dynamic between fiscal year ’24 and fiscal year ’25. And I’m not sure if that’s way you’re going, Mike. But at this point, we still do see that renewal available to renew for next year, the growth in that is accelerating compared to what we saw for fiscal year ’24. Because that was partly earlier than co-term was but was also just a beginner cohort that is coming up in ’25, which is reading to that accelerated renewals ATR in ’25, compared to ’24. So overall, again, I would say, you know, pretty strong quarter from renewals perspective, and generally these are all the outperformance driven by things that we like to see, so nothing that I would sort of characterize as better than expected, certainly, but allows us to sort of suddenly manage the business on a more predictable basis going forward. Michael Cikos: Got it. And my — it’s funny, you’re ending that response on predictability. I think one of the things that I’ve been going through on my side, this earnings season is certain companies have cited seeing larger deals in their pipeline, and greater variability based on when those deals close. So I wanted to get a sense of possible, but can you help us think about the magnitude when you’re citing these larger deals? Like, are they coming with, like an X percent increase in size from a $1 perspective versus what you’re historically seeing, just to help us get a better sense of that? And then the second piece tied to that is, how do you get financing, driving those deals again, just because they are obviously more strategic, there’s less certainty around the timing of when those close, just anything there as far as how you do gain confidence on that front? It’s a high quality problem I have, I’ll start with that. But I just want to make sure that you guys are thinking about this and wanted to see how you respond to that?.....»»

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Amicus Therapeutics, Inc. (NASDAQ:FOLD) Q4 2023 Earnings Call Transcript

Amicus Therapeutics, Inc. (NASDAQ:FOLD) Q4 2023 Earnings Call Transcript February 28, 2024 Amicus Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning ladies and gentlemen and welcome to the Amicus Therapeutics’ Full Year 2023 Financial Results Conference […] Amicus Therapeutics, Inc. (NASDAQ:FOLD) Q4 2023 Earnings Call Transcript February 28, 2024 Amicus Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning ladies and gentlemen and welcome to the Amicus Therapeutics’ Full Year 2023 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Mr. Andrew Faughnan, Vice President of Investor Relations. You may begin. Andrew Faughnan: Great. Thank you, Didi. Good morning. Thank you for everyone. Thank you for joining our conference call to discuss Amicus Therapeutics’ full year 2023 financial results and corporate highlights. Leading today’s call we have Bradley Campbell, President and Chief Executive Officer; Sebastien Martel, Chief Business Officer; Simon Harford, Chief Financial Officer; and Dr. Jeff Castelli, Chief Development Officer. Joining for Q&A is Dr. Mitchell Goldman, Chief Medical Officer; and Ellen Rosenberg, Chief Legal Officer. As referenced on Slide 2, we might make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to our business as well as our plans and prospects. Our forward looking statements should not be regarded as representation by us and any of our plans will be achieved. Any or all the forward-looking statements made on this call may turn out to be wrong and can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. You are cautioned not to place undue reliance on any forward-looking statements, which speak only to the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update this presentation and conference call to reflect events or circumstances after the date hereof. For a full discussion of such forward-looking statements and the risks and uncertainties that may impact them, we refer you to the forward-looking statements and risk factors section of our annual report on Form 10-K for the year ended December 31st, 2023 to be filed today with the Securities and Exchange Commission. At this time, it’s my pleasure to turn the call over to Bradley Campbell, President and Chief Executive Officer. Bradley? Bradley Campbell: Great. Thanks Andrew and welcome everybody to our full year 2023 conference call. This year, our call falls a day before Rare Disease Day, so before I dive into our results, I just wanted to take a minute to acknowledge this important day for the rare disease community. This year’s theme is achieving true health equity for the nearly 300 million people around the world living with a rare condition. Since our inception, Amicus has been dedicated to serving the needs of those in the rare disease community in extraordinary ways and we are committed to advocating for patient communities and fighting on behalf of those whose voices have not been heard. Rare Disease Day serves as a global call to action to collectively work towards equity and social opportunity, health care, and perhaps most importantly, access to medicines for people living with rare diseases. So, I just ask that all of you join me in commemorating this important day for the global rare disease community. So, with that, let me to shift into our financial results and outlook and I’m very pleased to highlight what tremendous progress we made across our global business last year and into the start of 2024. As you saw in this morning’s press release, I’ll highlight several key points before I turn it over to the team to go through more detail. So, first Galafold continues its strong performance and it remains the cornerstone of our success. We are very pleased with the continued uptake of Galafold globally. We now have over 2,400 people living with Fabry disease who take Galafold or were taking Galafold at the end of 2023. For the full year, that translated to Galafold revenue of $388 million globally, representing 18% growth year-over-year, outperforming our expectations and our initial guidance for the year. Throughout 2023, we continue to observe strong trends across our key performance indicators in all of our key geographies including continued demand through new patient starts from both switch and naive populations in all of our leading markets. We saw steady growth of in-person visits between our field team and Fabry treaters and we’ve continued to see sustained patient compliance and adherence rates of over 90%. Growth in 2023 was driven primarily by patient demand from net new patient starts, continuing to switch patients in our newer launch markets, and continued penetration into the diagnosed and untreated population, which we expect to continue to be a major driver of growth in 2024 and beyond as the Fabry market continues to see improved diagnosis and medical education and finding patients. Just to put that in perspective for a minute. As a reminder, just over eight years ago, we estimated there were 5,000 treated Fabry patients and 5,000 patients who are diagnosed with untreated. Today, there are more than 11,000 treated patients. So, the treated market has more than doubled in that time, while the untreated market has also increased to almost 6,000 patients. These underlying market dynamics will provide the opportunity to grow Galafold for many, many years to come, including in 2024, when we expect another great year with 11% to 16% projected growth at constant exchange rates. Second, the global commercial launch of Pombiliti and Opfolda is underway and is off to a great start in the three largest Pompe markets. Our teams have made significant progress in the initial commercial launch in Germany, the UK and the US, and we remain incredibly pleased with the launch so far. Seven weeks ago at JPMorgan, we shared that 120 patients were on treatment or scheduled for treatment, including 15 new commercial patients. And as we said at the conference, we’re not going to give mid-quarter updates, but I can share more color on how incredibly pleased we are with the continued patient and physician demand for this new therapy. The key performance indicators that we talked about last time continue to improve and continue to give us confidence in the strength of this launch. Specifically, the rate of new commercial patients coming on to Pombiliti and Opfolda continues to increase in all three markets, as we progress through the early weeks of the year. We anticipate launches in additional countries will add to that growth through the latter part of the year. And importantly, for our new commercial patients, we continue to see prescriptions proportionally coming from Nexviazyme and Lumizyme, as well as naive patients in ex-US markets. So that means in the US, the majority of new patients are switching off of Nexviazyme and coming on to Pombiliti and Opfolda, whereas in Europe, where Lumizyme has the majority market share, most of our switch patients are coming from that therapy, and we’re seeing an increasing number of naive patients as well, so all the patient segments are performing as we would expect. In a moment, Sébastien will provide further color on the ongoing launch of these key performance indicators, but overall, we’re very pleased by the launch and the great momentum we’re seeing across each of our markets. Throughout 2024, we’ll continue to focus on increasing patient access by expanding into additional European countries, as we navigate the country-by-country pricing and reimbursement process and focus on additional regulatory submissions as well. We are incredibly pleased to be providing a real choice for patients and challenging therapeutic options for both physicians and people living with Pompe disease. Third, Amicus has maintained an incredibly strong financial position as we continue to execute on the expansion of Galafold and advance the global launch of Pombiliti and Opfolda. We are pleased to share today that as we promised, we delivered our first quarter of non-GAAP profitability in the fourth quarter of 2023. This is obviously a significant milestone as we now look to deliver our first full year of non-GAAP profitability in 2024, supported for the first time by well over $0.5 billion in combined product sales, as well as prudent expense management to really significant milestones in the evolution of Amicus as a biotechnology company in the rare disease space. Our key strategic priorities for 2024 are laid out in the slide four. As we laid out last month, we are focused on achieving our key strategic priorities for 2024, including: number one, again, sustaining that double-digit Galafold revenue growth of 11% to 16% at constant exchange rates, continuing our successful launch of Pombiliti and Opfolda and executing multiple successful new commercial launches throughout the year, advancing our ongoing studies to support our medical and scientific leadership in Fabry and Pompe disease, and finally, maintaining our strong financial position as we carefully manage our expenses and investments in order to achieve a full year of non-GAAP profitability. With that, let me now hand the call over to Sébastien, who can give further highlights on our commercial performance. Sébastien? Sebastien Martel: Thank you, Bradley. Good morning or good afternoon to everyone on the call. I’ll start by providing you with more details on our Galafold performance for the year. On slide 6, for the full year 2023, Galafold reported revenue reached $387.8 million. Galafold growth in 2023 was primarily driven by strong patient demand, particularly from our leading markets. Turning to slide 7. Our results in the full year highlight the strength of our global commercial efforts. The demand for Galafold globally continues to be strong with patients added in all major markets, delivering operational growth of 18% over the same period in 2022 or 17% at constant exchange rates. We finished the year strongly, with fourth quarter 2023, Galafold reported revenue of $106.6 million, up 21% or 19% at CER. We’re pleased to share that 2023 was the strongest year for net new Galafold patients since 2019. Our leading markets such as the UK, the US, EU 5 countries and Japan remain the biggest drivers of patient demand and gives great confidence in the growth this product has over the long run. As Brian mentioned, we ended the year with more than 2,400 patients on Galafold, which is roughly over half of the global market share of treated amenable patients. Galafold that’s captured 60% to 65% of the global market share of treated amenable patients. But the good news is there are still many more patients to put on to therapy. Within the global mix, which is about 43% switch and 57% naïve, we’re seeing stronger uptake in naive populations. So we continue to achieve high market shares in countries where we’ve been approved the longest there’s still plenty of opportunity to continue to switch patients over to Galafold and keep on growing the market as we penetrate into the diagnosed and treated and newly diagnosed segments. All of that is underpinned by sustained compliance and adherence rates that continue to exceed 90%. Reiterating our belief that those patients who go on Galafold for them to please stay on Galafold. As mentioned on past calls, due to a variety of contributing uneven ordering patterns and FX fluctuations, the rate of growth within the year is typically nonlinear. Additionally, we’ve historically seen Q1 revenues come in slightly below prior Q4 due to the timing of orders and the reauthorization process in the U.S. and we expect that to continue into 2024. So within the table. On the right hand side of the slide, we’ve provided a five-year historical snapshot of the percentage of Galafold sales, and after each quarter during a given year. Interestingly, the average of quarterly sales distribution over the last five years corresponds precisely to what we achieved for the full year 2023. We would expect a similar trend to occur this year. So, as an example, we expect Q1 sales of the current year to be around 22% of full year sales for Galafold. On Slide 8, we know that there’s a significant patient demand for Galafold and the segment of growth of the global Fabry market made of patients with amenable mutations as the potential to reach up to $1 billion in annual revenue by the end of the decade. We anticipate sustained growth in 2024 and beyond to be driven by several key growth drivers. First, continuing to increase patient identification through ongoing medical education screening and improved diagnosis. As you know probably is one of the most under diagnosed rare disease. So the more patients are identified for more patients can be eligible for Galafold. Second the other piece is continuing to drive Galafold’s market share of treated amenable patients through continued commercial execution. As noted, Galafold currently has 60% to 65% of the global amenable market. What we’re seeing in our most mature market is that we can reach up to about 85% or 90% of market share. So we know that there’s potential to reach two levels in the global market share as well. Importantly, as Bradley highlighted earlier, this is a robustly growing Fabry market with a significant portion of growth coming from finding new patients and penetrating into the nine diagnosed untreated population. Just within the 2,400 patients on Galafold for the end of 2023 about 1,400 of these individuals were naive to any treatments before coming on Galafold. We’ve been successful in finding new patients through newborn screening and other diagnostic initiatives as well as artificial intelligence through our partnership with [indiscernible]. And again all of these efforts are supported by solid compliance and adherence rates from physicians and patient education and support programs. We’ll continue to make progress on expanding Galafold into new markets and extended the labels. There are still some markets in that time some in the Middle East and Asia Pacific regions where Galafold is either newly reimbursed or we expect reimbursement. Also important to note here, we have often exclusivity in the US and Europe in addition to our 57 orange-bophystic patents 41 of which provide protection into 2038 and beyond including 11 composition of matter patents. This provides us with the opportunity to provide access to Galafold globally for a long time to come. We intend to continue to protect and enforce our broad intellectual property rights. Looking ahead we expect steady double-digit growth for Galafold throughout 2024 and we remain confident that our strong IP protection will provide Galafold a long runway well into the next decade. Turning now on to Pompe Disease on Slide 10. we outline our global launch progress with Pombiliti and Opfolda. So full year 2023, Pombiliti and Opfolda reported revenue reached $11.6 million for the full year and $8.5 million for the fourth quarter. At the beginning of the year, 2024, 120 patients were on treatment or scheduled for treatment, of which approximately 105 were from our clinical trial and early access programs, and 15 from competitor ERTs or naive to treatment. We’ve been pleased with the continued demand for this new therapy. As Brad said, and as anticipated, I would say, the rate of new commercial patients coming onto Pombiliti and Opfolda continues to increase across all three markets. In the US, we continue to see a majority of patients switching from Myozyme, roughly about 75% of the switches we’ve seen, and the remaining 25% coming from Lumizyme. This means we’re switching patients proportionally from both products. Outside of the U.S., we’re seeing patients switching from all three segments, from Myozyme, Nexviazyme and naive population, at a proportional rate, exactly what we want to be seeing at this stage. Our launch has leveraged our highly experienced cross-functional teams, and we’ve had great outreach with KOLs. We’re seeing an increase in depth, as well as breadth of prescribers, across all three markets and in particular, see a growing number of prescribers who are not part of our clinical studies or expanded access programs. All core treating centers have been engaged with, and we have had very positive feedback from HCPs and other stakeholders as to our business approach, support and patient focus. Finally, we find an important metric to track is our progress with access and reimbursement. We have a highly experienced team who are engaging in positive conversations with payers to demonstrate the value of Pombiliti and Opfolda. In the US, and with the start of the new year, many of the large payers have already put Pombiliti and Opfolda onto their respective formularies, and we’ve also seen strong acceptance by Medicare and Medicaid as well. Today, we’re launched in Germany, the UK, the US, and Austria. We’re also in active pricing and reimbursement discussions with additional major European markets as we focus on securing broad patient access throughout the EU. More than 10 reimbursement dossiers have been submitted. Overall, we’re starting off the year strong, and we’re very pleased with the building momentum on patient demand. Over the course of 2024, our focus will be on maximizing the number of patients on therapy by year-end. So, in summary, we’re very pleased with the launches of Pombiliti and Opfolda across all the first wave of countries, the strengths of our clinical data, the depth of experience and talent we have at Amicus gives us great confidence in our ability to make a real difference to people living with Pompe disease. We believe amicus is in a great position for our second successful launch. And with that, I will hand the call over to Jeff Gatseli, our Chief Development Officer, to discuss the ongoing clinical studies as well as regulatory timelines. Jeff? Jeff Castelli: Thank you, Sebastian, and good morning, everyone. On Slide 11, we remind everyone that we continue to build the body of evidence for Pombiliti and Opfolda through our ongoing clinical studies as we also continue to execute on expanding commercial access through regulatory submissions. As we enter the second phase of launch, in addition to the various reimbursement dossiers that we have or that we are in the process of submitting, we also have multiple ongoing or planned regulatory submissions for marking and approval in new geographies throughout this year. For the younger Pompe community, we continue to enroll the ongoing open-label ZIP study for children living with late-onset Pompe disease and the open-label RZELA [ph] study for children living with infantile-onset Pompe. We see this as an important opportunity to support label expansions into these patient segments and provide access to these kids much in need in the years ahead. Through ongoing clinical studies and the Amicus Pompe registry, we expect to continue generating evidence on our differentiated mechanism of action and long-term data supporting the impact of Pombiliti and Opfolda across endpoints and patient populations. I am very excited to announce that we have actually now begun enrolling patients into the amicus Pompe registry globally. And here in February, we once again had a very engaging conference and a significant presence at the 20th Annual World Symposium that was held in San Diego. Amicus had 11 posters and an oral presentation highlighting our continued work across Fabry and Pompe disease. Of note Amicus was honored with the WORLDSymposium 2024 New Treatment Award for Pombiliti and Opfolda, which recognizes companies that have made important achievements in advancing treatments for lysosomal diseases and have obtained regulatory approval. It’s an honor to achieve an award based on our scientific innovation, but even more importantly the meaningful difference we can make in the lives of so many people living with these rare diseases. Finally as highlighted in the pipeline slide in the appendix for our earlier stage pipeline. We continue to focus on novel approaches for Fabry and Pompe day including delivery of our engineered GLA and GAA transgenes and the next-generation Fabry-Chaperone. With that, I would like to now turn the call over to Simon Harford, our Chief Financial Officer to review our financial results, guidance and outlook. Simon? Simon Harford: Thank you, Jeff. Our financial overview begins on slide 13 with our income statement for the full year ending December 31, 2023. We had a very successful year full year, achieving total revenue of $399 million, which is a 21% increase over the same period in 2022. At constant exchange rates, revenue grew strongly 20%, a global geographic breakdown of total revenue for 2023 consisted of $250 million or 63% of revenue generated outside the United States and the remaining $147 million or 37% coming from within the US. Cost of goods sold as a percentage of net sales was 9.3% for the full year 2023 as compared to 11.7% for the prior year period. Total GAAP operating expenses decreased to $439 million in 2023 as compared to $503 million in 2022, a decrease of 13%. On a non-GAAP basis, total operating expenses decreased to $342 million for 2023 as compared to $413 million in the prior period, a decrease of 17%. We define non-GAAP operating expense as research and development and SG&A expenses excluding stock-based compensation, loss on impairment of assets, changes in fair value of contingent consideration and depreciation. Net loss for the full year 2023 reduced to $152 million or $0.51 per share including a $14 million or $0.05 per share expense related to the extinguishment of prior debt following our Blackstone refinancing that compared to a net loss of $237 million or $0.82 per share for 2022. In the fourth quarter as Bradley mentioned, we achieved our goal of non-GAAP profitability, which was $2.6 million. Cash, cash equivalents and marketable securities were $286 million as of December 31, 2023 and that compared with $294 million at the end of 2022. Turning now to slide 14. I’m pleased to share our full year Galafold revenue growth guidance of 11% to 16% at constant exchange rates. Our full year 2023 non-GAAP operating expense guidance is $345 million to $365 million. We are pleased to share that amidst a launch year, we have kept operating expense growth minimal. As a reminder, we continue to have R&D commitments including registry studies in both Fabry and Pompe, the ongoing Pompeii Phase 3 study in countries not yet reimbursed as well as next generation of manufacturing for Pombiliti. There is very minimal investment in preclinical activities, which we expect to continue in 2024. Following the achievement of non-GAAP profitability in Q4 of 2023, we anticipate to achieve non-GAAP profitability for the full year of 2024 driven by our first year of well-over $0.5 billion in combined revenue, as well as continued prudent expense management. As we think about profitability throughout the year, we anticipate a similar non-GAAP profit in Q1 2024 as we saw in Q4 2023. And non-GAAP profit is expected to build sequentially quarter-over-quarter after that. And with that, let me turn the call back over to Bradley for our closing remarks. Bradley Campbell: Great. Thanks Simon, Jeff, Sebastian, as well a huge thanks to all of our employees around the world, who I know continue to work tirelessly for people living with rare diseases. Looking 2024, we will continue to drive significant top-line revenue growth supported by sustained double-digit Galafold performance and the successful ongoing global commercial launch upon building up for that, which puts us on track for our first full year of non-GAAP profitability. As I said in my opening comments, Amicus is at a major inflection point. We are strongly positioned to continue to advance our mission of delivering groundbreaking new medicines to thousands of people living with rare diseases around the world and creating value for our shareholders. With that, operator, we can now open up the call to questions. See also 15 Best Stocks to Buy According to Billionaire D.E. Shaw and 16 Best Future Stocks For The Long Term. Q&A Session Follow Amicus Therapeutics Inc. (NASDAQ:FOLD) Follow Amicus Therapeutics Inc. (NASDAQ:FOLD) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator instruction] And our first question comes from Anupam Rama of JPMorgan. Malcolm Kuno: Hi. Thank you for taking the question. This is actually Malcolm Kuno on for Anupam. So, in the US with regard to pump pay, are you seeing switches from patients that are clearly progressing or patients who are stable but just not gaining a benefit from their current treatment? Bradley Campbell: Yes, great question. I think the answer is a little bit of both. So, you know we know that some patients we’ve heard, I should say that some patients who were new commercial patients not in clinical studies. I’ve heard by word of mouth or through relatives, who might be participating in those studies about how well they thought that those patients stayed in the study. And so those patients, I think were eager to start pumping up folder kind of regardless of their own status. And then, I know that others, I’m sure were in a declining phase and therefore wanted to switch with the hopes of seeing different outcomes, which of course, as per the label where we have the drug is indicated for patients who are not improving on current therapies. So, I think we’re seeing healthy dynamics from both of those segments. Malcolm Kuno: Great. Thanks Brad. Operator: Thank you. One moment for our next question. And our next question comes from Ritu Baral of TD Cowen. Ritu Baral: Good morning, guys. Thanks for taking the question. To drill down a little further on that Brad and Sebastien, how are you guys seeing clinicians in the field define the decliners and the two symposiums that world, both yours and your competitors, having spent a lot of time on defining decliners, defining stable. What do you see in your conversations during the conference on the tools that clinicians are using to define that in their own head? Have you done any market research on segmentation of the population into sort of that definition of decliner that definition of stable as you see it now? Bradley Campbell: Sure. Yes. Great question, Ritu. Thanks very much. I’m going to let Jeff talk to the first part of your question, which is sort of what are the tools and end markers that clinicians might use to follow or determine whether a patient is stable or declining. I would remind you though that the indication statement is for patients not improving on therapy, which means that either stable or declining patients are eligible for us from a market research perspective. But the work that we did leading into the launch, suggested that about 50% of patients would historically be defined as stable. Although, I think Jeff will talk us through why in fact they may be suddenly declining as well. About a quarter of patients, are clearly declining and about a quarter of patients are likely in some sort of improvement phase, which is what we would expect based on historical data. But Jeff maybe talk through how physicians the obvious ways that they would look for declining patients and then maybe the not so obvious more subtle but equally important ways that that patients may be declining. Jeff Castelli: Yes. Thanks, Brad. And thank you for the question Ritu. So first of all, just in terms of the follow up typically the cadence for Pompe patients is about every six months. They come in and visit with their primary treating physician and care team. They do measure the quantitative endpoints you know on motor function respiratory function that are cited in the trials things like six minute walk distance forced vital capacity other measures of motor function respiratory parameters. So what we see is that a lot of what they do is really more qualitative in terms of some of the formal questionnaires, but really just asking the patient how are they doing during activities of daily living. And then of course they also do look at biomarkers depending on the site they may put more or less some importance on the biomarkers. So it’s very much a holistic assessment of different parameters. And what we’re learning is that actually does differ across sites and across countries. And one of the things that we’re looking to do is trying to help in the community of physicians of looked at trying to standardize some of those assessments more moving forward? So in terms of as Brad mentioned you know it’s as we look in the US, for example it’s about 25%. We would estimate improving 25% clearly worsening. And then that 50% in the middle overseeing as physicians now have more treatment options and are really digging into how patients are doing. I tried to say who is declining, who is stable, who is improving. We’re starting to hear that many of those patients that they might have perceived as stable as they do that deeper holistic assessment of they’re finding out that while six minute walk or forced vital capacity might be generally stable that patients reporting having a much harder time climbing stairs or going out and doing tours or their fatigue when they’re sleeping. So we do think a significant chunk of that 50% sort of stable middle patient segment is actually declining when physicians start to dig in more holistically. So it’s definitely an evolving space in terms of how physicians monitor patients especially related to switching there’s been a lot of different symposium and meetings on this topic. So it’s something that we’ll certainly keep an eye on. But as I said it’s really this holistic approach. It’s not one or two parameters that they used to define sort of status and when patients might switch and how they do after switch? Bradley Campbell: Thanks Jeff. I would think that’s really the exciting opportunity. Ritu is for us to challenge the expectations of therapy. Now that as Jeff said we have more choices for physicians and patients. Ritu Baral: Great. Thanks. Operator: Thank you. One moment for our next question. And our next question comes from Dae Gon Ha of Stifel. Dae Gon Ha: Good morning, guys. Thanks for taking our question on Pompe, if you can just remind us on the 15 that were new and not part of the expanded access or clinical trial. Did you guys ever break them down in terms of geographies? And I guess what I’m thinking about is 2024 how we should think about the cadence of patient onboarding given that you have these multiple launches going on? Thanks so much. Bradley Campbell: Yes, thanks, Dae Gon. What we had said at the at JPMorgan which will remind you here is those patients came roughly equally from each of the launch countries. Remember, we launched in Germany and the UK first and then the US later in the year. So we thought that was very positive. The other thing we saw which we highlighted in the call here is in each of those markets we’re pulling and this trend continues. We’re pulling kind of proportionately from of the patients who are treated on the various medications. So in the US is Sebastian highlighted the majority of our patients are coming from next Myozyme that makes sense because the majority of patients in the US are not treated with Nixviazyme. And then in Europe we’re pulling from both Lumizyme as well as next Nixviazyme and increasingly in naive patients which is an important segment there as well. And then to your last point I think the color we provided here is that we’re seeing the rate of new patient starts increasing at an increasing rate. So the first two months of the year and then a faster net new patient acquisition versus the months over the course of launch last year so all of those things for us point to continued building momentum and gives us great confidence in the launch. Dae Gon Ha: But any visibility on ex-US versus US kind of the cadence of growth that you anticipate this year? Bradley Campbell: Yes. I think you’ll see just because the US is such a larger market you’ll start to see more patients coming on in the United States. I think that’s just a volume point. And I think typically what we’ll see is that will that will carry us through the various markets. The bigger markets have more patients to bring on and you’ll start to see that play out. Dae Gon Ha: Excellent. Thank you very much. Operator: Thank you. One moment for our next question. And our next question comes from Joseph Schwartz, Leerink Partners. Joseph Schwartz: Thanks so much and congrats on the progress. It’s interesting that you’re getting more switches from Nexviazyme and Lumizyme. So I was wondering, if you could talk about why that might be? Maybe give us some color in terms of the proportion of each of those sub-segments that you think might be deemed to not be improving. And yeah, just give us any color in terms of that dynamic that would be helpful. Thank you. Bradley Campbell: Yeah. Thanks Joe. I think one of the big questions that everybody had was boy, in the markets where next Nexviazyme has been launched the longest, maybe those patients are going to be too sticky and you’ll have a really hard time penetrating into those markets. I think what we’ve seen you know it’s still early days, but what we’ve seen is no. And in fact, we’re — as we said the majority of the patients in United States and that has continued into this year are coming from next Nexviadyme. So I think what it really is, physicians and patients are focused much more on how they’re doing as Jeff described versus what medication they’re on. And so if a patient is stable or declining, they may be looking for better outcomes. And with choice you have a chance to challenge those outcomes. So I don’t think that it’s a question of which drug, am I on? I think it’s a question of, how am I doing? And what are my expectations for therapy. And that’s where we’re really excited to really challenge those expectations. And as Jeff said, drive that question for physicians and patients to think a lot more carefully about how they’re performing on their current medication. So that’s why I think we’ve seen so far, in the US again with the majority of patients on Nexviazyme. We’re switching the majority of our new patients are switching from next Nexviazyme, although we are getting some Lumizyme patients as well. And then outside the US where it’s still a majority Lumizyme market. We’re getting a majority of switches from Lumizyme, although we are getting Nexviazyme patients and we’re getting naïve patients as well. So we think all of those dynamics are really healthy and will continue. Joseph Schwartz: Great. Just to, follow-up if I could. Does it indicate or could it indicate at all that patients on that Nexviazyme patients are essentially self selecting to be more severe and there might be more people on Lumizyme in the United States that are satisfied and they might be harder to switch. Bradley Campbell: I don’t think that’s necessarily the case. I think it’s likely that patients who have just started a medication i.e. Lumizyme or Nexviazyme are going to be at a, how am I doing mode for a period of time. And that’s that kind of 25% of the segment that we talked about when we did the market research and I think physicians said about 25% of the patients are in an improving phase. I don’t think patients or physicians would necessarily look to switch those patients initially. It’s really more of those stable or declining patients where we have a real opportunity. And again, we estimate that’s about 75% of market. Joseph Schwartz: Very helpful. Thank you. Bradley Campbell: Thanks, Jeff. Operator: Thank you. One moment for our next question. And our next question comes from Ellie Merle of UBS. Ellie Merle: Hey guys congrats on the progress. And thanks for taking the question. Just if you could talk a little bit more income pay in terms of the numbers of centers or physicians that you’re targeting as the key prescriber base here? And I guess what proportion of these have already written a script for possibility of full data, like you mentioned that you’re seeing increasing starts at an increasing rate. Are you seeing something similar in terms of the specific new physicians? Or is it a deepening of prescriptions from those sites that were already prescribing or involved in the clinical trials? Thanks. Bradley Campbell: Yeah. Great question, Ellie. So as Sebastian mentioned on the call we’re seeing both increasing breadth and depth. So it’s kind of both of what you asked. So the physicians who have already been writing prescriptions are continuing to write prescriptions. But then we’re seeing expanding numbers of centers in particular in the US and Germany that weren’t involved in the clinical trials who are now starting to write prescriptions as well, so both of those segments are improving. I would know in the UK all of the centers participated in the AIMS program or the Clinical Trial Program. And so they all have were already writing prescriptions and continued to do so. So I think yes really healthy dynamic so far. Eliana Merle: And then just of the 120 patients that you mentioned at JPMorgan I guess any color on what proportion of these are already reimburse them? Bradley Campbell: Yeah, majority of them are already reimbursed. And I would say that as a reminder it takes about 90 days to go from prescription to commercial infusion at this point in time. So that means the people who got their prescriptions in December and January may still be in that process. But of course, as we highlighted in the call, we’re continuing to add more patients into the funnel which is great. And the other thing we’re seeing is that the newer commercial patients are going through the process more quickly as we continue to see possibility unfold to added to more and more formularies in the United States. And so we could we would continue to expect that number to come down as we progress through the launch. That was the same trend we saw as you might remember with Galafold as well where it sort of started in that 90 day range. And then overtime winnowed down to where we sit today which is around 30 days. Eliana Merle: Great. Thanks so much. Operator: Thank you. One moment for our next question. And the next question comes from Jeff Hung of Morgan Stanley. Jeff Hung: Thanks for taking my question. I mean, you talked about the seasonal patterns you’ve seen in the past with Galafold going from Q4 to Q1. How should we think about the potential seasonal trends for probability and unfold. I know would you expect them to move similarly? Or do you think that maybe it doesn’t apply as much this year given that the launch is still fairly early? Thanks. Bradley Campbell: Yeah, good question. I think probably the answer is too soon to tell. I think in a launch year, you would expect to continue to build momentum throughout the year, which is I think a natural phenomenon as you get more and more physicians and patients with experience as we add countries over the course of the year. And so I guess, the answer is too early to tell, as we are able to provide color there going forward. Of course, we’ll share that with you. But I think in general you could just expect momentum to build throughout the year given it’s a larger. Jeff Hung: Thank you. Operator: Thank you. One moment for our next question. And our next question comes from Kristen Kluska of Cantor Fitzgerald. Kristen Kluska: Hi, good morning, everybody. The patient diagnosis growth has been really impressive. Fabric growing 70% from 2015 to 2023. So, since part of this growth came from new therapies on the market including your own. Curious how you’re thinking about some of the growth we might see in the postpaid market numbers with the recent launches? Bradley Campbell: Yes. Thanks Kristen. And I think it’s a phenomenon you typically see right which is when more companies are involved when more therapeutic options are out there. I think you do tend to see and increased focus in Diagnosis & Treatment. So I wouldn’t at all be surprised if that’s part of the driver of growth although we would also remark. And maybe Jeff you can share some of the details here, while not quite as under diagnosed as Fabry is believed to be. We — in the last sort of 10 years have seen significant evidence that in fact Pompe’s is significantly more prevalent than what was originally reported in the literature. So maybe just talk a little bit about kind of the data excuse me from newborn screening and from high-risk screening and that would lead us to believe that Pompe should also benefit from increased diagnosis over time. Yes. Jeff Castelli: Yeah. Thanks, Brad, and thanks for the question Kristen. There’s a few dynamics and importantly leading to better diagnosis across rare diseases. One is doing better education of physicians and other importantly is a better diagnostic tools and low cost genetic testing there. Also our newborn screening initiatives in many countries importantly in the US. So I think a lot of that is similar in Fabry and Pompe for Fabry. The extra benefit is the fact it’s an X-linked dominant disease and you find one patient and then you can screen the whole family. Pompe is more of a recessive disease. So you need to find each patient independently of themselves or siblings but you know the Pompe similar to Fabry. When you look classically it was thought to be one in 40,000 more than 50,000 screening studies both newborn as well as looking at people just with elevated CK levels, or limb-girdle muscular dystrophy weakness type symptoms. Many of them have Pompe and the Apex actual estimate of Pompe is more like one in 15,000. So two to three times more common than what has been thought. So a lot of patients still left to be diagnosed in Pompe a lot of the same underlying factors that are helping us diagnose more patients. I think Fabry is just sort of a little bit ramped up, because of that X-linked factor, but we do expect significant underlying growth of new patients, coming onto therapy being diagnosed and definitely having multiple companies helping with some of that diagnostic initiatives in education will certainly help drive that as well. Kristen Kluska: Thank you. Operator: Thank you. One moment for our next question. And our next question comes from Salveen Richter of Goldman Sachs. Q – Unidentified Analyst: Hi this is for Shrinachal [ph] on for Salveen. Thank you for taking our question. You mentioned in the slides that your focus in 2024 is to maximize the number of patients on therapy for Pombiliti and Opfolda, is there a target number that you have in mind in this aspect and on payer coverage particularly for Medicare and Medicaid? Or when do you expect to see publish Pombiliti and Opfolda there. Thank you. Bradley Campbell: I’m sorry I just missed it first part of the question. I got the second one, can you repeat that? Q – Unidentified Analyst: Sure. In the first part I – I asked given that your focus and training force to maximize the number of patients on therapy on Pombiliti and Opfolda. Is there a target number that you have in mind that you want to achieve by the end of 2024? Bradley Campbell: Great question. As I think we’ve said before, we can’t give guidance at this point just given the fact that it’s a launch year but of course, we have our own internal targets. But I think at this point, we’re still in the early part of the launch. So it wouldn’t be prudent to give guidance yet, as soon as we have more color. And I’m sure going into next year, we’ll be able to provide I think more clarity and more guidance on revenue in particular and we will continue from a quarterly basis to report patients on therapy as we have done. And I’ll give you a flavor for the — for the ramp As it relates to your second question. Yes, good news is as Sebastien mentioned in addition to being adding to a number of major payer formularies in that process will continue to increase and over the first few weeks of the year, we have already seen a number of patients accepted through both Medicare and Medicaid......»»

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Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript

Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript February 28, 2024 Editas Medicine, Inc. beats earnings expectations. Reported EPS is $-0.23, expectations were $-0.52. EDIT  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Editas […] Editas Medicine, Inc. (NASDAQ:EDIT) Q4 2023 Earnings Call Transcript February 28, 2024 Editas Medicine, Inc. beats earnings expectations. Reported EPS is $-0.23, expectations were $-0.52. EDIT  isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Editas Medicine’s Fourth Quarter and Full Year 2023 Conference Call. All participants are now in listen-only mode. There will be a question-and-answer session at the end of this call. Please be advised that this call is being recorded at the company’s request. I would now like to turn the call over to Cristi Barnett, Corporate Communications and Investor Relations at Editas Medicine. Cristi Barnett: Thank you, Maria. Good morning, everyone, and welcome to our fourth quarter and full year 2023 conference call. Earlier this morning, we issued a press release providing our financial results and recent corporate updates. A replay of today’s call will be available in the Investors section of our website approximately two hours after its completion. After our prepared remarks, we will open the call for Q&A. As a reminder, various remarks that we make during this call about the company’s future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Annual Report on Form 10-K, which is on file with the SEC as updated by our subsequent filings. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. Except as required by law, we specifically disclaim any obligation to update or revise any forward-looking statements, even if our views change. Now, I will turn the call over to our CEO, Gilmore O’Neill. Gilmore O’Neill: Thanks, Cristi, and good morning, everyone. Thank you for joining us today on Editas’s fourth quarter and full year 2023 earnings call. I am joined today by four other members of the Editas executive team, our Chief Medical Officer, Baisong Mei; our Chief Financial Officer, Erick Lucera; our Chief Scientific Officer, Linda Burkly; and our Chief Commercial and Strategy Officer, Caren Deardorf. We are pleased with Editas’ momentum and progress in the fourth quarter and all of 2023. In early 2023, we shared our vision and the three pillars of our strategy to position Editas as a leader in in vivo program for gene editing and hemoglobinopathies. The first of these pillars, to drive reni-cel, formerly known as EDIT-301, toward BLA and commercialization. The second, to strengthen, reorganize, and focus our discovery organization to build an in vivo editing pipeline. And the third, to increase business development activities with a particular focus on monetizing our very strong IP. So how did we do last year? Well, we achieved a lot. First, we accelerated the clinical development of Reni-cel, exceeding our enrollment goal of 20 patients and sharing clinical updates from our RUBY and EdiTHAL studies in June and in December of 2023. And those accumulating data have strengthened our belief that reni-cel is a competitive potential medicine with a differentiated profile characterized by correction of anemia at normal physiologic ranges of hemoglobin. Second, we strengthened our in vivo discovery capabilities and organization and hired a new Chief Scientific Officer, Linda Burkly, who brings three decades of experience in successfully inventing, developing, and moving new human medicine forward. And third, we increased our business development activities and monetized our IP, leveraging our robust IP portfolio. A critic example was our granting Vertex a non-exclusive license for our Cas9 IP in a focused way to enable the [XSL] launch. Finally, we strengthened our senior leadership team with people who have a proven track record in bringing new medicine through development to approval and commercialization. So how are we executed against these strategies and these objectives? Well, let’s start with Reni-cel. First, on enrollment, we have now enrolled 40 sickle cell and 9 beta thalassemia patients in our RUBY and EdiTHAL studies respectively, and enrollment continues at a good pace. Second, on dosing, we have dosed 18 RUBY patients and 7 EdiTHAL patients, and we have multiple patients scheduled for dosing in the coming month. Patient screening and demand in both studies continue to remain robust. Third, on clinical data, we remain on track to present a substantive clinical data set of sickle cell patients with considerable clinical follow-up in the RUBY study in the middle of 2024, with a further update by year-end 2024. On the regulatory front, we have engaged with the FDA regarding the RUBY sickle cell trial. The FDA agrees that RUBY is a single Phase 1, 2, 3 study and has aligned with us on the study design. Our discussions with the FDA will continue as RUBY and EdiTHAL progress and will be enhanced by our RMAT designation for severe sickle cell disease. Baisong will share further details regarding the development of reni-cel in his remarks, as well as recap the RUBY and EdiTHAL takeaways and clinical data that we provided in December and share more information on the adolescent cohort. Now, let’s turn to in vivo and our pipeline development, where we strengthened our in vivo discovery capabilities in 2023 and began lead discovery work on in vivo therapeutic targets in hematopoietic stem cells and other tissues. As we announced earlier this year, we aim to establish in vivo preclinical proof-of-concept for an undisclosed indication this year. Linda and her team are leveraging key capabilities that we have in-house and she looks forward to sharing more at a future date. Regarding our hemoglobinopathies focus, after a thorough evaluation of the development landscape, we have decided not to pursue internal development of a milder conditioning regime. We believe standalone milder conditioning regimens will be widely available once FDA approves and therefore we have determined that research, clinical development and regulatory investment in hemoglobinopathies can be better deployed for our continued development of in vivo HSE medicines. Turning to business development. In the fourth quarter, we announced a licensed agreement with Vertex Pharmaceuticals. Editas provided Vertex a non-exclusive license for Editas Medicine’s Cas9 gene editing technology for ex vivo gene editing medicines targeting the BCL11A gene in the field of sickle cell disease and beta thalassemia, including Vertex’s CASGEVY. And the upfront and contingent payments pursuant to this agreement extended our cash runway into 2026. This and other agreements, the strength of our patents and the number of companies developing CRISPR/Cas9 medicine reaffirm our confidence that our IP portfolio of foundational U.S. and international patents covering Cas9 use in human medicine are a source of meaningful value. So what are our objectives for 2024? For reni-cel, we will provide a clinical update from the RUBY trial for severe sickle cell disease and the EdiTHAL trial for transfusion-dependent beta thalassemia in mid-2024 and by year-end 2024. We will complete adult cohort enrollment and initiate the adolescent cohort in RUBY, which we’ve already initiated, and continue enrollment in EdiTHAL. For our in vivo pipeline, we will establish in vivo preclinical proof-of-concept for an undisclosed indication, and for PD, we will leverage our robust IP portfolio and business development to drive value and complement core gene editing technology capabilities. We are energized by our progress and execution in 2023. With our sharpened strategic focus, our world-class scientists and employees, and our keen drive in execution, we continue to build momentum to progress our strategy to deliver differentiated editing medicines to patients with serious genetic diseases. Now, I will turn the call over to Baisong, our Chief Medical Officer. Baisong Mei: Thank you, Gilmore. Good morning, everyone. Let’s talk about reni-cel, which is on the clinical development for severe sickle cell disease and transfusion-dependent beta thalassemia. As of today, in the RUBY trial for sickle cell disease, we have enrolled 40 patients and dosed18 patients. We have multiple patients scheduled for dosing in the coming month. We’re also pleased to announce that we have initiated adolescent cohort in the RUBY study, which is one of our 2024 objectives. The interest and demand are high, and adolescent patients have already started screening. In the EdiTHAL trial for transfusion-dependent beta thalassemia, to date, we have enrolled nine patients and dosed seven patients. As I shared earlier, I continue to visit our RUBY and EdiTHAL clinical trial sites and continuously speak with investigators. I appreciate the enthusiasm and support from the investigators and study size. I’m pleased with the momentum of reni-cel in patient recruitment, apheresis, editing, and dosing in both studies. I’m excited to hear from the investigators that patients dosed with reni-cel have already seen positive changes in their lives. As Gilmore mentioned, we have aligned with FDA that RUBY clinical trial is now considered a Phase 1, 2, 3 trial for BLA finding. We have also aligned with FDA on the study design and endpoints, and the FDA has agreed to our activation of adolescent cohort. We look forward to future discussion with FDA and continued collaboration. Turning to clinical data, in December 2023, we shared safety and efficacy data from 17 patients, 11 RUBY patients, 6 EdiTHAL patients. Once again, the data confirmed observation from our prior clinical readouts, including reni-cel driving early and robust correction of anemia to a normal physiological range of total hemoglobin in sickle cell patients. Reni-cel drove robust and sustained increase in fetal hemoglobin in excess of 40%. All RUBY sickle cell patients have remained free of vaso-occlusive events following reni-cel treatment. Reni-cel treated sickle cell and beta-thalassemia patients have shown successful engraftment, have stopped red blood cell transfusion. And the safety profile of reni-cel observed today is consistent with myeloablative busulfan conditioning and autologous hemopoetic stem cell transplant. In addition, the trajectory of the correction of anemia and expression of fetal hemoglobin is consistent across reni-cel treated sickle cell disease patients and beta-thalassemia patients at the same follow-up time points. These data reinforce our belief that we have a competitive product and the product potentially differentiated from other treatments with rapid correction of anemia. Thanks to the deliberate choice that our discovery group has made early in the program. As we have previously stated, the choice of CRISPR enzyme and the target to edit for increased hemoglobin, fetal hemoglobin expression matters. Reni-cel uses our proprietary AsCas12a enzyme to edit HBG12 promoter. AsCas12a increases efficiency of editing and significantly reduced off-target editing when compared to other CRISPR nucleus, including Cas9. Editing HBG12 promoter in human CD34 positive cells, resulting in greater red blood cell protection, normal proliferative capacity and improved red blood cell health when compared to editing of BCL11A. We look for differentiation in three categories of outcome in clinical trials. Hematological parameter and organ function and patient reported outcome or quality of life. Based on the clinical data thus far, we believe that sustained normal level of total hemoglobin could be a potential point of differentiation for reni-cel. As a reminder, a sustained normal total hemoglobin level is an important clinical outcome for patients. As the correction of anemia can significantly improve quality of life and ameliorate organ damage. We look forward to sharing additional updates, including RUBY and EdiTHAL clinical trial data with more patients and longer follow-up period in mid-year and additional data by year-end. Now I will turn the call over to Erick, our Chief Financial Officer. Erick Lucera: Thank you, Baisong, and good morning, everyone. I’m happy to be speaking with you and I’d like to refer you to our press release issued earlier today for a summary of financial results for the fourth quarter and full year 2023, and I’ll take this opportunity to briefly review a few items for the fourth quarter. Our cash, cash equivalents, and marketable securities as of December 31 were $427 million compared to $446 million as of September 30, 2023. We expect our existing cash, cash equivalents, and marketable securities together with the near-term annual license fees and contingent up-front payment payable under our license agreement with Vertex to fund our operating expenses and capital expenditures into 2026. Revenue for the fourth quarter of 2023 was $60 million, which primarily relates to revenue recognized under our license agreement with Vertex, which as Gilmore referenced earlier on this call, we announced in December of 2023. R&D expenses this quarter increased by $18 million to $70 million from the fourth quarter of 2022. The increase reflects additional sub-license expenses offset by the decrease in R&D spend resulting from our reprioritization and targeted focus on our reni-cel program. G&A expenses for the fourth quarter of 2023 were $14 million, which decreased from $18 million for the fourth quarter of 2022. The decrease in expense is primarily attributable to reduced patent and legal costs. Overall, Editas remains in a strong financial position bolstered by our sharpened discovery focus, June capital rates, and our recent out-licensing deals. Our cash runway into 2026 provides ample resources to support our continued progress in the RUBY and EdiTHAL clinical trials at reni-cel, continued commercial manufacturing preparation, and the advancement of our discovery and research efforts. With that, I’ll hand the call back to Gilmore. Gilmore O’Neill: Thank you, Erikc. We are very proud of our progress in 2023 and look forward to accelerating the momentum into 2024 as we continue to evolve from a development-stage technology platform company into a commercial state gene editing company. We look forward to continuing our transformation and sharing our progress with you. As a reminder, our 2024 strategic objectives include, for reni-cel, we will provide a clinical update from the reni-cel RUBY trial for severe sickle cell disease and the EdiTHAL trial for transfusion-dependent beta thalassemia in mid-2024 and year-end 2024. We will complete adult cohort enrollment, and we already initiated the adolescent cohort in RUBY, and will continue enrollment in EdiTHAL. For our in vivo pipeline, we will establish in vivo preclinical proof-of-concept for an undisclosed indication. And for PD, we will leverage our robust IP portfolio and business development to drive value and complement core gene editing technology capabilities. As always, it must be said that we could not achieve our objectives without the support of our patients, caregivers, investigators, employees, corporate partners, and you. Thanks very much for your interest in Editas, and we’re happy to answer questions. Thank you. Operator: [Operator Instructions] Our first question comes from Joon Lee with Truist Securities. Please proceed with your question. See also 30 Highest Paying Jobs In The World In The Future and 20 Most Valuable Electric Car Companies in the World. Q&A Session Follow Editas Medicine Inc. Follow Editas Medicine Inc. or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Joon Lee: Hi. Good morning, and congrats on the quarter. I’m sorry for my voice. My question is that, could you please elaborate on the hemolysis markers that you’re tracking and tell us how they will relate to patient-reported outcomes such as quality of life? Thank you. Gilmore O’Neill: Thanks very much, Joon. I hope that your voice gets better. I’m going to pass that question over to Baisong. Baisong Mei: Thanks for the question, Joon. For the hemolysis marker, we look into multiple markers for indicating for hemolysis including reticulocyte, LDH, bilirubin, among others. For the patient-reported outcome, we use several instruments to measure that clinical outcome and quality of life. They’re related to the general PRO instrument as well as sickle cell specific instrument. Joon Lee: Thank you. Operator: Our next question comes from Samantha Semenkow with Citi. Please proceed with your question. Samantha Semenkow: Hi. Good morning. Thanks very much for taking the question. Can you share just any additional insights into your FDA conversation as you aligned on the RUBY trial specifically in terms of the number of patients you’ll need and the amount of follow-up you’ll need to file a potential BLA? Gilmore O’Neill: I’m going to have Baisong to address that question. Baisong Mei: Thank you for the question. We aligned with the FDA about the RUBY trial to be a Phase 1, 2, 3 trial to support BLA including endpoint, sample size, and study design. We are continuing to have engagement with the FDA about the BOA data package and the follow-up. We’ll have a further discussion with the FDA. Samantha Semenkow: Got it. Thank you. Operator: Our next question comes from Brian Cheng with JPMorgan. Please proceed with your question. Brian Cheng: Hi, guys. Thanks for taking our questions this morning. Can you just give us a sense of what does a Phase 1, 2, 3 designation for RUBY really mean from a timeline perspective? And on the potential differentiation, I think based on your talk about investigators’ feedback so far, I’m curious if you can also talk about just feedback that you’ve been hearing from investigators. Are they seeing potential differentiation this early on? Thank you. Gilmore O’Neill: Thanks very much, Brian. I think there were three parts to your question. What is a Phase 1, 2, 3 and its impact on the BLA path? What was the investigator feedback on differentiation? And were they seeing signs or what were the things that they might be seeing in patients at this point? What I’ll do is just address the first part and then ask Baisong to follow-up on the other two. So with regard to Phase 1, 2, 3, I think the key point here is that it is a single. We’ve agreed that there’s a single Phase 1, 2, 3 study. We have important agreement on what the outcomes are and the size of the study. And what that basically means is that we remain on track and are more confident about being on track to a BLA. I think it’s worth calling out that the Vertex study was also the study that was used for their BLA application was designated a Phase 1, 2, 3 before or prior to that BLA. So I hope that actually helps from the point of view of our path to BLA. And I think just mentioning Vertex, it’s just worth calling out that we sort of have a benchmark based on the BLA filing from last year with regard to the size of the filing that was originally used for that approval. Baisong? Baisong Mei: So Brian, for the differentiation and investigator feedback wise, so we actually have quite a bit of engagement with the investigator and from their own observation of their patients as well as to see the data, they’re very pleased to see the correction of anemia. And the hematologist that very much appreciate that the level of total hemoglobin be able to correct the anemia and they see their patient is less fatigued and they have more energy and they just, they’re direct observation. And then also they told us that total globulin level as published also impacted the end organ function. So those are the direction that we’re also looking for. Gilmore O’Neill: And one other thing I’d just like to quote just with regard to the Phase 1, 2, 3, I think the important thing is that the RUBY study has been, we’ve agreed with the FDA it’s converted from a Phase 1 to a Phase 1, 2 , 3 which allows, because it’s a single study, a seamless transition to that study to support BLA. I hope that’s helpful. Baisong Mei: Just to add on Gilmore’s point, what Gilmore means is also to say we’d be able to use all the patient data from the study to support the BLA. Brian Cheng: Great, thanks guys. Operator: Our next question comes from Greg Harrison with Bank of America. Please proceed with your question. Greg Harrison: Hi, good morning. Thanks for taking the question. Now that there is a gene editing treatment approved in sickle cell, what are your latest thoughts on how reni-cel would fit in the space? And what have you learned from the early launch by the competitor? Baisong Mei: Thanks very much, Greg. I’m going to ask Caren to address that question. Caren Deardorf: Yes, great. Thanks for your question. What we’ve been hearing from the various stakeholders in this space is a lot of interest and some really good initial momentum. I think we are also hearing that across all of the groups so your stakeholders, your patients, families, your centers which are transplant, maybe gene therapy centers, your qualified centers as well as your payers. There’s just a lot of work that needs to happen and I think you all are picking up on that. But it’s starting and it’s happening. So I think it’s the balance of saying there’s tremendous interest even from the government in the CMMI pilot that CMS has kicked off. So the way we see it as it is very encouraging. It’s going to take time and we really believe that the fast follower of reni-cel is going to be timed very well......»»

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Blackstone Secured Lending Fund (NYSE:BXSL) Q4 2023 Earnings Call Transcript

Blackstone Secured Lending Fund (NYSE:BXSL) Q4 2023 Earnings Call Transcript February 28, 2024 Blackstone Secured Lending Fund isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and welcome to the Blackstone Secured Lending Fourth Quarter and Full Year 2023 […] Blackstone Secured Lending Fund (NYSE:BXSL) Q4 2023 Earnings Call Transcript February 28, 2024 Blackstone Secured Lending Fund isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day and welcome to the Blackstone Secured Lending Fourth Quarter and Full Year 2023 Investor Call. Today’s conference is being recorded. [Operator Instructions]. At this time, I’d like to turn the conference over to Stacy Wang, Head of stakeholder relations. Please go ahead. Stacy Wang: Thank you, Katie. Good morning and welcome to Blackstone Secured Lending fund’s fourth-quarter and full year. Earlier today, we issued a press release with the presentation of our results and filed our 10-K, both of which are available on the shareholders section of our website, www.bxsl.com. We will be referring to that presentation throughout today’s call. I’d like to remind you that this call may include forward-looking statements, which are uncertain and outside of the firm’s control and may differ materially from actual results. We do not undertake any duty in updating these statements. For some of the risks that could affect results, please see the risk factors section of our most recent annual report on Form 10-K filed earlier today. This audio cast is copyrighted material of Blackstone and may not be duplicated without consent. With that, I’d like to turn the call over to BXSL Co-Chief Executive Officer, Brad Marshall. A professional banker meeting with a customer in her office to discuss his finances. Brad Marshall: Thank you, Stacy, and good morning, everyone. Thanks for joining our call this morning. Also with me today our Co-CEO, Jon Bock; and our President, Carlos Whitaker; and our CFO, Teddy Desloge. Turning to this morning’s agenda, I will start with some high-level thoughts before Jon, Carlos, and Teddy to go into more details on our portfolio and fourth-quarter results. So just turning to the slide deck that we posted. And if we start on slide 4, the BXSL reported another strong quarter of results, including growth in net investment income, increased net asset value and continued solid credit performance. Several other key highlights in the quarter include the highest weighted average asset yield on the portfolio since inception at 12%, our second-best quarter of net investment income per share and the busiest deployment period in two years. Net investment income or NII per share increased 1% quarter over quarter to $0.96 per share, which represented a 14.5% annualized return on equity. It’s important to note, along with strong earnings, the quality of our earnings remains high, the limited PIC payment, nonrecurring and fee driven income. In fact, interest income, excluding PIC, fees, and dividends represented 95% of our total investment income in the fourth quarter. BXSL maintained its dividend of $0.77 per share, representing an 11.6% annualized distribution yield, one of the highest among our traded BDC peers with as much of their portfolio in first-lien senior secured assets, while covering our fourth quarter dividend by 125%. We continue to focus on our mandate of protecting investors’ capital by constructing a portfolio of first-lien senior secured loans. As of December 31, BXSL’s portfolio is 98.5% first-lien senior secured debt for the 48.2% average loan to value. We had strong credit performance, supported by minimal nonaccrual rate below 0.1% at both amortized cost and fair market value, lowest among our traded BDC peers, and approximately 1.5% of our debt investments as a percentage of total cost are most marked below 90. Turning now to page 5 of the presentation deck. In the fourth quarter, BXSL saw a meaningful increase in investment activity, ending the period with over $1 billion at par in new investment commitments and $874 million in new investment fundings. New investments fund in the quarter were over 98% first lien with a weighted average EBITDA of approximately $130 million and an average loan to value of 41.5%, reflecting our continued focus on what we believe are high quality investments. See also 15 Countries with the Most Beautiful Castles in the World and 16 Best Future Stocks For The Long Term. Q&A Session Follow Blackstone Secured Lending Fund Follow Blackstone Secured Lending Fund or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. In addition, the weighted average spread was approximately 580 basis points with an average OID of 1.7% and nearly two years on average of call protection. From a market activity’s perspective, we see strength building as fourth quarter M&A volume increased almost $400 billion, a 40% boost year over year. We expect M&A activity to continue to build and accelerate in 2024. This view is supported by our ongoing dialogues with the top financial sponsors that we cover as well as the sell-side advisers with whom we partner with. M&A activities expected to be largely driven by the buildup in record levels of private equity dry powder, large amounts of unsold assets that sponsors are sitting on, and older previous vintage funds, and the impact of lower M&A activity in 2023, 54% lower than the most recent peak in 2021. This expected market activity can be sustained by the prospect of lower interest rates and continued narrowing of bid-ask spreads between buyers and sellers. In addition, the number of deals in the Blackstone credit and insurance pipeline doubled as of the end of the fourth quarter versus the end of the first quarter. These pipeline deals are predominantly first-lien senior secured exposure on companies, and historically recession resilient sectors we know very well. While we know every opportunity in BXSL’s pipeline, we’ll not convert into investments. And our underwriting bar remains high, the volume gives us a sense for the scale and presence that we believe we have as an institution to drive deal flow. BXSL’s origination pace benefits from the scale and platform Blackstone for BXSI, which is one of the world’s largest alternative credit managers with $319 billion in assets under management and over 500 investment professionals in 18 offices globally. Our incumbency in over 4,500 corporate issuers allows us to see more deal flow, leverage our incumbency, and select into what we believe are the most attractive risk-adjusted assets. Further, BXSI has been the sole or lead lender in approximately 84% of BXSL’s direct lending transactions since inception. This quarter alone, 12 of 17 BXSL’s funded transactions were for deals Blackstone led, which allows us to be in a position to drive the negotiation of terms and documentation. During the quarter, we issued nearly $330 million of common shares through our ATM offering with additional equity and increased capacity for our debt, which has a weighted average cost of just over 5%. We remain very well positioned to take advantage of an improving M&A environment where we believe we can deploy capital and drive earnings for shareholders. 2023 was also our best year performance since inception with a 14.7% return on NAV basis and a lot of that return was supported by higher rates. We believe there are multiple drivers of returns that could work in our favor in 2024. These drivers include sustained elevated interest rates despite potential cuts later this year, tightening credit spreads, which could result in asset appreciation, and refinancings in our first-lien senior secured portfolio. And lastly, as I just mentioned, additional potential income driven by increased M&A activity, which we are starting to see as evidenced by our fourth quarter activity. So with that, I will turn it over to Jon Bocks. Jonathan Bock: Thank you, Brad. And let’s turn to slide 6. We ended the quarter with $9.9 billion of investments, an increase from $9.5 billion in the third quarter. We also modestly de-levered and end the quarter at 1 times debt to equity averaging 1.05 times in the quarter. And we enhanced our liquidity position this quarter to $1.8 billion. That’s comprised of cash and available borrowing capacity across our revolving credit facilities, including ABLs, and that’s a lean into an expanded pipeline. And our weighted average yield on debt investments at fair value was 12% this quarter compared to 11.9% last quarter. New investments continue to be accretive to investment income. The yield on both new debt investment fundings and assets repaid during the quarter averaged around 11.7%. And importantly, the weighted average base rate over the fourth quarter expanded approximately 120 basis points on our 98.9% floating rate debt portfolio compared to the same quarter in the prior year as rates remain elevated. Now let’s look at the portfolio in on slide 7. BXSL continue to focus on its defensive positioning in the current market environment. And this is reflected in our nonaccrual rate of less than 0.1% at cost and fair market value with no new nonaccruals in the quarter. As we look into 2024, we expect to see dispersion in performance across the market with defaults increasing in certain areas, particularly in smaller companies and businesses with cyclical and capital intensive profile, neither of which are within the BXSL’s investment focus. In addition, we expect the underperforming businesses with upcoming maturities where sponsors have taken value out, could also face more challenges. And while we expect market defaults and non-accruals to pick up modestly, fewer than 10% of BSXL’s loans have maturities in the next 24 months, and liquidity profiles overall remain healthy, and further 9% of BXSL’s exposure to revolver credit facilities is drawn. And while we’re pleased with our non-accrual rate, we continue to monitor our portfolio companies very closely, leveraging our team of 84 professionals in Blackstone’s Credit and Insurance’s strategic investment office. Now over 98% of BXSL’s investments are in first-lien senior secured loans and 99% of those loans are to companies owned by private equity firms or other financial sponsors who generally have access to additional equity capital and equity owners of this type has historically shown a willingness to support borrowers. These sponsors have significant equity value in these capital structures with an average loan-to-value of 48.2% in BXSL. And to complement healthy credit fundamentals and what could be a lower interest rate environment later this year, our portfolio also starts from a very strong EBITDA base. Taking a look at slide 8. You can see why we view larger companies as higher performing borrowers. Our portfolio companies generated an average of $192 million in LTM EBITDA, up from approximately $167 million at the end of the fourth quarter of 2022, and more than 2 times larger than the private credit market average. As we can see from the Lincoln International Private Market database, a market resource on private credit markets overall, larger companies of $100 million or higher in EBITDA have experienced nearly 4 times greater EBITDA growth and default nearly 5 times less than when compared to true middle market transactions. And this is often said these companies are not simply good because they are big. We believe they are big because they are good. And with our extensive sourcing capabilities in origination engine, we have the ability to identify and choose a broad array of investments that are in our view, attractive risk-adjusted opportunities in a market environment where we’re anticipating increased activity as Brad outlined earlier. Now slide 9 focuses on our industry exposure. Another important part of our defensive positioning, where we like to focus on better investment neighborhoods. And this means focusing on key sectors with among other themes, lower default rates and lower CapEx requirements. This quarter, 30% of BXSL’s deals were closed in the software industry as we continued to focus on more historically lower default rate industries. We increased the number of portfolio companies while maintaining nearly 90% invested at historically lower default rate industries, including software healthcare providers and services, professional services, and commercial services and supplies, which are some of the highest exposures and highest conviction themes across the portfolio. On slide 10, we can see BXSL’s portfolio company fundamentals compared to the private credit market as measured by Lincoln. And then relative to the private credit market, BXSL has approximately 2 times — our portfolio companies have approximately 2 times higher growth rate and generate nearly 15% higher profitability. Now, we continue to stress the importance of interest coverage. Average LTM EBITDA coverage of interest for BXSL portfolio companies over the last 12 months was 1.8 times in Q4, which again compares favorably to the Lincoln database for the private credit market at 1.4 times coverage in Q4. As we always say, the tails here are key. And 6% of BSXL’s portfolio reflected interest coverage below 1 times compared to the market at 15% on an LTM basis. It is even more important to understand what’s driving these tails and which companies comprise them. If you’re looking at the market, looking at their tail below 1 times EBITDA coverage, more than 70% of the companies below 1 times interest coverage are small with less than $50 million in EBITDA. And for BXSL, the majority of these companies are associated with recurring revenue loans, which were underwritten as higher growth names with lower initial coverage ratios, and if you exclude recurring revenue loans from the analysis, BXSL’s share of the portfolio below 1 times interest coverage becomes less than 1% versus the market at 13%, especially relative to the broader private credit market, we’ve seen our portfolio companies continue to deliver strong fundamental performance. Now looking ahead, the market’s expecting rates to begin fall this year. Current pricing implying an average SOFR rate in 2025 of 4.1%. Now as many of you know, lower interest rates effectively lower the interest burden that’s currently placed on our portfolio companies and that in turn allows more free cash flow to equity holding all else equal, whether this trend of free cash flow and interest payments, borrowers can reinvest excess cash into growth or prepare for sale or refinancing. And to illustrate this point, running at a 4.1% average base rate through BXSL’s portfolio as of Q4 2023, that imply a hypothetical increase in the portfolio’s interest coverage ratio from 1.8 times to 1.9 times holding other data constant. Now I’ll conclude with some points on our documents and recent amendment activity. As Brad indicated, when we negotiate our credit agreement, especially when we’re the leading lender, we place significant focus on ensuring important protections are put in place. Nearly 100% of the Blackstone led deals held in BXSL, include certain protections against asset stripping and collateral release and have caps on add-backs to EBITDA. This is in stark contrast to the syndicated market where the majority of loans lack these kind of lender protections and which we believe have been a significant driver of depressed recoveries and liquid loans over the past year. Finally, amendment activity continues to be relatively benign. In the fourth quarter in BXSL there were 40 amendments. The vast majority of which were associated with add-ons, DDTL extensions, and other immaterial technical matter. And there were two other amendments associated with providing additional PIC flexibility and one amendment associated with an underperforming investment. Among the two PIC amendments, one was associated with a significant equity infusion by the PE sponsor and the other was effectively extension on a PIC option provided at initial underwriting. Now when we extend the call, we also extend the call protection on one of the deals by two years. And for the underperforming investment, we proactively engaged the PE sponsor who also contributed new equity. And the amendments here was associated with recognizing additional equity in our covenant tests. With that, I’ll turn it over to Carlos. Carlos Whitaker: Thanks, Jon. Turn to slide 11. BXSL maintained its dividend distribution of $0.77 per share, a 28% increase from Q4 of last year and a 45% increase since our IPO two years ago. As you can see, we have continued to focus on delivering high-quality yield to shareholders, building a level of confidence through steady regular dividends while also building NAV per share. We expect this approach to continue. As the economic environment shifts, it’s important to look at the market as a whole. We expect private credit spreads to tighten as M&A increases, a trend we began noticing in late 2023. To expand on Brad’s point regarding deal activity, we are optimistic about M&A volumes and the deployment picture for 2024. Valuation expectations have improved. Record private equity dry powder of $1.5 trillion is on the sidelines. Economic sentiment is improving. Fundamentals remain healthy. And there is a new prospect for lower cost to capital if rates fall. All drivers for pent-up market activity. Given our broad origination platform and expansive credit footprint, we believe BXSL is well positioned to take advantage of this environment. Another benefit we offer is our scaled investment franchise, which allows us to drive investor returns. A main Blackstone focus. Recall, our value creation program, which all BXSL portfolio companies have access to. Seeks to assist our companies by lowering their expenses and creating cross-sell opportunities across the broader Blackstone portfolio. We have created an implied $3.5 billion plus of enterprise value for our BXCI companies, in addition to being their lender. For example, we made over 20 introductions across the broader Blackstone ecosystem to a digital service provider and generated approximately $7 million in sales for this borrower. This included projects for enterprise architecture and enterprise resource planning selection, cloud optimization consulting and material requirements and planning, all directly with other Blackstone investments. We also worked with a management service provider for healthcare, to put together a request for proposals for medical consumables. The request contained over 1,000 SKUs. And through this process, saved the borrowers almost $2 million. And again, we are just the lender here. So to be able to provide such assistance is quite remarkable. It’s a point worth emphasizing, as we provide BXCI value creation services that aim to add value to our companies. We offer our borrowers access to over 50 data scientists, over 90 senior advisers, and a team of cybersecurity experts, all of which we believe ultimately makes us an attractive manager to partner with. But all of this ties to our focus on shareholder experience and alignments. We built BXSL to help drive attractive risk-adjusted returns to shareholders with what we consider to be industry leading best practices. Even after the expiration of our fee waiver BXSL has among the lowest fee structures, expense ratios, and cost of debt relative to our peer set as a percentage of NAV and as of the end of Q4. This helps us to build a defensive portfolio and deliver returns to our investors. We have a three-year look-back for total return hurdle related to incentive fees on income and importantly, we amortize OID over the life of the loan and do that scrape upfront fees to the manager by passing on all of BXSL’s portion of investment related fees fully to the fund, another example of shareholder alignment and another way we aim to differentiate ourselves. And with that, I’ll turn it over to Teddy. Teddy Desloge: Thank you, Carlos. I’ll start with our operating results on slide 12. In the fourth quarter BXSL’s net investment income was $172 million, or $0.96 per share, representing the second highest NII quarterly performance since our IPO. GAAP net income in the quarter was $157 million or $0.88 per share, up 16% from a year ago. Our total investment income for the quarter was up $53 million or 21% year over year, driven by increased interest income, primarily due to higher rates. Payment in-kind or PIC income represented approximately 5% of total investment income during the quarter. We would also like to acknowledge that the fee waivers in place since our IPO expired near the end of October 2023. While this quarter included partial waivers for approximately one third of the period, future quarters will fully incorporate BXSL’s full management fee of 1% and its incentive fee of 17.5%. The partial waivers added approximately $0.02 of NII per share to the quarter. Turning to the balance sheet on slide 13. We ended the quarter with $9.9 billion of total portfolio investments at fair value, less than $5 billion of outstanding debt and nearly $5 billion of total net assets. With our strong earnings in excess of the dividend in the quarter, NAV per share increased to $26.66, up from $26.54 last quarter. Next, slide 14 outlines our attractive and diverse liability profile, which includes 57% of drawn debt in unsecured bonds. These bonds have a weighted average fixed coupon of less than 3%, which we view as a key advantage in this elevated rate environment and contribute to an overall weighted average interest rate on our borrowings of just over 5%. Again, this compares to a weighted average yield at fair value on our debt investments of 12%. Additionally, we have no maturities on our liabilities until 2026, and our funding facilities have an overall weighted average maturity of 3.4 years. As mentioned in our prior earnings call, BXSL was the first traded BDC to receive an improved outlook from Stable to Positive by Moody’s, and we continue to maintain our three investment grade corporate credit ratings. We ended the quarter with approximately $1.8 billion of liquidity in cash and undrawn debt available to borrow, providing us with significant capacity for continued portfolio growth. The fourth quarter of 2023 was our most active quarter since 2021 with BXSL committing to over $1 billion in investments in the quarter that have closed to date, plus an additional $221 million committed to BXSL as of December 31 that have yet — not yet closed. As you heard from Brad, Jon, and Carlos, we believe deal activity will increase in 2024 and create new deployment opportunities we are seeing that play through our pipeline. We also have seen spreads tighten and activity rise in a syndicated loan market, generally a leading indicator for what we expect to see in the private side. As such, we are actively leveraging incumbency to retain exposure where capital structures were set up in a wider spread environment while company performance has remained strong, exceeding expectations. For example, in the fourth quarter, we redefined repricings in the portfolio in exchange for an average of nearly two years of additional call protection. We are also finding success offering private solutions that are differentiating versus what the syndicated market can offer, such as refresh DDTL capacity or modest PIC flexibility. In conclusion, we remain positive about the year ahead, our competitive advantages in the market and robust performance in various metrics against our peer set. We believe the positive factors that have supported returns for investors remain in place, including portfolio positioning for a modestly lower, but still elevated rate environment, ample liquidity to deploy in what we believe will be a more robust deal environment and continued elevated earnings powered by low cost financing sources, all of which is backed by Blackstone’s platform advantages in scale and sourcing and our focus on protecting investors’ capital. With that I’ll ask the operator to open up for question. Thank you......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

Astec Industries, Inc. (NASDAQ:ASTE) Q4 2023 Earnings Call Transcript

Astec Industries, Inc. (NASDAQ:ASTE) Q4 2023 Earnings Call Transcript February 28, 2024 Astec Industries, Inc. beats earnings expectations. Reported EPS is $0.9, expectations were $0.62. Astec Industries, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello and welcome to […] Astec Industries, Inc. (NASDAQ:ASTE) Q4 2023 Earnings Call Transcript February 28, 2024 Astec Industries, Inc. beats earnings expectations. Reported EPS is $0.9, expectations were $0.62. Astec Industries, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello and welcome to the Astec Industries Fourth Quarter and Full Year 2023 Earnings Call. As a reminder, this conference call is being recorded. It is my pleasure to introduce your host, Steve Anderson, Senior Vice President of Administration and Investor Relations. Mr. Anderson, you may begin. Steve Anderson: Thank you, and good morning, everyone. Joining me on today’s call are Jaco van der Merwe, Chief Executive Officer; and Becky Weyenberg, Chief Financial Officer. In just a moment, I’ll turn the call over to Jaco to provide comments, and then Becky will summarize our financial results. Before we begin, I’ll remind you that our discussion this morning may contain forward-looking statements that relate to the future performance of the Company, and these statements are intended to qualify for the Safe Harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions. Factors that can influence our results are highlighted in today’s financial news release, and others are contained in our filings with the SEC. As usual, we ask that you familiarize yourself with those factors. In an effort to provide investors with additional information regarding the Company’s results, the Company refers to various U.S. GAAP, which are generally accepted accounting principles, and non-GAAP financial measures, which management believes provides useful information to investors. These non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP, and therefore, are unlikely to be comparable to the calculation of similar measures for other companies. Management of the Company does not intend these items to be considered in isolation or as a substitute for the related GAAP measures. A reconciliation of GAAP to non-GAAP results is included in our news release and the appendix of our slide deck. All related earnings materials are posted on our website at www.astecindustries.com, including our presentation which is under the Investor Relations and Presentations’ tabs. And now, I’ll turn the call over to Jaco. Jaco Merwe: Thank you, Steve. Good morning, everyone, and thank you for joining us. I will begin on Slide 4 with a review of our full-year highlights. 2023 was an important year for Astec, as we advanced key strategic initiatives such as operational excellence, growing our parts’ business, new product development, and Oracle ERP execution. These efforts enabled us to achieve great results in 2023 and will help us deliver more consistent, profitable growth in the future. I am very proud of what the team has been able to accomplish this year. In 2023, we had record full-year sales as end-market demand remained solid in both segments. We were particularly encouraged by the steady momentum we saw across the business at the end of the year, with Q4 implied orders growing 27.6% sequentially. I met with many customers at the recent World of Concrete and National Asphalt Paving Association events and was encouraged by their positive sentiment. They remain busy and are using our equipment to complete their projects. Their optimism, combined with a positive turn in implied orders during Q4, increased funding from the Federal Highway Bill, and new product introductions give us confidence in the long-term demand outlook for our business. During Q4 2023, our team delivered improved profitability and expanded margins. This is a testament to the team’s ability to execute efficiently and apply operational excellence practices. We expanded gross margins 400 basis points and adjusted EPS more than doubled for the full year. A priority for us in 2023 was to build a performance culture that consistently delivers financial results. Our full-year results demonstrated that we have made great progress towards this objective. These achievements have laid the foundation for an even higher level of profitability as our business continues to grow. Our Oracle ERP implementation continues to move forward as indicated by the 2023 milestones we achieved. We will continue to harness the capabilities of the enhanced new systems to drive efficient and effective operations. Lastly, we published our first Corporate Sustainability Report in December. It was a tremendous team effort to get this project across the finish line and I would like to acknowledge the hard work done by many individuals to complete this report. Guided by our core values of safety, devotion, integrity, respect, and innovation, this report describes how we strive to do what is right for our customers, employees, and the communities in which we operate. Our vision is to build industry-changing solutions that create life-changing opportunities. This inaugural report provides a foundation from which we can move forward with the goal of long-term sustainable growth. Turning to Slide 5, as demonstrated over the past few years, we have taken steps to simplify our business by eliminating waste and enhancing processes to improve productivity. We are focused on areas where we add the greatest value, bringing innovation to our customers and working with our dealers to develop best-in-class aftermarket practices. We plan to continue to grow organically and explore opportunities through a disciplined acquisition roadmap. Moving to Slide 6, after taking on the CEO role last year, one of the key priorities I established was for us to create and embrace a performance culture built on consistent execution. Reflecting on the last 12 months, I am pleased to see that we have made progress on this journey as evidenced by our 2023 results and achievements. At the same time, we have identified significant additional opportunities to strengthen our business further and build those into our long-term target goals. I would like to take a few minutes to highlight some notable achievements from the past year. We expanded gross margins by 400 basis points in 2023. We continued to invest to improve processes and deliver innovation, creating positive margin. We will continue these efforts in 2024. Additional investments will help us better serve growing markets, and a slate of new products will enable us to provide solutions to customer needs. A second area we prioritized in 2023 was our dedication to our customers, dealers, and shareholders. Accomplishments here included the expansion of our distribution network and the launch of new products that enable dealers and customers to better serve our growing global market. We want to continue prioritizing these elements in 2024 through greater collaboration and increased availability of parts to better serve our customer. These actions to drive an enhanced product offering out to a broader customer audience will enable us to create consistent, profitable growth. Promoting the OneASTEC operating model drives continuous improvement. The implementation of the Oracle ERP system is a great example, as we have launched modules at corporate and one major manufacturing site in 2023. We have implementation plans for additional sites in 2024 and 2025. Operationally, we have made improvements in areas such as parts fill rates, which improved 20% in the past two years. We will make additional investments to further improve throughput velocity this year. One constant in our business is our steadfast focus on our core value of safety. This is very important to me and our team. I want our team to go home healthy and injury-free every day. Through continuous improvement, we have reduced our recordable injury rate to 1.27, the best in the Company’s recent history and very favorable when compared to the industry average. Our goal is zero harm and we will continue to work to eliminate injuries across our sites. And finally, the Astec team will continue to unite around our long-term objectives and new vision statement, which is to build industry-changing solutions that create life-changing opportunities. We will work together to make Astec an even greater organization. Turning to Slide 7, I would like to offer some observations on the current business dynamics. While the macro environment remains uncertain, there are an increasing number of indicators that point to a stable demand environment with opportunities for growth. In our Infrastructure Solutions’ end markets, demand for asphalt road building and concrete production is strong. Dealers need additional inventory and we are working closely with our dealers to support a growing aftermarket opportunity by further improving the delivery of parts and service for our mobile equipment. For Materials Solutions, we saw signals from our annual dealer order writing event that heightened interest rates’ concerns may weigh on mobile crushing and screening equipment outlook in the near-term. For the long-term however, demand trends looks favorable due to domestic infrastructure spending and opportunities in international markets. In both groups, we are releasing new products to deliver innovation to our customer needs. Customers are busy and they rely on us to help keep their projects moving forward efficiently. In addition to new product introductions, we are increasing our sales coverage by expanding our dealer network and deploying additions to our direct sales force to further penetrate markets. Funding from the Federal Highway Bill continues to be deployed at a growing rate. Contract awards increased 8.6% in 2023, which is a positive leading indicator for future construction. Funding from federal legislation provides stability for our customer, driving future product and aftermarket demand. Next, I would like to update you on two of our new products show on Slide 8. Both products were launched in 2023 and both have been met with positive reception from our customer. The Peterson 5710E Horizontal Grinder was launched in March. The number of units sold and incremental margins for this product are in line with expectations and we are on track with our unit forecast in 2024. The Roadtec RX405 Cold Planer was launched in October and is off to a great start. New product launches are complex and require teamwork and dedication. I am pleased with the success of these and look forward to presenting more new products at the World of Asphalt trade show in Nashville on March 25th through 27th. Slide 9 shows that backlog continues to normalize from the peak levels experienced in 2022 that were primarily caused by customer reactions to supply chain and logistics constraints. Over the past year, orders have returned to more historic patterns and we have made progress in converting backlog to sales through investments in throughput and operational excellence initiatives. Implied orders shown on Slide 10 increased 27.6% sequentially in Q4 after holding steady through the first three quarters of 2023. While one data point does not make a trend, we were encouraged with the increase in order. Customer sentiment for Infrastructure Solutions’ products is positive. While higher interest rates may temper demand for Materials Solutions’ products in the near-term, industry data point to double-digit growth in federal and state road construction, which bode well for our industry in 2024. Combined with our new products and healthy backlog, I am becoming increasingly confident that 2024 will be a solid year for Astec. With that, I will now turn the call over to Becky to discuss our detailed fourth-quarter and full-year financial results. Becky Weyenberg: Thank you, Jaco, and good morning, everyone. I’ll begin with a review of our fourth-quarter 2023 results on Slide 12. Sales were $337.2 million, down 3.6%, as a slight increase in Infrastructure Solutions was more than offset by Material Solutions decline. By region, domestic sales growth of $4.1 million was more than offset by softer international sales, which were down $16.8 million, with particular weakness this quarter in Europe, Australia, and Canada. Parts’ sales grew 2%, which was offset by a decline of 6.9% in equipment sales. Adjusted EBITDA increased 46.8%, increasing adjusted EBITDA margins by 340 basis points. The biggest driver was pricing realization and tailwinds for manufacturing efficiencies. We expanded gross margins by 610 basis points to 26.4%. Full-year gross margins were 24.7%. Increased SG&A costs were driven by higher planned personnel-related costs and increased consulting and project costs. Overall, we are pleased with the progress and improvements we’re making on margins. Adjusted earnings per share increased to $0.90 from $0.34 the prior year, an increase of 164.7%. This figure excludes the transformation program and other costs. The adjusted net effective tax rate for the quarter was 17.3%, a significant decrease from last year. The lower effective tax rate for the current period included an income tax benefit from the utilization of existing net operating losses and corresponding release of valuation allowances in Brazil and India. Our normalized net effective tax rate for the full year was 22.1%, which was slightly below the 23% to 24% range we had estimated. On Slide 13, fourth-quarter adjusted EBITDA increased 46.8% to $32.6 million, with margin expansion of 340 basis points to 9.7%. The positive contribution from volume, pricing, and mix, plus manufacturing efficiencies, more than offset the impact from inflation and higher SG&A expenses. Moving on to Slide 14, Infrastructure Solutions’ net sales increased slightly to $240 million, with domestic growth of 5% offset by soft international demand. Parts’ sales were strong this quarter, up 7.2%, as we were able to fulfill parts’ orders for aftermarket demand. Adjusted EBITDA margin for Infrastructure Solutions increased 500 basis points to 14.7%. Favorable net volume, price, and mix outpaced inflation, driving higher gross margins. Net positive manufacturing efficiencies were partially offset by higher SG&A personnel costs. Turning to Slide 15, Materials Solutions’ net sales decreased 13.1% to $95.4 million, as there were decreases in both international and domestic demand. International sales decreased 28.7% and domestic sales declined 7%. Equipment sales declined 15.7% and parts were down 7.8%. Adjusted EBITDA margins for Material Solutions increased 50 basis points to 9.3%. This was largely due to the positive impact from pricing and manufacturing efficiencies, partially offset by lower volume and mix, and an increase in SG&A personnel costs. On Slide 16, I’ll review our full-year results. Sales were $1.3382 billion, up 5%, with increases in both Infrastructure and Material Solutions due to price cost alignment and stable demand. By region, domestic sales growth of 6.8% was slightly offset by softer international sales which were down 2.1%. Adjusted EBITDA grew 55.4%, and adjusted EBITDA margins increased 260 basis points due to our ability to drive gross margin expansion through pricing initiatives. Adjusted earnings per share also had strong growth at 117.1%, even when factoring in the litigation loss reserve we incurred in the second half of the year. Moving to Slide 17, we highlight the key drivers of our year-over-year adjusted EBITDA bridge. As previously mentioned, adjusted EBITDA increased 55.4% to $110 million, with an EBITDA expansion of 260 basis points to 8.2%. As seen in the chart, the positive impact of net volume, pricing, and mix more than offset headwinds from inflation and higher SG&A costs. We are proud of the strong expanded margin as our factory investments and pricing realization has come to fruition, and we expect to drive increased EBITDA to deliver long-term shareholder value. Turning to Slide 18, our cash and cash equivalents stood at $59.8 million. We generated operating cash flow of $27.8 million compared with the use of cash of $73.9 million in the prior year, a difference of $101.7 million. This turnaround was due to improved earnings and steps we took to improve our working capital. Our liquidity is up slightly from the end of 2022, positioning us to continue investing in profitable growth initiatives while still maintaining a strong balance sheet. Turning to Slide 19, we maintain a disciplined capital deployment framework, balancing investments in growth with returning cash to shareholders. We spent $9.1 million on CapEx in the fourth quarter, bringing our full-year CapEx to $34.1 million. This is within the range previously communicated. We were pleased to return $11.8 million to shareholders in the form of dividends during 2023, as we continue to direct capital to create the best returns. With that, I will now turn it back over to Jaco. Jaco Merwe: Thank you, Becky. In closing, on Slide 20, we closed 2023 by delivering strong results in the fourth quarter. I am confident our teams can deliver even better results during 2024. We have work yet to do, but we are well on our way to delivering enhanced performance for our customer and shareholder. I am grateful to our employees for their dedication and hard work and to our customers for their loyalty and support. With that, operator, we are now ready to open the call for questions. See also 21 Countries that Have the Highest Rates of Cancer Deaths and 21 Best Countries to Buy Real Estate According to Reddit. Q&A Session Follow Astec Industries Inc (NASDAQ:ASTE) Follow Astec Industries Inc (NASDAQ:ASTE) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Your first question is from the line of Steve Ferazani with Sidoti. Please go ahead. Unidentified Analyst: Hi, good morning. This is Alex on for Steve. Thank you for taking questions. Can we start by providing a little bit of color around what’s led to the higher margins? Is that higher margin sales or pricing or other factors? Jaco Merwe: Yes, Hi, morning, Alan, this is Jaco here. Like we mentioned in previous earnings calls, Q4 is typically a strong quarter for us with regards to favorable parts mix. We’ve definitely seen that during the quarter. We also had a strong performance from our Infrastructure Solutions team, and it’s difficult to pinpoint to one thing, but our teams have obviously done a lot of work on our parts performance. We’ve done a lot of work around operational excellence and investing in our facilities. And then, we have a positive effect on pricing versus inflation. And as you’ve seen by the bridges, that effect is getting narrower every quarter. So definitely, for the coming year, we expect that to move much closer to each other as well. Unidentified Analyst: Thank you for the context. And a follow-up for me, could you talk a little bit about order rate trends and, if you’re seeing movement towards a positive turn or particular areas of improvement within the backlog? Jaco Merwe: Yes. When it comes to ordering and backlog, there’s a couple of factors that we are looking at. As mentioned in the prepared remarks, I’ve had the opportunity to speak to many customers already this year at World of Concrete and National Asphalt Paving Association. Our customers are busy. Sentiment is positive. We are seeing, improved flow from federal funding and, we obviously mentioned the release of new products that is busy eating the market right now. On the opposite side of that, obviously interest rates are affecting mostly our mobile crushing and screening equipment. And then this year, obviously being an election year, we always expect a little bit of up and down from an order point of view. But, overall, we believe that this year is going to be a stable year for us. The implied orders that jumped here in Q4 was a positive signal, so, we are expecting, flat to single-digit growth for 2024. Unidentified Analyst: Great, thank you. And last question for me. Could you talk, a little bit more? You’ve mentioned the plant efficiency and ERP, but I’m curious about some of the timing of margin improvements we might see from those as the implementations develop. Jaco Merwe: Yes, so just on margins as a whole, it comes from various places. We are continuously working on delivering operational excellence and as you can see with our CapEx last year, we invested quite a bit in our facilities. Those are continuously now, having an effect and obviously we saw that in the last couple of quarter. We mentioned already the pricing inflation parity, and, our OneASTEC procurement team, they are really coming together now nicely and we are definitely taking advantage of the size of Astec now across the organization. So those are all contributing. On the ERP side specifically, we went live with one site last year. We have various sites that will go live here during 2024, and we will have specifically two sites that will go in Q2. So we expect to see, positive effect of those in future quarters. But, for the shorter-term, there’s a lot of good work that the teams have already done that should help with margins. I think one thing to consider also, from a margin point of view, the level of work that we have in our factories are always a big item to consider when it comes to, having good absorption, and I think our teams are doing a really good job now with improved sales and operations planning processes to plan for resources based on level. So, the teams are well-positioned that, if the market continues to be strong, that we can take advantage of that. On certain products, if the market turns down, we have good visibility now to take the appropriate actions. Becky Weyenberg: Jaco, I might like to add a reminder as well. We had a significant transformation program that’s been in play the last two years with one of our sites in Chattanooga, and that is coming to a close. We are putting the final detail, which is launching in Q1 here, and then that’s the end of that program as far as the investment, and then throughout the remainder of the year, they’ll continue to perfect and stabilize. And so we do expect continued margin improvement from that investment to impact us in the back half of the year. And then going forward, it’ll just continue to grow. The other major investment we’re making is in our Omagh facility in Northern Ireland. We had a capital expansion to their facility, which is still in progress, but will also finish in 2024, and that is specifically what we’re calling our gateway to Europe. So we will be launching several new products in that facility once they have the room, and that will be in the back half of the year and into 2025. So we do see opportunity from our investments to increase our margin, our gross margin and EBITDA margin portfolio. Unidentified Analyst: Thank you, Jaco and Becky, I really appreciate all the color. Operator: Your next question comes from the line of Mig Dobre with R.W. Baird. Please go ahead. Joe Grabowski: Hi, good morning, guys. It’s Joe Grabowski on from Mig this morning. I also wanted to ask about EBITDA margin, but maybe kind of split it out between segments. The infrastructure EBITDA margin was the highest quarter it’s been in the past several years, but Material Solutions margin was softest that it’s been in 2023. So maybe kind of, talk about margins by segment, and I know, Becky, you were just kind of touching upon it, but what is kind of working in Infrastructure that maybe is not flowing through in Material Solutions? Jaco Merwe: Yes, hi, Jaco here, I can take a first stab at that. You’re absolutely right. Infrastructure Solutions had a really strong performance. If you look at, that group specifically, Q4 is a very strong parts quarter, as will be Q1 this year, so parts obviously has a positive influence. We’ve also – the teams have done really well in driving efficiencies around our plants and, the asphalt and concrete plants that we’re selling. You guys have heard us talk in the past around modularization and the work we’re doing on that, so we’re starting to see, the outcomes of that. So – but on the Infrastructure Solutions side, I will also say that, over the last three, four years, we’ve created a very strong operational team, and that team, has obviously had enough time now to execute. And now that we have a new leader on the Material Solutions side, we will duplicate what we’ve done on that side. We have definitely seen, interest rates having a more significant effect on the Material Solutions side of the business, specifically with customers not converting rental units to procured units. So our dealers are carrying a bigger rental fleet versus, converting those at the end of leases. The good thing is that, our customers are running the equipment. So it’s not that we’re not – that we have equipment standing, they are running. So as soon as they are starting to convert those rental to purchase agreements, our dealers will have to replenish their inventory. And, we’re obviously having discussions with our dealer network on a daily basis around that. Joe Grabowski: Got it. Okay, thanks. Thanks for that color. My next question would be, I guess, international sales, $51 million in the quarter, down 25% year-over-year. Can you talk about what you’re seeing on the international side of the business? Jaco Merwe: Yes, and I will say, a big piece of that was more timing. So, obviously, Europe is soft. I think you’ve heard that from multiple other people in the industry. So Europe is soft. Although, Europe is not a big part of our business. But actually, if you look at our pipeline from an international point of view, we have a very strong pipeline in our quoting funnel, and, we have various pieces of equipment that was in transit to international customer, and those should flow through here in Q1. So, actually, I think our investment in our international organization, have shown improvements over the last few years. And with the strong pipeline that we have, we believe that 2024 will be stronger on the international side. Joe Grabowski: Got it. Okay. And final question for me. Becky, you touched upon the transformation program. I think you had $26 million of charges in 2022, $29 million in 2023. Maybe just kind of, talk about what is – what all is in the transformation program charges and what you expect those charges will be in 2024 and beyond? Becky Weyenberg: Sure. Absolutely. So we do expect the same kind of range of spending, as ’24 and ’25 are the rollouts to all the sites, and we do expect to conclude the majority of that program in 2025 with all of our largest sites that manufacture products, and then we’ll continue with international sales entities and such. But those will be a lighter lift as we go forward. The transformation program, there was two programs, as I mentioned, the transformation at our facility here in Chattanooga is concluding this year. And so that one is – that is finished at the end of Q1, for all intents and purposes, so that we won’t have those charges going forward. The remainder of the transformation is tied to our Oracle rollout. And I’ll just remind everyone it’s more than an ERP. So it is – we really had, disparate systems everywhere in the Company. Every site had a different flavor, but we were missing some fundamental basics. So we rolled out a human capital management system, we rolled out a customer relationship management tool, and we rolled out a corporate consolidation tool, our ERP, and we’re doing a transformation management system program. So quite a few heavy lists there, but it will conclude at the end of ’25. And we’re pretty excited about it because we are already seeing that we have more effective and efficient operations because we went live in the manufacturing facility and corporate, and then we went all of the U.S. on the human capital management. So the information we’re getting, the quickness of the information, the accuracy of the data, that’s really setting us up for future profitability and efficiency. Joe Grabowski: Got it. Okay. Thanks for taking my questions. Good luck. Jaco Merwe: Thanks, Joe. Operator: Your next question is from the line of Larry De Maria with William Blair. Please go ahead. Larry De Maria: Hi, thanks. Good morning, everybody. I wanted to talk — Jaco Merwe: Hi, good morning, Larry. Larry De Maria: Hi, good morning, Jaco. First, that Material Solutions, it’s obviously, it’s kind of a little bit weak in your term, but can you answer that, A, can you break out backlog by segment? And then secondly, how did, Materials Solutions’ orders do versus expectations considering the dealer event? I think we were looking for a $70 million to $75 million there. Did we hit that number? Is that not relevant? Or can you just talk about, the orders versus expectations and maybe split out backlog of orders by segment? Jaco Merwe: Yes, I’ll take a stab at the Material Solutions event. We – the full value came in quite a bit lighter than what we expected, Larry. We had about $40 million. Now, I will say that we had two or three of our biggest dealers that did not participate in that program this year due to, what we explained earlier, equipment not converting from rental to procurement. We are having discussions with those dealers right now. Customers are using equipment, so we might – we’re actually expecting some of that writing to take place here in the next couple of months. So, yes, it came out quite a bit lighter but, customers are still using equipment. And if you look at, the reports of companies in the material crushing space, all of those companies are expecting a pretty strong 2024. So we feel comfortable that this is more of a, timing issue and we’re continuously working with our dealers on getting what they need to support their customer. On the backlog by segment, I don’t think we typically break that out by segment, but obviously, Material Solutions saw the biggest reduction year-over-year from a percentage point of view. Sequentially here in the last quarter, both were more or less the same percentage reduction compared to previous years. But we fully expect that bookings here in Q1 will be in line with what we expect and, potentially be above what it was last year in Q1. Operator: [Operator Instructions] Your next question’s from the line of Brian Sponheimer with Gabelli Funds. Please go ahead. Brian Sponheimer: Hi. Good morning, everyone. I appreciate all the color on the call. Just a question about backlog. If we’re looking at the $500 million or almost $600 million in backlog, your $570 million, and compare that to $913 million a year ago, talk about maybe imputed margins and imputed pricing and what is in that backlog maybe relative to a year ago or what you’ve seen there, and your ability to really defend pricing in that backlog as it’s normalized? Jaco Merwe: Yes. Now, Brian, I will say we are very confident in the pricing that we have in our backlog. I think our teams did a exceptional job after that first year, being caught off guard with the inflationary pressures that jumped up so quickly. So we feel, confident about that. We’ve also already implemented pricing to offset any inflationary expectations for 2024. Brian Sponheimer: So are there any – within that backlog, are there any potential mechanisms in case inflation – the inflation outlook changes for you to adjust price on that and on what is there? Jaco Merwe: We typically do not have an inflationary adjustment in our contracts post the signing of a deal, and that was the reason why, what was it, two years ago, pricing lagged inflation so much. So I think the teams have been much more proactive to anticipate inflation and building that into pricing for future deliveries. Brian Sponheimer: I appreciate that. And maybe, Becky, you can help here. As I’m thinking about how 2023 went, with, some decent quarters to start the year, obviously third quarter was a challenge. If we’re thinking about the ability to drive profitability in 2024, maybe in a year where Infrastructure is up and Materials is down, talk about where your starting point is from a profitability perspective relative to a year ago. Becky Weyenberg: Oh, certainly, Certainly, we had – we’ve seen some softness in MS but we don’t expect that to continue. We are seeing signs that that will come back. And part of that comes from the fact that on our Infrastructure Solutions side of the house, we are largely direct sales. So we don’t have the same pressures from – we don’t internally have the same pressures from interest rates. Certainly our customers do, but we have some pretty large customers, that can weather these storms a little bit more than we can at our size. But on the dealer sales channel, that’s where we’re seeing the most pressure. And if interest rates come down, I think everybody can read what’s out there the same as I can, but we expect maybe one or two cuts to come next year. If that happens – we’re not, we’re not banking on it, but if that happens, then that’ll give some confidence to our dealer network and they’ll be able to carry some more inventory. Right now, they’re kind of wait and see. They want to see that these rentals convert, but certainly we were pretty pleased, every single quarter this year we had above 23% gross margin and we know that we can do better than that as we saw in Q4, so if we can get the sales, we feel pretty strong that we have a runway to expand both gross margins as well as EBITDA and profit margins going forward. We’re also very confident in our programs that we’re rolling out, the return on our invested capital grew quite a bit this year, finishing the year at 9.9%. So we know that we’re tracking very well with our programs that we’re spending money on and we make sure that they hit our metrics for approval. So we do see quite a bit of opportunity, and Jaco mentioned this as well, the other point that gives us confidence is our ability to increase our parts fill rates. We should never have parts in backlog, so that is part of our drop in backlog. We are turning parts’ orders at a regular routine. We want to satisfy the customer in 24 hours when possible, a little bit longer if we have to manufacture something that’s, on older equipment, but we’ve seen very good progress there and – but we’re not where we want to be, so we’ll continue to focus on that and that should also give us some room for expansion. Jaco Merwe: Hi, Brian, I don’t know, it’s Jaco here, maybe just a, additional comment on that. That this year for us I will say, if we get the sales, we feel that operationally we have a lot of stability now in the way we manufacture, pricing. So if the sales are there, we feel that there’s an upside, to profit development. So, we’re spending a lot of time and effort with our sales teams to drive that, to fill the pipeline up. And, because of all the work that we’ve done to create more consistency in our business, that should show up positively in the future, if we materialize the sales. Brian Sponheimer: I appreciate that. I guess, one last one if you’ll allow. With the idea that, you’ve kind of set a baseline for where profitability is going to go. Balance sheet is in great shape. How do you think about using cash here? Is it buyback, you’re looking for acquisitions, is it just fixing what’s – continuing to fix what’s — Jaco Merwe: Yes, no, good question. Good question, Brian. So from a capital allocation point of view, there’s a couple of things that we have on the table. Obviously, CapEx, we still want to invest in our facilities. So, we think CapEx is going to be in that $30 million, $35 million range, and then, we’ll continue with the dividends. I think, in this past year it was about $12 million. From a buyback point of view, we do have an open program. Under the current program design, even if we do start buyback, it will not give us significant volume, just because of the way the plan is designed. But we want to make sure we drive down our inventory to obviously fund and pay down the debt that we have on our revolver today. And we are definitely, looking at future acquisition opportunities. The teams are all working on filling that pipeline, and if we find the right company, we’ll definitely consider that. I will also just mention that, our teams have done a really good job this last year on things other than just inventory. If you look at our accounts receivable, accounts payable work that the teams have done there, I will say it’s in the best shape it’s been in a long time. So a lot of work around using our capital in a good way and, driving that ROIC in the right direction is a big focus for us. Brian Sponheimer: All right, great. Much appreciated, and congrats on a good turnaround from Q3 here. Jaco Merwe: Thank you. Operator: Your next question is a follow-up from the line of Larry De Maria with William Blair. Please go ahead. Larry De Maria: Hi, thanks. Hi, sorry about that, I got disconnected before. Jaco, you noted the – and obviously, big increase in gross margin for the year, I think 24.7%, and obviously, above 26% in 4Q. If we look at ’25 – 2024, flat to up sales, transformation program benefits, growth in parts. So shouldn’t that not imply 25% to 26% growth margins in ’24? Is that fair or if not, why? Jaco Merwe: Yes, no, that’s a good question. We definitely have various, items that we are working on, Larry. I talked about further driving the parts business, the new products that we are releasing, the work we’re doing on procurement. I will say that the item that we are watching very closely is making sure that we have good control in our factories around absorption. So, all the goods that we’re working on, we are expecting margins to continuously improve. It’s just a, it’s just a timing thing on exactly when it will hit, but there’s definitely a lot of positive momentum around margin development......»»

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Permian Resources Corporation (NYSE:PR) Q4 2023 Earnings Call Transcript

Permian Resources Corporation (NYSE:PR) Q4 2023 Earnings Call Transcript February 28, 2024 Permian Resources Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Permian Resources conference call to discuss its fourth-quarter and full-year 2023 earnings. […] Permian Resources Corporation (NYSE:PR) Q4 2023 Earnings Call Transcript February 28, 2024 Permian Resources Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning, and welcome to Permian Resources conference call to discuss its fourth-quarter and full-year 2023 earnings. Today’s call is being recorded. A replay of the call will be accessible until March 13, 2024, by dialing 877-674-7070 and entering the replay access code 855841 or by visiting the company’s website at www.permianres.com At this time, I will now turn the call over to Hays Mabry, Permian Resources’ Senior Director of Investor Relations, for some opening remarks. Please go ahead. Hays Mabry: Thanks, John, and thank you all for joining us on the company’s fourth-quarter and full-year 2023 earnings call. On the call today are Will Hickey and James Walter, our Chief Executive Officers; and Guy Oliphint, our Chief Financial Officer. Yesterday, February 27, we filed a Form 8-K with an earnings release reporting fourth-quarter results. We also posted an earnings presentation to our website that we will reference during today’s call. I would like to note that many of the comments during this earnings call are forward-looking statements that involve risk and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors and the forward-looking statements sections of our filings with the SEC, including our Form 10-K, which is expected to be filed tomorrow afternoon. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance and actual results or developments may differ materially. We may also refer to non-GAAP financial measures that help facilitate comparisons across periods and with our peers. For any non-GAAP measure, we use a reconciliation to the nearest corresponding GAAP measure that can be found in our earnings release or presentation, which are both available on our website. With that, I will turn the call over to Will Hickey, Co-CEO. William Hickey: Thanks, Hays. We’re excited to share our fourth-quarter and full-year 2023 results, as Permian Resources was able to deliver another quarter of outperformance, closing out an incredible first year of operations under the PR name. I think that over the past five quarters, we’ve demonstrated just how good this Permian pure-play business is, operating efficiently on our core Delaware assets, executing on highly accretive deals, and continuing to demonstrate low-cost operatorship across the business, which all contribute to PR’s industry-leading returns since inception. As we look to 2024, we expect to continue maximizing shareholder value, and I want to take a moment to walk through how we think about value creation here at PR. Our relentless focus is on creating value on a per-share basis, and our team has positioned us to deliver a 2024 plan that’s expected to generate peer-leading production, cash flow, and free cash flow per share growth without increasing leverage. We’re able to drive this outsized growth per share through PR’s continued focus on being the lowest cost operator in the Delaware, our thoughtful capital allocation and development plan, and the highly accretive transactions we completed during the year. In the midst of closing the Earthstone acquisition on November 1, the Permian Resources team was still able to deliver an outstanding fourth quarter across all metrics. Q4 production outperformed, with total production of 285,000 barrels of oil equivalent per day and oil production of 137,000 barrels per day, exceeding both internal and external expectations. This production beat was attributable to three things. First and most significantly, we saw outperformance across the board between both PR and legacy Earthstone assets. Second, a reduction in downtime on legacy Earthstone assets led to higher-than-expected runtimes as the team realized operational synergies more quickly than planned. Third and finally, our drilling and completion efficiencies continue to impress, bringing incremental wells and producing days into the quarter. Even with the increased activity, capital expenditures were in line due to per-unit cost reductions, leading to significant free cash flow outperformance in the quarter. Our team was also able to transition seamlessly into integration and synergy capture mode in the fourth quarter, executing on our proven integration playbook while maintaining focus on driving low-cost leadership across the business. PR continued to increase operational efficiencies in the fourth quarter while integrating legacy Earthstone rigs and fleets into its program, contributing to overall program decreases in per-well unit costs that we’ve been able to carry forward into the full-year 2024 plan, culminating in a program average of $860 per lateral foot. In addition, the team demonstrated strong controllable cost discipline, driven largely by lower LOE with controllable cash costs decreasing 8% quarter over quarter to $7.33 per BOE despite higher legacy Earthstone costs. Overall, our strong production and low-cost structure allowed PR to report $0.47 per share of adjusted free cash flow or $332 million in aggregate. In addition to our focus on execution, we believe our portfolio optimization program will continue to drive meaningful value for shareholders. As many of you saw last month, Permian Resources announced a series of transactions which added 14,000 net acres and 5,300 net royalty acres in the core of the Delaware Basin, just three months after closing the $4.5 billion Earthstone acquisition. Most notably, the two bolt-on acquisitions add over 100 high-return locations, directly offset our core Parkway position, which represents one of the highest returning assets within our portfolio. This is in addition to a sizable acreage swap, a non-core divestiture, and our ongoing ground game. Importantly, when you combine all of our portfolio management efforts from the last year, our inventory additions more than replaced the wells we drilled on a standalone basis. We believe that excellent execution on these type of difficult transactions and smaller deals is a great path towards material improvements in our inventory position, NAV, and overall value proposition to stakeholders and will continue to be a key focus for us going forward. Our excellent Q4 results and increased free cash flow allowed us to deliver total return of capital of $0.24 per share to shareholders during the quarter. We announced a $0.05 per share base quarterly dividend, and we are excited to be able to demonstrate sustainable base dividend growth as we plan to increase our base dividend by 20% to $0.06 per share next quarter. In addition, we remain committed to paying 50% of the remainder of free cash flow to shareholders via dividends and or buybacks. And once again, we executed both methods of variable returns during the fourth quarter. First, we repurchased a total of 5 million shares at an aggregate price of $13.32 per share for the quarter. And consistent with our framework, we announced an incremental variable dividend of $0.10 per share, bringing the all-in quarterly return of capital to $0.24 per share. As I mentioned before, our team has absolutely hit the ground running with the integration and synergy capture phase of the Earthstone acquisition. We are well ahead of schedule, giving us high level of confidence that we’ll be able to beat the original synergy target timeline laid out in August. Importantly, drilling and completion costs and efficiencies are realized almost immediately at closing, with a 12% D&C savings per well already realized on the legacy Earthstone wells and more to come. I want to take a second to highlight the amount of effort that’s gone to that 12% cost reduction per well since closing the Earthstone acquisition because it’s not just swapping out rigs or changing a casing design. Slide 6 shows around 10 drivers. But in reality, it’s close to 40-plus small initiatives that add up to meaningful improvements. And our team has not stopped pushing on those efforts. Two of the largest savings, drilling and completion efficiencies, have improved by 35% and 20%, respectively, versus historical Earthstone results, as equipment has been high-graded and best practices have been shared across the unified team. These faster drilling completion time has both reduced costs and improved returns by shortening cycle times. Our field operations team has also made incredible progress on the LOE front, optimizing production operations in many large and small ways. We couldn’t be more pleased with the synergy results to date and look forward to providing another positive update next quarter. The same relentless focus on low-cost leadership that allowed us to maximize synergies in the Earthstone acquisition also allowed us to drive controllable cash cost to peer-leading levels. Our 2024 plan, which James will outline here in a minute, benefits from lower-than-expected all-in cost, with the combined business able to basically get back to PRs legacy cost structure despite higher historical Earthstone costs. Given the marginal nature of free cash flow, running a low-cost business is critical to supporting strong free cash flow per share generation. With that, I’ll turn it over to James to talk through the 2024 plan. James Walter: Thanks, Will. Turning to slide 8, we’re excited to discuss our 2024 development program, which is focused on maximizing returns and free cash flow per share through thoughtful capital allocation and efficient low-cost execution. Our plan is a result of a tremendous amount of work from every department at Permian Resources, and we want to thank our entire team for the work that went into this plan. Our goal is to focus on high-return developments in the Delaware Basin that allow the company to maximize returns while ensuring we minimize any future well or location degradation. Fortunately, our robust inventory allows us to drill similar zones, areas, and packages to what we drilled in 2023 and, as such, achieve similar well productivity. For the full year 2024, we expect total production to average between 300,000 and 325,000 BOE per day and oil production to average between 145,000 and 150,000 barrels of oil per day. We expect production to be in the lower half of the full range during the first half of 2024 and the upper half during the back half of the year. Our capital program consists of approximately $2 billion, of which 75% is allocated to drilling and completion operations. We expect to turn-in-line 250 wells this year. The balance is primarily investments in infrastructure that positions PR to continue to drive value in 2024 and years beyond. In terms of CapEx cadence, we expect CapEx to be slightly front-half weighted. Our drilling program is largely focused on our high-returning Delaware Basin asset, with a particular emphasis on the New Mexico portion of the Delaware, given the returns we’re seeing from those assets today. The Midland Basin will not be a substantial part of our development plan in 2024. As Will mentioned, we expect our controllable cash cost to be approximately $8 per BOE, which screens well relative to other operators in the Permian and is particularly impressive given the higher legacy cost structure that came over from the Earthstone assets. Turning to slide 9, we wanted to concisely lay out how our business is getting better this year through the lens of capital efficiency-related metrics. Simply put, in 2024, we expect our cost to be lower and our well productivity to be the same or slightly better than last year, which is a winning combination. We would also like to highlight that these improvements in capital efficiency do not come easy. Our team is focused on maximizing value by analyzing every input into our model on a per-unit basis and looking for areas to improve. We moved very quickly and leveraging our increased size and scale to receive better pricing on key consumables, such as casing and sand. But some key input costs, such as drilling rigs and pressure pumping, remain at elevated prices as we head into 2024. Our team continues to find ways to do more with less, and we’re always looking for ways to tweak and optimize well designs and find that these individual changes only reduce cost by a percentage point or two, but the cumulative effect adds up to real dollars when multiplied over a 250-well program. This hard work drives our basin-leading cost structure and really makes a difference in our ability to extract as much value from every single asset as possible. I’d like to conclude today’s prepared remarks on slide 11, which helps to re-emphasize our value proposition for current and future investors. Since the formation of Permian Resources, we have delivered best-in-class returns for our sector and meaningfully outperformed the S&P 500. This outperformance was largely driven by successful execution, low-cost leadership, and accretive acquisitions. As a result, our business continues to represent a compelling value proposition against other large cap oil companies. For some of the recent deals announced, there are fewer and fewer Permian pure plays solely focused on the highest returning base in the lower 48. It’s worth emphasizing Permian Resources now fits to the new cost of large-cap peers with an enterprise value of greater than $15 billion and 100% of our business focused on the Permian. It continues to be our belief that quality businesses such as ours with core assets in the Permian, efficient operations, and strong multiple — strong production and free cash flow per share growth have room to re-rate to higher multiples. By continuing to cultivate and enhance these attributes through efficient execution and opportunistic transactions such as Earthstone, we believe that we can continue to create outsized value for shareholders and solidify our position as a leader in the energy sector. Thank you for tuning in today. And now, we will turn it back to the operator for Q&A. See also 15 Countries With Economic Growth or Debt Problems in 2024 and Real Estate Investing For Beginners: 11 Best Stocks To Buy. Q&A Session Follow Permian Resources Corp (NASDAQ:PR) Follow Permian Resources Corp (NASDAQ:PR) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions]. Your first question comes from the line of Scott Hanold from RBC Capital Markets. Scott Hanold: Yeah, thanks. Great quarter, guys, and good to see those synergies coming in faster than expected. And if we turn to page 6, where you kind of walk down the Earthstone cost to where they’re at right now, could you give us a sense of — as you look at the current cost and bring that down to the PR legacy costs, what are really the areas where that difference is going to be occurring and how fast can you do those? And so is it drilling efficiencies, casing? What gets you to the PR well costs and how quickly can you get there? William Hickey: Yeah. Look, I think we’ve made — frankly, we’ve gotten here way faster than I thought we would be. If you think about the five Earthstone rigs that we picked up, we’ve already swapped out three of them just three months post close. And we’re able to get our casing design implemented effectively day one. We were in a fortunate position they didn’t have a big backlog of casing that we had to chew through before we can start running our wellbore design and our casing. So that’s how we were able to achieve dramatic cost reduction in just three months. And if you think what’s on to come, it’s the — it’s not the pricing power. We’ve already implemented all that. It’s more to go build the last bit of efficiencies across all the Earthstone equipment. So we’ve got two more rigs we’ll have to either get up to our standards or swap out over time. We’ll have to continue to drive a few more efficiencies on the drilling and frac side, but we’re more than halfway there to where we’re trying to get to. And we’ve done that in just three months. So I’d say we’re feeling really good about both the absolute quantum of dollars that we’ll be able to cut from the Earthstone well costs and also the time to get there. Scott Hanold: Understood. And as we think about the 2024 activity and budget, it looks like it’s maintaining your current pace coming into the year. But with you all seeing better efficiencies and performance, you obviously pulled a few wells into 2023. Would that allow you guys to reduce the well count next year and the rig count? Or would you guys just produce at a higher level if your efficiencies continue through next year? So it’s really a question on pace of next year. And if you keep going faster, will you just keep rolling through that? William Hickey: Yeah, I think there’s two [indiscernible] that I’ll give. First, as we think about pace of activity, I’d say just as our business has gotten bigger and working interest moved around a little bit, we’re much more focused on the total quantum of dollars that we want to reinvest. What is the capital dollar budget? I say that’s how we’re thinking about activity. I think as you follow this year, we’ve got 12 rigs running today. And you could see that number move up and down around 11 to 12 throughout the year, just as we’re optimizing both the rig fleet as we continue to swap out and bring in better rigs, but also optimizing around larger , et cetera. So more of a focus on — I think you’ll see a relatively consistent capital profile around that total capital budget of $2 billion. And then, yeah, as you get to year end and you get to these weird things where, are we going to — if we bring wells in the quarter, are we willing to spend more and what not? I’d say we’ll take it on a case-by-case basis. But historically speaking, when our per-unit costs are the lowest they’ve ever been because efficiencies are the highest they’ve ever been and returns are very, very good, like they were in Q4 just two or three months ago that, we lean towards — we’ll go ahead and kind of bring the extra wells on at the value the business focused on the long term as opposed to doing some kind of cute things on a quarter-to-quarter basis. Operator: Your next question comes from the line of Neal Dingmann from Truist. Neal Dingmann: Good morning, guys, and thanks for the time. My first question, just going right to well productivity, looking at slide 10. Specifically, Will, I’m just wondering. How repeatable is this production not only in Lea and Eddy Counties? But maybe you could go down into Texas. And then I’m just wondering, is — you continued the plan throughout this year and maybe more into next year and ’26. Should we assume more child wells or the same mix as you’ve always had? William Hickey: No, I think it’ll be very, very similar. I can speak very specifically to ’24 to ’25 because we’ve already got basically ’25’s scheduled all lined out. And it’s a very, very similar well mix. Our development methodology really hasn’t changed from 2022, 2021, 2023. Now, you’re seeing it in ’24, and I’d expect you’d see this again in ’25 and ’26. Just — we are methodically marching across the position, joining the right-sized pads to make sure to minimize any future degradation. And you’re seeing that flatten out the capital efficiency. So should be quiet, no story. No news is good news on the well productivity side for us for the years to come. Neal Dingmann: That’s fantastic. And then, well, for you James, just on — my second was just on your ground game yields. While you’ve done a great job, Earthstone and some larger deals which have been really notable, could you speak to the degree of upside that the bolt-on trades and grassroot efforts will continue to provide? It seems like that certainly was a big deal even here recently. James Walter: Yeah. We obviously put out that release in January that went through all the detail of the slide in the back here. But I think our ground game in the Delaware is awesome. We’ve got an incredible land team, an incredible business development team, that every day are out there, doing deals, looking to accretively add acreage in places a lot of people aren’t looking. So really cool. Some stats — I mean, I think you’ve seen this. But we did 145 acquisitions last year that added almost 17,000 net acres to our position. And I think that’s just a little piece of the pea, our secret sauce, that drives value in a different way than I think a lot of our peers are. But it’s something we think we can continue to do, I’d say, those small deals. The pipeline still feels really good for 2024 and 2025. And I think we’re confident we continue to get the right deals done at the right prices. Operator: Your next question comes from the line of Gabe Daoud from TD Cowen. Gabe Daoud: Thanks, guys. Thanks for taking my questions. I guess what I would like to hit on first is just — you talked about the increasing pad size. And you obviously highlighted the target that you’ll be going after in the Delaware. I was just wondering if you could, overall, refresh our memory on where the pad size or project size is going this year relative to last year and then just what the spacing looks like for this year? James Walter: In the Delaware? William Hickey: Yeah. I mean, it ends up being a couple wells per pad bigger than where we were last year. But this isn’t really a change in kind of spacing or anything from a development perspective. It’s more just as we look at the footprint of the acreage we’re drilling, we’ve got some wider fairways than maybe we had the year before, which calls for slightly larger pads. So it’s factually correct. Our average pad size will be a couple of wells higher this year than it was last year, but I wouldn’t view that as any bit of a change in the development philosophy. It’s more just the acreage that we’re drilling this year calls for slightly larger pads to keep with a consistent development methodology and really nothing more than that. Gabe Daoud: Okay. Got it. Understood. Thanks for that. And then I guess as a follow-up, could you maybe just talk a little bit about that 25% non-D&C capital, what kind of infrastructure projects? And is that a similar level of spend we should expect on infrastructure in ’25 and beyond? William Hickey: No. Look, really, what it is this year is it’s a little bit of catch-up on the Earthstone side, just some stuff where we want to go build out some batteries and some stuff PR way. So there’s a little bit of incremental catch-up cost this year with Earthstone and a little bit of — some of the gathering side to make sure that we’re continuing to have really, really good takeaway in New Mexico, like we’ve always had. But I think of it more as kind of one time in nature. And as you look forward, we’re probably back to that, I don’t know, 15% or something like that on a total percent of capital budget for infrastructure spend. Operator: Your next question comes from the line of Zach Parham from JPMorgan. Zach Parham: Morning, guys. Thanks for taking my question. First, we’ve heard from some of your peers about some natural gas processing tightness in New Mexico that’s been a headwind. Has this been an issue for you all at all? And maybe talk about how you’ve managed this issue and if you see anything impeding the ’24 program as far as a processing standpoint. William Hickey: Zach, I mean, we’re in a really fortunate position that we’ve got the right long-term midstream partners in New Mexico — we said in our calls in the past that fortunately, we’re part of some of the biggest and best natural gas processors and transporters in the basin. That’s both in New Mexico and Texas. And looking back historically, we’ve really never had any issues and don’t foresee anything going forward. I think that’s just being in the fortunate position to have the right partners in the right places, but we don’t doesn’t foresee any issues whatsoever on the midstream side. Zach Parham: Thanks. And my follow-up is just on cash taxes. You guided to $75 billion in cash taxes for 2024. Could you give us some color on how you expect cash taxes to trend in 2025 and in future years? Guy Oliphint: Yeah. I mean, we’ll start getting closer to a normal-course cash taxpayer beginning in ’25. We have some sensitivity in ’24 oil price, obviously. But we have NOLs today, a meaningful portion of which, we’re using. And we’ll start turning to more cash taxes in ’25 and beyond. Operator: Your next question comes from the line of Oliver Huang from TPH. Oliver Huang: Great quarter. And you all have obviously done a good job with integrating the Earthstone assets ahead of schedule. But I just wanted to see if you all might be able to provide some incremental detail to help us better understand the drivers of LOE moving sustainably lower for both Q4 and for the 2024 guide being so quick, just kind of looking at where the figure was just six months or so ago from the standalone Earthstone business. William Hickey: Yeah. I think the big drivers of LOE, there’s two or three things that we’re working on. I’d say one, just to give there Earthstone team some credit, their LOE was improving quarter over quarter pre-close. I mean, it was — I think we’ve applied some best practices and some things that have helped accelerate that and maybe have a slight step change from where it was headed. But that LOE was coming down on its own, so there’s a little bit of tailwind there. I’d say secondly, just the overall production profile in Q4 and go forward helps. A bigger denominator, obviously, is going to help on the LOE side. And then probably, the more sticky stuff would be what we’re doing on the water disposal side and how we’re addressing failure rates and really optimizing artificial lift for the right well set. We’ve got the best practices at PR. We’re not a blanket gas-lift company. We’re not a blanket ESP company. We’re not a blanket [indiscernible] company. It’s really a — we challenge every engineer over every area to — it’s build to suit. It’s built with the right lift that the well needs, which will give better run times and lower LOE. And we’ve been really successful. You could go out to a PR pad across the Delaware. You may see a different lift type and two wells that are very close to each other in the same area because that’s what they call for. And we’re starting to see the benefits of that pretty quickly. So there’s a lot more to come there. Look, I think that we can do some stuff on the water disposal side in a bigger way. We’ve had some quick wins, where we had good water contracts or good water disposal solutions or water recycling solutions in areas that Earthstone wells didn’t have that time and was right us. But go forward, I’d expect we’ll continue to tackle the LOE side on the — really with the respect to water. Oliver Huang: Okay. That’s certainly helpful. And maybe for a follow-up. I mean, definitely good to see some of the drilling and completion efficiency improvements starting to be realized right off the bat for Earthstone. But just with understanding that there’s still solid running room to converge those well costs towards the legacy PR business, just wanted to see how much of that future benefit has already been taken into account when looking at the D&C budget that you all laid out for this year. William Hickey: It is taken into account. So I’d say from what we have line of sight on, expect to get all of it. Obviously, we’re hopeful in doing everything to try to get more. But the budget does take into account the synergies that we have achieved to date and expect to achieve between now and year-end. Operator: Your next question comes from the line of Leo Mariani from Roth MKM. Leo Mariani: Hi, guys. You had very, very strong production here during fourth quarter. And I was hoping you could provide a little bit more detail. I mean, did you get some extra wells on? Were there some extra non-op benefit? Obviously. you just had very strong growth in both oil and in total volumes. And I guess my understanding was that you maybe had quite a fewer wells down the this quarter versus last, but perhaps I’m mistaken. So maybe you could just provide a little bit more color on the dynamic there. William Hickey: Yeah. I mean, I tried to address some of it in the script, Leo. I’d say the biggest driver would just be well outperformance. The legacy Earthstone wells and the PR wells you brought online in the quarter just outperformed even our expectations. So that’s going to be more than half of the volume beat for the quarter. The balance is going to be made up of — we’re able to make some material progress on downtime on the Earthstone assets in Q4, a step change in less downtime. So better runtime than what we had budgeted for and what we’ve seen historically, which really helps with Q4 production. And then lastly being we did bring some more wells in the quarter. I don’t know the exact numbers. It was a couple of wells, so a couple of wells with some meaningful amount of producing days into the quarter that were expected to be in ’24. And again, that’s just going to be — we didn’t expect to start drilling 35% faster and fracking 20% faster on the Earthstone assets effectively day one, and we were. So that just brought some activity into the quarter. Leo Mariani: Okay. That’s helpful in terms of all that color. I mean, just looking at 2024, I think you guys had mentioned that CapEx is a little bit front-half weighted. You generally expect it to decline during the course of the year. And I’m guessing production is maybe a little bit of a mirror of that. Would you generally expect first quarter to be low on production and to build a bit throughout the year? Just any color you have around the cadence in 24 will be helpful. James Walter: Yeah, I think how you said it is right. CapEx is a little bit front-half weighted and production’s a little bit back-half weighted, but it’s not giant swings. I’d say it’s pretty modest, but what you said was just right. Operator: Your next question comes from the line of Doug Leggate from Bank of America. John Abbott: Hey, good morning. This is John Abbott on for Doug Leggate. Thank you for taking our questions. My first question is just on your Midland position. Just, what is your current production on that position? And then just given the continued interest in Permian assets, what is your latest thoughts on what you do with that position and also the possible timeframe? James Walter: Yeah. So the Midland position’s about 20,000 barrels of oil per day and about 60,000 BOE a day. And it’s a great cash flow business. I think the Earthstone team and our PR team have that in a really good place, where we’ve got consistent low declines, low cost, et cetera. So we like having it. I think I’d say we’re doing a couple of wells on that asset the first half of this year. And I’m pretty excited of what our team has done to date just on the cost side. I think there could be some meaningful cost reductions there that are a big boost to the value of that asset. But I think over the long term, we’ve been really clear we’re a Delaware Basin-focused business, and that’s where the majority of our capital, our time, and our energy are focused. So I don’t think we’re going to do anything strategic with the Midland Basin asset in the near term. But I think over time, as we better understand that asset, if there’s ways to extract more value other than owning it, I’d say we’re all ears. But I’d say that’s probably down the road, most likely a 2025 type of thing if were to do anything at all. John Abbott: Appreciate it. And then for our follow-up question, while it is not your focus necessarily, how do you think about long-term maintenance CapEx? I mean, do you look at the midpoint of your guidance of several million dollars or less than that? How do you think about long-term maintenance CapEx for your business? William Hickey: Yeah, I think that’s right. I mean, just given all of the integration and acquisitions over the last six months, it’s hard to peg what production level you’re calling maintenance. But I think if you’re going to predict — peg where we were in Q4 or where we’ll be in Q1 and then maintenance CapEx to be exactly what you said, I think it’s about $200 million less than the midpoint of guidance, something like that. Operator: Your next question comes from the line of John Annis from Stifel. John Annis: Hey, good morning, guys. Congrats on the strong quarter. For my first question, digging further into your comments around on downtime, what was Earthstone’s primary source of downtime and what were some of the specific practices in the field you’ve implemented to minimize it? William Hickey: Look, there’s two ways to attack downtime. One is lower failure rate. Just the easiest and most sticky, best thing to do is lower failure rate. And although I think that is in progress, that takes a little longer. And the second is when wells go down, you just get on quicker. Try to have turnaround time on a well that fails a day or measured in a day or measured in hours, not measured in a week or weeks. And well, it’s a little bit of that. It’s a little bit of what I said. There’s some tailwinds on the Earthstone assets. The team have done a good job of starting to address some of these problems over the last six months. So we stepped in at a time where we were set up to succeed. And I think the people on the Earthstone team that have become part of the PR team were excited to do things the PR way and really jump head first into it. And so we think that the low-hanging fruit, things like that — I think where we’ll go get now is hopefully really start to improve run times, which is the best way to lower LOE and increase the runtime. John Annis: Terrific. For my follow-up, referencing slide 7 and where you stack up against peers in terms of cash costs, it’s quite impressive, especially with the Delaware being a little heavier in water production. What’s your sense of the biggest delta between you and other Delaware operators? William Hickey: I think — I mean, what helps us, if you compare to other operators in general — one is we don’t have a lot of old vertical wells. We’ve got relatively clean, new horizontal production, which really helps keep costs down. I think it’s a great asset of ours. We don’t have a lot of vertical wells that increase the cost structure. And we have great assets. If you think about where our assets sit within the Delaware Basin, although I think it’s a fair statement that there’s more water on average, we’re in some of the oiliest places in the whole basin on an oil cut percentage. We’re not at any places that have — are very few [indiscernible] like high H2S treatment, not something like that. We are in the [indiscernible] core of the basin. I mean, look, this is what we do. We are a low-cost operator. We focus on controlling the things that we can control. We try to be the lowest on the D&C side, the lowest on the LOE side, and the lowest on the G&A side. And so I think that’s what shows up here. James Walter: And I think the only thing I’d add to that is we have a real awesome culture in the field with an ownership mindset. I think we spend a lot of time answering questions on management ownership, management stock, et cetera. And I think that’s what’s honestly probably more impactful to that is that ownership mindset in the field, where our team is incredibly proud of what they do and work incredibly hard in the field to fix wells as soon as they go down and waste no time, waste no effort, and getting the right things to run the business the right way done. So I think it’s that ownership mindset that we’ve talked about a lot , but really permeates through the entire Permian Resources organization that — I don’t think that gets enough credit. Operator: Your next question comes from the line of Paul Diamond from Citi. Paul Diamond: Thank you. Good morning. Thanks for taking my call. Just a quick one on valuation. You talked about the potential opportunity for you and similarly sized peers to re-rate versus the larger. Just wanted to get your — get a bit more detail on what type of catalyst do you think or you anticipate to see to close that gap? William Hickey: Yeah. I mean, I think for us, it’s all about execution. I think the market has started to realize the quality of our business, looks a lot more like the other Permian pure plays than other large caps, albeit at a smaller scale. But I think over time, as we can continue to execute quarter in, quarter out and year in, year out, I think that that re-rating happens on its own. I think it’s too obvious to miss. And the most important thing for us is to execute and continue to be the lowest cost operator at the Delaware. Paul Diamond: Understood. Thank you. Just a quick follow-up. As you guys are thinking about the go-forward cadence on D&C improvement, you’re already catching that 12%. You note some more is coming from the full integration of Earthstone. I guess I’m trying to get understanding of your guys’ view on the quantum you can expect going forward, into late ’24 and ’25 and beyond. William Hickey: I think it is [indiscernible] to think about. I think on the Earthstone assets specifically, we expect, over the coming months, those costs to converge with the legacy PR costs, where we don’t really talk about legacy Earthstone or legacy PR anymore. It’s just these are Permian Resources well cost by area, and that’s well on its way and expect to be there in short order. And then what does that mean for absolute PR D&C cost? What we laid out is this $860 a foot is the guide for the year this year, and that’s based on what we’re seeing real time today. So we’re not baking in further efficiencies or further deflation. I think there’s — we’re hopeful we’ll get a little bit of each of those over the coming years. But again, we’ve made a ton of progress recently. I think we more expected to see that kind of gradual decreases in costs, no more of the step changes seen in the last four quarters. Operator: Your next question comes from the line of Phillips Johnston from Capital One......»»

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Ambarella, Inc. (NASDAQ:AMBA) Q4 2024 Earnings Call Transcript

Ambarella, Inc. (NASDAQ:AMBA) Q4 2024 Earnings Call Transcript February 27, 2024 Ambarella, Inc. beats earnings expectations. Reported EPS is $-0.24, expectations were $-0.33. Ambarella, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day, and thank you for standing […] Ambarella, Inc. (NASDAQ:AMBA) Q4 2024 Earnings Call Transcript February 27, 2024 Ambarella, Inc. beats earnings expectations. Reported EPS is $-0.24, expectations were $-0.33. Ambarella, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good day, and thank you for standing by. Welcome to Ambarella’s Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] Please note that today’s conference is being recorded. I would now hand the conference over to speaker host, Louis Gerhardy, VP, Corporate Development and Investor Relations. Please go ahead. Louis Gerhardy: Thank you, Lydia. Good afternoon, everyone and thank you for joining our fourth quarter and full year fiscal 2024 financial results conference call. On the call with me today is Dr. Fermi Wang, President and CEO; and John Young, CFO. The primary purpose of today’s call is to provide you with information regarding the results for our fourth quarter and full year fiscal 2024. The discussion today and the responses to your questions will contain forward-looking statements regarding our projected financial results, financial prospects, market growth and demand for our solutions, among other things. These statements are based on currently available information and subject to risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect, our actual results could differ materially from these forward-looking statements. We are under no obligation to update these statements. These risks, uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents we filed with the SEC. Access to our fourth quarter and full year fiscal 2024 results press release, transcripts, historical results, SEC filings and a replay of today’s call can be found on the Investor Relations page of our website. The content of today’s call, as well as the materials posted on our website are Ambarella’s property and cannot be reproduced or transcribed without our prior written consent. Fermi will now provide a business update for the quarter. John will review the financial results and outlook, and then we will be available for your questions. Fermi? Fermi Wang: Thank you, Louis, and good afternoon. Thank you for joining our call today. In the fourth quarter of fiscal 2024, our revenue increased about 2% sequentially, and we slightly exceeded the midpoint of our guidance range. Thanks to the early actions we took to help our customers navigate their excess inventory, our business continued to stabilize, and it’s beginning to recover. For the full fiscal year 2024, our revenue declined 32.9% year-over-year, as our customers digested inventory resulting from the industry-wide semiconductor cyclical downturn. Looking ahead to fiscal year 2025, we continue to expect both our automotive and IoT business to grow. As the cyclical challenges went and the secular growth of AI strategy emerges. Our customers currently have a cumulative install base of more than 20 million AI inference SoCs, all from our 10-nanometer CV2 family and the 5-nanometer CV5. This is based on approximately 280 customer products that have a rich production on a cumulative basis. The CV2 family is expected to continue to be the key driver of our revenue growth in fiscal year 2025. Our AI inference business, all in-age applications, represented approximately 60% of total fiscal 2024 revenue, and it was the key factor in the meetings percent year-over-year increase in our blended ASP. The trend to a richer mix of AI revenue and higher averaging selling price is expected to continue. In particular, the CV3 SoC family enters production. At this time, virtually all of our customers’ new design activity involves our AI inference processors. In fact, this was the first year at the CES where all of our SoC demos, more than 30, were based on our AI inference products. Fiscal 2024 was certainly challenging for most of the industry. However, there were key industry developments and the company’s specific achievements that we believe leave us very well positioned for growth as the market recovery plays out. For the industry, in the past, the AI process opportunity had primarily been represented by training GPUs in server located in data centers, and this is a market that we do not serve. However, in the last year, the important role and opportunity for inference processors, in particular at that age, has become better understood, and this is exactly where we have been focused on. Internally, we achieved four key milestones during the last year. First, we have now shipped more than 500,000 units of our first 5-nanometer SoC, CV5, and we expect our shipments in fiscal year 2025 to possibly double. Most of CV5 volume is currently in our IoT business, although we expect an automotive OEM to start production in the second half of the year. The fact that we have already achieved a high volume mass production at 5-nanometer helps pave the way for our other 5-nanometer SoC, such as the CV3 family. Second, the automotive market resembles both the high-end production version of our 5-nanometer CV3, as well as a 5-nanometer version for China. At the high end, we sample CV3-AD685, targeting L3 and above autonomy, and this central domain controller is currently evaluated, is in evaluation at multiple OEMs and tier ones globally. So far, we are finding success in L3 and above commercial vehicles. For the basic highway L2 plus opportunity in China, we introduced a CV72AQ, and we have numerous tier one design wins and OEM discussions underway. Third, we introduced our generative AI, Gen AI strategy for the age of the network, and we are sampling our 5-nanometer N1 processor, targeting age applications, ranging from IoT devices to age servers. Fourth, we’ll continue to build out the CV3 automotive platform to offer our Tier 1and OEM customers turnkey options with our software stack and our centrally processed HD radar algorithms. We started the new year at the Consumer Electronics Show, CES, where we hosted over 200 customer meetings and made a number of significant announcements for automotive, Gen AI, and our new Cooper Development Platform. We were pleased to receive a CES Innovation Award for the second year in a row, this time for our centralized radar processing architecture. In December, we unveiled our latest software stack for Level 2 Plus and the higher autonomous driving applications. This software is optimized and can scale across our entire CV3 processor family, enabling OEM to get to market faster and reduce development costs. The new software stack, including the perception, fusion, and planning layers, is primarily deep learning based, which allows software development to scale more easily, resulting in a more accurate solution. Finally, most important, we rely on high resolution camera and the radar perception data to create a real-time map inside the vehicle. And for this reason, we eliminate the use of stored HD maps that may contain stale data, which results in improved results and a reduced cost for OEM. If needed, the software stack is available in modules and can be combined with an OEM’s own software intellectual property. During the CES show, we demonstrated a stack running on a single CV3 automotive AI domain processor in our own autonomous vehicle, successfully completing over 150 autonomous drives. The demonstration integrated our Oculii radar algorithm for the first time. We also announced the expansion of our CV3 processor family with the addition of our CV3 AD635 and the 655 SoCs. The new CV3-AD635 supports a sensing suite that includes multiple cameras and radars to enable mainstream level 2 plus feature set, such as highway autopilot and automated parking, in addition to meeting the GSR2 and NCAP standards. Additionally, the 655 enables advanced level 2 plus with urban autopilot, as well as the support for additional cameras, radars, and other sensors. With the previously announced flagship 685 SoC, along with the ChinaFolk’s CV72 AQ SoC, the CV3 family of four processors now covers the full range of AD and ADAS solutions, from mainstream to premium passenger vehicles. The new CV3-AD SoCs were endorsed by our partner Continental. Kodiak Robotics, a leading autonomous vehicle company focused on trucking and defense, announced that it had selected our CV3-AD685 AI domain controller for its next generation autonomous vehicles. In IoT markets, during CES, we announced we are bringing Gen-AI capabilities to the edge through the introduction of our N1 processor for on-premises applications. This SoC supports up to 34 billion parameters, multimodal large language models, LLMs, with low power consumption, enabling Gen-AI for edge applications. We demonstrated multimodal LLMs running on the new N1 processor at a fraction of the power per inference of leading GPU solutions. Ambarella aims to bring Gen-AI to a wide range of edge applications, including video security, robotics, and industrial applications. Quanta Computer announced it was partnering with Ambarella to develop products based on our CV3-AD685, CV72, and new N1 processor to address cutting-edge AI devices. This offering addresses the up growing market demand for a diverse range of neural networks and LLMs and the well-empowered business across sectors, including autonomous vehicles, smart surveillance, robotics, and healthcare. Quanta demonstrated PCIe add-in cards based on our N1, as well as showing automotive ECUs based on CV3-AD685. We also introduced and demonstrated our new Cooper developer platform. Cooper offers seamless integration of software, hardware, state-of-the-art, fine-tuned AI models, and services that provide universal support across Ambarella’s entire portfolio of AI SoCs. We have now successfully deployed Cooper to some of our IoT customers worldwide. I will now quickly highlight some of the customer products announced and made during the last quarter. In the Chinese automotive market, we continue to expand our position in this important market. During the quarter, GAC Auto announced Aion S Max passenger car with combination driver monitoring and in-cabin sensing based on our CV25 AQ automotive AI vision processor. GAC also introduced this Trumpchi M8 passenger car with driver monitoring and the multi-channel occupancy monitoring also based on our CV25 AQ. And in January, XPENG unveiled its X9 minivan including an electronic mirror system based on our A12 automotive SoC. And in the enterprise IoT market, career market leader Hanha [ph] Vision introduced multiple models based on AI vision SoC including 4K and the four-channel multi-directional cameras based on our CV2 SoCs. And the AI thermal camera based on our CV22 SoCs. All Korean camera supplier IDIS introduced a 2-megapixel voice-over-IP video intercom based on our CV28 SoC. And Taiwan-based VivoTech also introduced this new 87-V3 family of IP camera based on our CV22 AI SoCs and featuring fixed-on and bully models with advanced AI capabilities. And in the home monitoring market, Canadian service provider TELUS announced its home view doorbell camera based on our CV28M AI SoC and featuring advanced AI detection. In summary, looking forward our key objectives to restore revenue growth and profitability while continuing to drive our strategic R&D priorities for AI inference process opportunities at the edge. To achieve this goal, we’re highly focused on commercialization of technology and products we have developed. And in particular, converting the multiple RFIs and RFQs we are currently working on for CV2 and CV3 into awarded business. Furthermore, returning our IoT business to its positive secular growth trajectory is very important. And this includes our early business development for our new Gen AI and one-price. In conclusion, we have not been distracted by the prolonged industry-wide cynical downturn. And we see the secular trends we address, safety, security, and automation remaining very strong. The increased market attention on inference processing, in particular at the edge, is aligned with where we have been investing. In the new year, we are very excited about the opportunities we are working on and look forward to move more business into one column. And I’m excited about what we will achieve in the years ahead. With that, John will now discuss the Q4 and the full-year fiscal year 2024 results and outlook in more details. John Young: Thank you, Fermi. Before I begin, I would like to say that I’m honored to assume the CFO role. I’ve been working with the team for seven years and I’m very excited to help the company as it pursues growth in its target markets. I’ll now review the financial highlights for the fourth quarter and full fiscal year 2024, ending January 31st, 2024. I will also provide a financial outlook for our first quarter of fiscal year 2025, ending April 30th, 2024. I will be discussing non-GAAP results and ask that you refer to today’s press release for a detailed reconciliation of GAAP to non-GAAP results. For non-GAAP reporting, we have eliminated stock-based compensation expense, along with acquisition-related and restructuring costs adjusted for the impact of taxes. Fiscal year 2024 revenue decreased 32.9% to $226.5 million. IoT revenue was about two-thirds of the total revenue and declined about 40% for the year. Auto revenue represented the balance of revenue and declined about 14% for the year. From a product point of view, a large majority of our fiscal 2024 revenue decline was from our human viewing video processor, SoCs. For fiscal year 2024, non-GAAP gross margin was 63.3% versus 63.9% in fiscal 2023. Non-GAAP operating expense increased 3.9% for the year versus 17.6% in the prior year. Ending cash and marketable securities totaled $219.9 million up from $206.9 million at the end of the prior year. For fiscal Q4, revenue was $51.6 million, slightly above the midpoint of our prior guidance range, up 2% from the prior quarter, and down 38% year-over-year. Non-GAAP gross margin for fiscal Q4 was 62.5% in line with our prior guidance range. Non-GAAP operating expense was $44.1 million, approximately flat with the prior quarter, and below our prior guidance range of $45 million to $48 million, driven by continued expense management and the timing of spending between quarters. We remain on track to our internal product development milestones. Q4 net interest and other income was $2.1 million. Q4 non-GAAP tax provision was approximately $119,000. In fiscal Q4, we recorded a one-time GAAP non-cash tax charge of $22.7 million, establishing a valuation allowance on certain U.S. deferred tax assets that were deemed more likely than not to be unrealizable in the foreseeable future. This valuation allowance was excluded from fiscal Q4 non-GAAP tax provision, consistent with our historical practice for changes to tax valuation allowances. This adjustment is a non-cash tax charge required by GAAP based on the proportion of taxable income in the United States. We reported a non-GAAP net loss of $9.8 million, or a $0.24 loss per diluted share. Now I’ll turn to our balance sheet and cash flow. Fiscal Q4 cash and marketable securities decreased $2.4 million from the prior quarter to $219.9 million. Receivables days of sales outstanding increased from 42 days in the prior quarter to 44 days, while days of inventory decreased from 145 to 131 days. Inventory dollars declined 6% sequentially and declined 28% from a year ago. Operating cash outflow was $4 million for the quarter, and for the full year we generated operating cash inflow of $19 million. Capital expenditures for tangible and intangible assets were $1.9 million for the quarter and $12 million for the year. We had two logistics and ODM companies representing 10% or more of our revenue in Q4. WT Microelectronics, a fulfillment partner in Taiwan that ships to multiple customers in Asia, came in at 55% of revenue for the fourth quarter and 53% for the full fiscal year 2024. Chicony, an ODM who manufactures for multiple end customers, was 14% of revenue for both the quarter and the full fiscal year 2024. I’ll now discuss the outlook for the first quarter of fiscal year 2025. Our early actions during the cyclical downturn in the semiconductor industry have helped our customers navigate their high inventory balances, and these actions are now enabling our business to stabilize and begin to recover. For fiscal Q1, we estimate our total revenue will be in the range of $52 million to $56 million. We expect sequential growth in both IoT and auto. We expect fiscal Q1 non-GAAP gross margin to be in the range of 61.5% to 63%. We expect non-GAAP OpEx in the first quarter to be in the range of $46 million to $49 million, with the increase compared to Q4 driven by new product development costs and employee-related expenses, which we were able to delay in previous quarters. We estimate net interest income to be approximately $1.5 million, our non-GAAP tax expense to be approximately $500,000, and our diluted share count to be approximately 40.8 million shares. Ambarella will be participating in a fireside chat and hosting one-on-one and group meetings on February 29th in New York City at Susquehanna’s Technology Conference. We will also be participating in Morgan Stanley’s TMT Conference in San Francisco on Monday, March 4th. On March 18th, we will participate in the ROTH Conference in Southern California. We hope to see you at one of these events. Please contact us for more details. Thank you for joining our call today, and with that, I will turn the call over to the operator for questions. See also Top 55 Video Games Of All Time: 2024 Rankings and 16 Longest Lasting Jeans Brands of 2024. Q&A Session Follow Ambarella Inc (NASDAQ:AMBA) Follow Ambarella Inc (NASDAQ:AMBA) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Now, first question coming from the line of Quinn Boulton from Needham. Your line is open. Neil Young: Hey, this is Neil Young on for Quinn Boulton. Thank you for taking my questions. So you said you were seeing project delays from Tier 1s and OEMs, as well as volume reductions in planned projects, which you called out more of an inventory issue. How’s that inventory improvement — or I should say, is that inventory improvement progressing ahead of where you thought it would? And if so, are you starting to get the sense that these projects will resume soon? And then I had a follow-up. Fermi Wang: So you are referring to what we said a quarter before? Neil Young: Yes. Fermi Wang: So I think in November, when we provide, I think early December, when we provide our final guidance for this year, I think we talk about there’s a project got pushed out, and OEM Tier 1s, also some decision for a new project also got delayed. And also there’s some inventory. I think what we are saying is still consistent with what we have said in December last year. I think there’s no new updates. I don’t think — we haven’t seen new development in terms of a further project got delayed or pushed out. Neil Young: Okay. So on the auto side, regarding inventory, you aren’t seeing any improvements? Fermi Wang: We haven’t seen any improvement, but we are not saying there’s — it’s getting worse. Neil Young: Okay. Thanks. And then for my follow-up. So in the past, you talked about how the first CV3 revenue would come from China. I believe in your opening remarks, I heard you say you’re engaged in discussion with multiple Tier 1s and already have multiple design wins on the way. If that’s the case, when do you think you’ll see first revenue from those wins? And then maybe just an update on the demand environment in China. Fermi Wang: Right. So for CV70 to 8Q, we expected that the first revenue from those design wins would be in calendar year 2026. We have talked about this in a previous call. And basically, that was a low end CV70 to 8Q is basically the low end of CV3 family and addressing first level of Level 2+, for example, for the ADAS plus smart parking. So that’s the no market in China, and we’re working on. We already have design with Tier 1 and working with OEM design wins right now. But I think for the market development point of view, I think China continues to be one of the focus areas that we are in because I think that — I think everybody sees the EV development in China and we believe autonomous driving also will happen in China faster than other areas. So that’s definitely we believe we can monetize our CV3 technology in China faster than any other areas. Operator: Thank you. And our next question coming from the line of Christopher Rolland with Susquehanna. Your line is open. Christopher Rolland: Hi, thanks for the question. Just about your N1 product, maybe any more thoughts on how large this could be for you guys? Have you considered or has anyone talked about combining multiple chips into a server or appliance? And then lastly, does this meet the Chinese compute restrictions for import as well? Thanks. Fermi Wang: Right. So first of all, in terms of N1, we definitely believe that — first of all, technically we can put multiple chips together and to serve a high-end solution. But so far, we believe a single chip solution at the edge will meet demands for a lot of our current customers, maybe even new customers. But I do see a point if you want to go to the edge server side that with multiple chips will provide a better solution. Definitely that’s the direction we are looking at. And the current solution that, for example, we demo with our partners building PCIe card today is a single chip solution, but it can be multiple chips in the future. In terms of the American regulation, I think N1, because our architecture, although we can provide high performance at very low power consumption. But our total tops, top number as well as the bandwidth, is much lower than our competition. And that’s our strength, our architecture, that we can use a smaller top number and lower bandwidth to achieve similar or higher performance. Christopher Rolland: Great. Thank you for your comments. John Young: Chris, in terms of the market size, we’ve had many discussions at CES and afterwards with customers on our Gen AI and LLM products. And we see really good feedback about what these products can do. And many customers, we found out, just were not aware that Gen AI models like Lava could run so efficiently on a sub 50-watt SoC. And so this has triggered a lot of discussions with our customers and how they’re going to use the product. And we’re going to wait to put some market sizing figures out until we’re a little bit farther down that process. But the feedback’s really good, especially doing this on a sub 50-watt SoC. Fermi Wang: Great. Do you have a follow up, Chris? Christopher Rolland: Yeah. Maybe around the kind of edge AI and camera opportunity. Maybe if you could describe that. I mean, there’s so much focus on auto. But Next Gen, like security cameras with all this AI functionality, what are growth rates for that market? Do you have now visibility into a funnel to kind of refresh that and to revigorate that market? And what kind of growth could we be talking for kind of that edge market as well with your products? Thanks. John Young: Well, for our SAM, we haven’t updated it for Gen AI, kind of like the prior discussion, so we’re still sizing that up. But the prior SAM CAGR, if you will, that we talked about was in the low teens range, thinking of a five-year SAM CAGR for that market. But that does not include the Gen AI products. And we’re going to take a little bit longer to put those numbers in. In terms of kind of the insight into building momentum in this market and any sort of funnel, I’ll pass that off to Fermi. Fermi Wang: Yes. In fact, although we talk a lot about auto because that’s a huge opportunity, but we never underestimate the importance of security camera market for us. This is really a big portion of our revenue. And we continue to believe that the edge AI application for security cameras is important for us. And we continue to develop new platform. For example, we announced the CV72 and we’ll announce new chips for this market in the near future. So, I think we believe that the AI performance demand in security camera will continue to grow. And we want to continue to be the player and the dominant player on the mainstream high-end product line. Operator: Thank you. And our next question coming from the line of Matt Ramsey with TD Cowen. Your line is open. Matthew Ramsay: Good afternoon, guys. Thank you. I guess, Fermi, I wanted to follow up with you on some of the initial feedback on the N1 from an inference perspective. And I guess it’s not a surprise to me, given that the engineering and architecture team is getting good feedback on low power inference. I guess my question is, as you get that good feedback and you’re interacting with customers that can potentially ramp this product over time, given where the P&L is for you guys right now during the correction, what’s the business model over the next 12 month to 18 months to start to really build a business around this and get something that could ramp at scale, given the software investments that you need, etcetera? Are customers willing and are you willing to do sort of NRE payment arrangements? Are people willing to invest alongside you on software? I’m just trying to figure out. I can see big potential here, but there’s also some limitations on capital, given where the business is. And I’m trying to understand what the discussions are to get you from point A to point B if this is going to be a big product. Fermi Wang: Right. So I think you make a good point. I think for the N1 development, it’s going to be significant for us. But that’s why we are open for any kind of business model, including from partnership to NRE numbers. I think with N1, we only can address some of the cost, particularly our existing customer demand. And also on the software, in fact, we can demo and show you that our investment on the software and tools and the silicon can be leveraged for our first-generation chip. So from that point of view, I think the majority of our investment for N1 is done. So the real question is what’s our roadmap moving forward? And for example, if we look at the Cooper development, although we define Cooper for other purposes, but definitely directly apply to our N1 development. So let’s talk about for our LLM or Gen AI roadmap. I think that’s where the difficulty is, right? I think it’s from the PR point of view, if we want to do this, we need to continue to invest in R&D for new chips and maybe even new software. So from that point of view, I agree with you that we have to look at all the possible scenarios, including a partnership as well as NDA. So some of the NRE payment for us to pay for the current cost. But I think based on the feedback, it’s become very clear that LLM is not only for the data center. LLM will penetrate to the H device and our current existing customer and future customer all want LLM as a part of the roadmap. So I think that we need to be flexible to develop a roadmap for our customer and we have to figure that out sometime this year. Matthew Ramsay: Thank you for all the thoughts there for me. I guess this is my follow up question where the revenue levels are right now, you guys have been consistent the last couple of quarters that you’re working with the customer base to burn through inventory that they had built. And you’re clearly under shipping and sell through by a pretty significant margin to do that. So, I mean, I asked this last quarter and maybe it was too early to ask, but now that we’ve had three more months, do you have a field now as to what the steady straight sell through revenue level of the business is currently just with the designs you’ve won, particularly in the security camera businesses. What sell through and what the market size right now after we’ve gone way up and then way down on the inventory correction, what’s kind of the steady state sell through that you’re under shipping to burn through inventory? You have an estimate for that, thanks. Fermi Wang: Yes, so we are trying very hard to understand numbers. So let me give you my thoughts. I think, when I look at the number that at peak we shipped probably 92 million a quarter, at the bottom we ship roughly 50 million. And when we look at all of the statistics and the numbers that the model we built, we feel the midpoint of that two number is probably the comfortable level for us. And we are definitely working hard to go to that to reach that level. So I think roughly in the $70 million range is probably the number we are shooting for when everything get equal, equalized. Operator: Thank you. And our next question coming from the line of Tore Svanberg with Stifel. Your line is open. Tore Svanberg: Yes, thank you. My first question for me, so you talked about fiscal 2025 you expect to see growth in both auto and IoT. I was just hoping you could give us a little bit more sort of the puts and takes and how you think the year to progress. Obviously, there’s still probably some lingering inventory, especially on the auto side. But yes, any more color you can give us as far as the growth you’re expecting in both segments this year? Fermi Wang: You are talking about CV5 or overall? Tore Svanberg: No, I’m talking about your — you mentioned you expect both segments to grow this year. So if you could just give us a little more sort of the dynamic. Fermi Wang: Right. So I think for the — let’s talk about IoT first. I think for IoT, it’s pretty clear that with the CV2 product line that we’ve been growing CV revenue from close to 60% last year. And we believe that the momentum of CV2 family will continue, particularly after the inventory problem is behind us. So I think at that point, I think CV2 family will drive the growth for us. But more importantly, I think in our script, we talk about CV5, what’s our ramping. Last year, we did half a million units, and this year, we’re probably going to double it. And that will also, if you consider ASP, that could be meaningful growth for us. So I think that’s square on the IoT side. On automotive side, I definitely think that, first of all, we’ll continue to announce the CV2 design win in ADAS, in the OMS, CMS, on the electronic mirror, and the recorders. Those continue to be a big portion of our revenue, but also we are announcing some partnership with CV3 early customer that we have started delivering samples and also partnership with NREs. That will definitely play a role in our automotive revenues in there. So I think overall, although that automotive market continues to be weak based on the feedback from the market, but I still believe that we are a small player in the automotive space and we are trying to be a big one throughout the process. Because we’re looking at more along the line, our growth with the current design wins. So I think that’s how we feel comfortable that automotive will also have growth this year. John Young: Yes, Tore, from a product point of view in fiscal 25, our AI inference products, it’s almost all CV2, will be more than 100% of our growth. That means the video processor business will, which was down substantially, as John mentioned, in fiscal 2024, it dropped about $80 million. That rate of decline in video processors will begin to really taper off in fiscal 2025. Did you have a follow-up, Tore? Tore Svanberg: Yes, that was very helpful. As my follow-up, I was pretty impressed with the new Cooper development platform when I saw your samples at CES. And I was just wondering how that development platform is helping you secure more business activity? Because it does seem like it was an important piece of the pie that was missing, but obviously now that you have it readily available. Fermi Wang: In fact, all our existing customers are eager to get their hands on Cooper. Tells me a lot about how much they like this development because now it’s become very easy for them to port software to different umbrella platforms, different silicon means. And also it’s easy to transfer the software and the functional AI algorithm from chip to chip. So this whole development is important not only for us, but also for our customers. And I think for the existing customer, that will make their development work even more comfortable and faster. So it will help us to keep those customers, but also for the new customer, even in the LLM part, I think that we can provide an environment for customers to quickly convert their software algorithm to run on our chip. It’s important for our designers. Operator: Thank you. And our next question coming from the line of Ross Seymore with Deutsche Bank. Your line is open. Ross Seymore: Hi guys. Thanks for — asking the question. When I think about the ASPs that you mentioned, going from CV2 to CV5 or even backwards looking to the CV2 itself, can you just walk us through again, kind of orders of magnitude or pricing ranges, how much for ASPs a tailwind in calendar year 2024 and what do you expect them to be in calendar 2025? Fermi Wang: Right. So first of all, right. So for CV2 family, I think we talk about the price can be anywhere from the high single digit to the probably $30 range. And that’s the average ASP probably high teens. That’s a CV2 family. And CV5, we’re talking about anywhere from the low 30s to high 40s in that range. And that’s, and with our run rate, we think that we can maintain very healthy, not only ASP but also cost margin in that product line. Then CV5, in fact we have CV72 that we mentioned. The price range is similar to CV5, but for AIoT, it’s a different part of the line. So I think, and then we talk about CV3, the ASPs anywhere from the $40 to $400 from CV72 to a CV3, 685. So that just gives you an idea of ASP changes. Ross Seymore: Great. Thanks for that detail for me. And then I guess you talked about the year and growing in both sides of the business. Obviously we have the first quarter guidance and talked about a little bit of the trajectory in a prior question on both your two sides of your business. But if we think about the kind of the second half versus the first half, it seems like you need some relatively sizable sequential increases on a percentage basis to get to that sort of number. Do you think you will be well within those kind of those average of roughly 70 million true sell through numbers? And if so, is that kind of a second half dynamic? And I guess, is that more just about shipping to demand? So the inventory headwinds debate, or is it about new products ramping? Fermi Wang: Right. First of all, we didn’t guide any quarter to be 70 million in our guidance. We talk about, we believe that we’re going to have growth this year and also believe that our Q1 guidance. But overall, I think when I look at the number that Street’s predicting, I think it’s reasonable. And also that based on what we have seen with our customer demands and as well as our booking, I feel comfortable with the current Q1, Q2 guidance. Of course, Q3, Q4, we haven’t seen enough booking, but however the momentum is there. So I think I’m comfortable that we’re going to grow. But in terms of our quarter-to-quarter growth, we haven’t provided any guidance on that yet. John Young: Yes, and Ross, just to follow up on the ASP question, our ASP in fiscal 2024 grew about 15% year-over-year. And looking into the next year, it really depends on the mix of video processor versus CV, but even within the CV2 family, the ratio of CV5s to some of the lower end CV2s, then of course we won’t have CV3 revenue contributing in fiscal 2025. So should be some increase, but it’s just hard to say how much now. Lydia, we can move on to the next question. Operator: Certainly. And our next question coming from the line out, Kevin Cassidy with Rosenblatt Securities. Your line is open. Kevin Cassidy: Yes, thanks for taking my question and congratulations on the strong results. Just on your N1, as you’re talking to customers about it, what is the competitive landscape What are some of the alternative designs that they’re looking at? And is the GPU still being considered even as an edge processor? Fermi Wang: Well, some low-end GPU being considered, but as an edge processor, you really need an SoC with very low power consumption. And with that, GPU is much less considered. But however, I do believe that Qualcomm definitely have an ambition to come to this market. And when we compare to them, just like when we compare to them in the automotive space, I think we can deliver higher performance at low power consumption. That’s consistent to be the case. So I do believe we are looking at very similar competitors like our automotive market. Kevin Cassidy: Great. Thanks. And it seems to me you’re getting a lot of leverage out of the 5-nanometer process. You’ve got lots of parts, price performance ranges with this 5-nanometer. Is there anything in your roadmap looking to go below 5-nanometer now? Fermi Wang: Yes, we have to. I think there’s no chance we’ll stay at 5-nanometer for long. But however, I think it’s really driven by two things. One is whether we can justify the cost and also whether the performance requirement. But I definitely believe that you’ll start hearing us talk about next generation of process selections in the near future. Operator: Thank you. [Operator Instructions] And our next question coming from Joe Moore with Morgan Stanley. Your line is open. Joe Moore: Great. Thank you. Fermi, you had alluded to some OEM wins for CV5 that start to ramp in the second half of the year. Can you talk about what applications you’re addressing there? Fermi Wang: It’s an EV truck in western space. And we definitely have been working on this case for several years. And the customer doesn’t allow us to talk about it just yet. But I think that since they are close to announce their product, and I feel that we should, we feel comfortable to share with this news, but not to mention the customer names. Joe Moore: Great. Thank you for that. And then I guess as far as the N1 product goes, you guys have kind of always shied away from doing anything in a phone because you don’t want to become a feature in a chipset. But obviously a lot of the potential large language model inference could be in devices like phones. So can you just talk about are there opportunities around that to do co-processors or where do you kind of draw the line at your participation? Fermi Wang: Since both Qualcomm and MediaTek are very eager to come in to introducing products in the phone space for LLM, I feel that our opportunity is limited. Because my idea is that even LLM on the phone, because you have 5G connectivity, you might be able to use some LLM at edge but still leverage the 5G so you can connect to the cloud to run most of the LLM functions on the server side. So with that, cell phone become a limited opportunity for us, not only because Qualcomm MediaTek has an advantage in terms of a market share there, but also the usage model is really not purely age, it’s a combination of age and the cloud. So my feeling is we are going to look at pure age devices that focusing on the battery sensitive and also the latency sensitive applications just like what we had before. Joe Moore: Great, thank you very much. Fermi Wang: Thank you. Operator: Thank you. And I’m showing no further questions in the queue at this time. I will now turn the call back over to Dr. Fermi Wang for any closing remarks. Fermi Wang: And I want to thank all of you for joining us today. I’m looking forward to talk to you in a different conference. Thank you. Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect. 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Vacasa, Inc. (NASDAQ:VCSA) Q4 2023 Earnings Call Transcript

Vacasa, Inc. (NASDAQ:VCSA) Q4 2023 Earnings Call Transcript February 28, 2024 Vacasa, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would […] Vacasa, Inc. (NASDAQ:VCSA) Q4 2023 Earnings Call Transcript February 28, 2024 Vacasa, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning. My name is Stephanie and I will be your conference operator today. At this time, I would like to welcome everyone to Vacasa Fourth Quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Jay Gentzkow, Vice President Investor Relations. Please go ahead. Jay Gentzkow: Good afternoon, everyone, and thank you for joining us for today’s call. I’m pleased to be joined today by Vacasa’s CEO, Rob Greyber; and CFO, Bruce Schuman. As a reminder, the content of today’s call is the property of Vacasa and may not be reproduced or transcribed without our written consent. We have posted a shareholder letter on the Investor Relations section of our website at investors.vacasa.com and will be referenced by our speakers. Comments made during this conference call and in our shareholder letter contain forward-looking statements. Such statements include those about future expectations, beliefs, plans, projections, strategies, targets, estimates, objectives, events, conditions and financial performance, including guidance for future period results. We caution you that various risks and uncertainties could cause actual results to differ materially from those in our forward-looking statements. For additional information concerning these risks and uncertainties please read the forward-looking statements section in the shareholder letter we issued earlier today and the forward-looking statements and risk factors section in our filings with the Securities and Exchange Commission. During this call we may refer to various non-GAAP financial measures. Information regarding our non-GAAP financial results including a reconciliation of our non-GAAP results to the most directly comparable GAAP financial measures may be found in our shareholder letter. These non-GAAP measures should be considered in addition to our GAAP results and are intended to supplement but not substitute for performance measures calculated in accordance with GAAP. And now, I will turn the call over to Rob Greyber. Rob? Rob Greyber: Thanks Jay. Good afternoon, everyone, and thank you for joining us. I’ll begin today with a recap on 2023 and then turn to how we’re positioning Vacasa in 2024 and beyond. I’ll then hand the call to Bruce to review financial results. Before that, I wanted to note that today we shared with our team that we decided to reduce our head count impacting around 320 people representing about 5% of our workforce. Decisions like this are always difficult and this was no exception. As we have shared before, we are on a path to transform the process to become a more efficient, high-performing organization, one dedicated to the service of our owners, our guests and the people who serve them. On that path to transformation, 2023 was a pivotal year for the company. We concentrated on building a better, more efficient business against the dynamic macroeconomic and industry environment. We sharpened our organic sales engine, accelerated product delivery and improved our cost structure. This allowed us to deliver an adjusted EBITDA profitable year despite double digit declines in gross booking value per home across the industry on a year-on-year basis. 2023 had its challenges and we made a great deal of progress in the business yet 2024 is off to a difficult start and it remains much more to accomplish in an industry environment that remains challenging. In 2023, we made it our mission to focus on improving the owner experience. We visited local markets and examine how we care for homes and destinations across the country. We surveyed and listened to homeowners and analyzed our internal processes. We delivered a number of new technology tools to make our value proposition to homeowners stronger than ever. From previous calls we’ve discussed the homecare dashboard like the SMS tool and clean inspection tool. We believe these products are significantly improving the homeowner experience as reflected in owner feedback we’ve received since implementation, in the fourth quarter we also launched our homeowner communication tool allowing owners to interact with our teams directly through our mobile apps and owner portals. We also introduced our proprietary market rates comparison tool, which gives our owners insights into how the price stays at their homes and allows them to model certain criteria to see how changes might impact their revenue. As a result of these initiatives and our team’s relentless efforts on our homeowner experience, our homeowner satisfaction scores improved steadily through the second half of the year. So we are seeing positive trends in homeowner satisfaction, but we have not yet turned the corner on churn. Some aspects of churn are an industry phenomenon, but many are in our control. Improving the homeowner experience including how we care for their guests is central to those efforts and homeowner retention will remain a critical priority throughout 2024. A few words about how we performed against the four critical priorities, I shared with you all last year which were; improving execution in local markets and customer support functions, unlocking the potential of the individual sales approach, developing the right technology products and prioritizing our business needs to drive profitable growth. We spent last year improving how we support and operate in our local markets. We implemented new processes enabled by technology, created efficiencies without sacrificing the service level excellence our homeowners and guests expect. For example, midway through 2023, we began rolling out our new field scheduling system. This tool is designed to optimize one of our most time consuming and expensive task, physical visits to homes. The effectiveness of this tool will help drive our highest guest reviews for the year in Q4, and our highest cleanliness and Net Promoter Scores of 2023 across all major channels, all while driving efficiencies that led to year-over-year cost savings in Q4, including a 7% reduction in the cost of revenue per Night Sold and a 13% reduction in operations and support expense. Turning to our sales efforts, entering 2023, we moved away from the portfolio acquisition approach toward our individual approach, with the goal of improving our ability to consistently and sustainably add desirable homes to our platform over the long-term. As part of this shift in strategy, we implemented a number of initiatives to streamline our organic sales processes and productivity and strengthen our team. We restructured the sales organization to drive our efficiency emphasizing organic sustainable home growth. We also redesigned sales incentive plans to better align performance and results, and improved our tools and systems to drive efficiencies in our sales enablement processes and owner and home onboarding, among other initiatives. Traction on these initiatives helped drive three consecutive quarters of year-over-year improvement in sales productivity to end 2023. We continue to add functionality to our technology platform, prioritizing investments that generate measurable efficiencies in our operations and deliver a better experience for homeowners and guests. In addition to the homeowner communications, market rates comparison and field scheduling tools launched in 2023. During Q4, we made several other technology driven improvements. We significantly upgraded our connectivity to Airbnb, enabling us to place critical information for guests directly into the Airbnb app such as Reservation Confirmations, Trip Updates and Departure Instructions. This has reduced the number of calls to our Guest Experience Center and helped drive higher Guest Satisfaction Scores. We expanded and are ramping, the number of channels through which we offer our homes, for also offering curated inventory on some of those channels to target different types of guests and provide incremental revenue opportunities for our owners. We also continue to introduce Artificial Intelligence tools that improve productivity. The most recent launch in Q4 has greatly reduced the time spent processing guest reviews. This allows us to more quickly identify review that requires an immediate action versus a, positive reviews that may require simple acknowledgments and Thank you. Finally, over the course of 2023, we drove cost efficiencies across the business while carefully managing expense spend, culminating in full year adjusted EBITDA profitability that exceeded our guidance, despite lower year-over-year revenue. We made it clear that 2023 would be a transition year for Vacasa. A year to reset, improve the organization and position the business for the long-term. 2024 will be a year of continued transformation, to maintain momentum and capitalize on the improvements in 2023. As I mentioned before, 2024 is off to a difficult start. Increased supply in the market as well as softening demand is resulting in continued bookings variability. We are watching those dynamics very closely. However, the current conditions are creating uncertainty as we look forward. Therefore, it is as important as ever to sharpen our focus on execution, zero at FX and raised the tempo on the top initiatives that are going to take the concept to the next stage on our journey. With that dynamic as context, I’d like to outline the strategic priorities that are driving our decision-making for 2024. We will continue to focus on improving and aligning the Vacasa’s product and technology capabilities for our owners, our guests, and the people who take care of them. We believe leveraging technology will support the superior experience for, and value to, homeowners and guests, while also making our operations more efficient. The team is already hard at work on a number of impactful new developments which I look forward to sharing with you over the coming quarters. Vacasa will also be putting a renewed focus into optimizing our service offerings and where we allocate resources. Adding desirable homes to our platform, while minimizing churn is at the foundation of our long-term growth strategy with the individual sales approach as the primary driver of that growth. However, against the backdrop of a persistently dynamic industry environment coming off the highs of 2021 and 2022, as well as our continued efforts to prioritize profitability, we will be very intentional with how we allocate resources across the business to drive long-term growth. We intend to prioritize investments in and allocate resources to creating or further leveraging tools to attract and retain homeowners and to explore additional service offerings and ways to monetize our platform. We will be revisiting our progress and strategy here in coming quarters. And finally, while we are focused on our long-term growth opportunities, we are continuing to execute on improving operational effectiveness and efficiencies across the organization. We made significant progress in this area in 2023, driving an over $50 million improvement in adjusted EBITDA year-over-year, primarily driven by reduced expenses and driving efficiencies throughout our business. We will be laser-focused on this throughout 2024 and beyond as a foundational principle of our culture at the costs. And in closing, we made a lot of progress in 2023, particularly given the headwinds we encountered throughout the year and there is more work to do in a challenging environment. And I believe we are making the right strategic decisions to allow the business to reach its full potential plan focused on continuing this phase of Vacasa’s journey. I’ll now turn the call over to Bruce to discuss financials? Bruce? Bruce Schuman: Thanks Rob. Unless noted otherwise, I will be comparing our fourth quarter results to the fourth quarter of 2022 and I’ll be referencing the operating expense lines excluding the impact of stock-based compensation, restructuring costs, and business combination costs, which you can find outlined in our shareholder letter. We finished 2023 with approximately 42,000 homes, down 5% year-over-year, reflecting the churn dynamic that we and the broader industry has been experiencing over the past few quarters. For the fourth quarter, gross booking value, which is the combination of nights sold and gross booking value per night sold, was $337 million, down 19% year-over-year. Nights sold were $1.1 million in the fourth quarter, down 5% year-over-year. Gross booking value per night sold was $309 in the fourth quarter, down 15% year-over-year. Throughout 2023, we’ve discussed the year-over-year declines in average gross booking value per homes as the industry normalizes off of the record highs from the past few years and we saw this dynamic play out again in the fourth quarter. As a reminder, there’s a strong correlation between nights sold and gross booking value per night sold and it’s difficult to look at either in isolation. Our revenue management algorithms and data team constantly evaluate the trade-off between price and occupancy and the mix of nights sold and gross booking value per night sold with the goal of optimizing homeowner income. Revenue, which consist primarily of our commission on the rents we generate for homeowners, the fees we collect from guests, and revenue from home care solutions provided directly to our homeowners, was $177 million in the fourth quarter down 19% year-over-year. For the full year 2023, gross booking value was $2.3 billion, down 10% year-over-year, primarily due to lower guests demand as traveler demand for domestic non-urban vacation rentals normalizes from the highs of 2021 and 2022. This drove revenue of $1.1 billion for the full year 2023, down 6% year-over-year, in line with our expectations. Now, turning to expenses. Cost of revenue was 58% of revenue in the fourth quarter versus 53% of revenue for the same period last year. Operations and support expense was 33% of revenue in the fourth quarter versus 30% of revenue in the same period last year. These two expense lines, primarily consist of our local market and customer support costs. While cost of revenue and operations and support expense as a percentage of revenue were up on a year-over-year basis in Q4, we decreased cost of revenue dollars by 12% year-over-year and Operations and support expense dollars by 13% year-over-year, while homes on the platform and nights sold both declined 5%. Our fourth quarter results are a strong example of the progress we are making in operating our local markets in a more efficient manner. We continue to demonstrate operating discipline in our central operations, where we achieved another quarter of year-over-year operating expense leverage in the fourth quarter. This represents four consecutive quarters of year-over-year reductions in our three other operating expense lines, as we continue to drive efficiency gains across our organization. Specifically on a year-over-year basis for Q4, technology and development expense declined 5%, sales and marketing expense declined 18% and general and administrative expenses declined 15%. Adjusted EBITDA was negative $55 million for the fourth quarter compared to negative $49 million in the same period last year. However, we achieved full year 2023 adjusted EBITDA of $24 million ahead of our expectations shared last quarter and our first full year of adjusted EBITDA profitability of scale. Despite revenue declines of $70 million in 2023 versus 2022, adjusted EBITDA increased over $50 million in the same period. While there is more to do, I believe our ability to drive profitability gains, despite the dynamic industry backdrop speaks to the progress the team is making in advancing our operating discipline. Now turning to 2024. As we detailed throughout 2023 and Rob reiterated in his remarks, we’ve made significant progress establishing a foundation for Vacasa’s long-term success. We’ve improved our operating discipline across the board and have better control of our expense structure in order to position the business for long-term profitable growth and free cash flow generation. However, as Rob noted 2024 is off to a difficult start. The short-term rental industry continues to adjust to softening demand for domestic nonurban vacation rentals as well as increases in supply of short-term rental units. As a result, we are experiencing continued bookings variability and our expectation for average gross booking value per home continues to be challenged at least in the first half of 2024. This creates significant uncertainty around our view of the coming year. Given these dynamics and their impact on bookings variability, average gross bookings per home as well as continued elevated churn there are a wide range of potential outcomes for 2024. As a result, we do not plan to provide guidance for 2024 until we have better visibility to how this plays out. However, we intend to continue to aggressively manage our cost structure and to prioritize adjusted EBITDA profitability as well as positive free cash flow generation. We’ll keep you posted in the coming quarters and how these dynamics are playing out and our progress against them. With that Rob and I will take your questions. Operator, please open up the line. See also 15 Best Shareholder Activism Law Firms and 15 Best Barbecue Chains in America That Are Actually Worth Trying. Q&A Session Follow Vacasa Inc. Follow Vacasa Inc. or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: The floor is now open for your questions. [Operator Instructions] Your first question comes from the line of Jed Kelly with Oppenheimer. Your line is open. Jed Kelly: Great. Thanks for taking my questions. Are realize the brief not behind giving guidance. But can you sort of just give us some trends on the way January and February were? I know that it was I think January targets some industry people is the toughest comps. Can you give us a sense on that? And then just on the softening demand in the opening comments using cash more macro driven or is that still the pattern of travel normalizing? Then I have a follow-up. Rob Greyber: Terrific. Hey, Jeff. Good to hear from you on. So I’ll share a few thoughts on the overall environment that we’re seeing and kind of trying to share a few thoughts on the demand side as well. So recall that for about a year maybe more than a year now we’ve been talking about the changes that we’ve been observing in the consumer booking kind of dynamic, and that’s been affecting both gross bookings, value per night sold, a number of nights sold and that’s coming off of two record years in 2021 and 2022. So look I think there are a combination of factors that are at play here. I think that there is still a dynamic where there is a shift back to urban and international travel others have referenced that I think consumers are returning to the office or if they’re not, they’re certainly returning to kind of a more normal dynamic in their own lives, where they’re not working remotely for extended period of time. I think there’s also some potential concerns on the macro side and when you think about the work that the Fed has been doing on maintaining inflation on those things. In the short run I think are terrific in the long – in the long run they’re terrific in the short run they can put some pressure on the customer spending dynamics. So we’ll see how all that plays out. I think in addition to that I would say that we are seeing continued double-digit increases year-over-year in supply in our markets and that has an impact on the demand for film that you’ve seen play out. So when you think about those factors at play. I think those are some of the drivers that we’re watching closely when we think about the bookings pace that we’re seeing at the start of 2024 and it’s a volatile environment. There’s some of the dynamics we’ve alluded to on the weakness at the close end of the booking curve that we’re observing and navigating. And so when we think about how we’re adapting and working through this environment, this is something that we’ve been seeing for us for a little while. We’re in the process of understanding these new patterns. We’re using that to sort of another motivation to really think about first how to operate efficiency efficiently. And then second how to maximize the income for our homeowners. There’s a lot of work that we are doing on those fronts. And I think that we’ve shown our ability to navigate some of those challenges for example in the fourth quarter with cost of revenue per night and operations and support expense coming down on a year-over-year basis. So we’re working hard to adapt to these new changes. We did that in 2023. We have to do it again in 2024. There’s not really a blueprint here but it reinforces that focus on execution and tactics which is really an important driver of our performance in the long run. So okay, as I think about it consumer, demand is going to ebb and flow in our vertical and it’s going to be driven by preference shifts within travel or a broader economic environment. But we think we’re focused on the right things by focusing on our local market operations being nimble, being thoughtful, variabilizing our costs and then staying very focused on navigating on our front foot via the changes. The changes in demand. Your other question on demand was… Jed Kelly: Just on the monthly trends that you could share anything like January, February and then in January, the toughest comp? Rob Greyber: Yes, we’re not going to parse the monthly dynamically Jed. We’re clearly watching it. It’s difficult for us to call that out especially. I think what we’re trying to be as open as we can about what it is that we’re observing. I think you’ve seen us do that before. I think that there’s a lot of industry data sources that are suggesting that it is – the dynamics are something that the broad market are seeing and I think that it’s probably all of the same drivers. Jed Kelly: Got it. And then just as a follow-up, saw you gave 42,000 homes. Are you planning to give that metric quarterly? And is that kind of a sign that churn is maybe stabilizing a little bit Thanks. Bruce Schuman: Yes. Hi, Jed. This is Bruce. Thanks for the question. I’ll take the first part of that and then maybe Rob can talk to the churn dynamic. The short answer to your question is yes, we do plan on disclosing that on a quarterly basis. Just for the simple reason that number one, it’s an important financial metric for us. And we think just as a matter of transparency for investors I think that’s important to disclose, so we are going to be doing that on it on an ongoing basis. Rob Greyber: In terms of the churn dynamic, we do a broad kind of talk through our progress there and what we’re doing to try to get that more under control. Bruce Schuman: Yes, Jed. So look I’m sure the reality is – it’s not – it’s not where we wanted to be. There’s a dynamic here that is still settling across the industry. We’re focused on the key things that we hear from owners. We’ve shared those with you before on homeowner communications and on rates and revenue. I would say that we’ve been we’ve been investing. We’ve been focusing our work and we’ve seen some of these leading indicators move in the right direction, but we’re not yet — we’ve not yet seen that the end result which is churn move you move to where we wanted to be. So, on the drivers, the focus on the homeowner experience that you’ve heard us talk about has led directly to steadily improving owner NPS, which has always been a key leading indicator for us and we haven’t seen it turn that back quarter, but it’s been a big area of focus for us......»»

Source:  insidermonkeyCategory: top~37 min. ago Related News

eBay Inc. (NASDAQ:EBAY) Q4 2023 Earnings Call Transcript

eBay Inc. (NASDAQ:EBAY) Q4 2023 Earnings Call Transcript February 27, 2024 eBay Inc. beats earnings expectations. Reported EPS is $1.07, expectations were $1.03. eBay Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon. My name is Krista, and […] eBay Inc. (NASDAQ:EBAY) Q4 2023 Earnings Call Transcript February 27, 2024 eBay Inc. beats earnings expectations. Reported EPS is $1.07, expectations were $1.03. eBay Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon. My name is Krista, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the eBay Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to John Egbert, Vice President of Investor Relations. John, you may begin your conference. John Egbert: Good afternoon. Thank you all for joining us for eBay’s fourth quarter 2023 earnings conference call. Joining me today on the call are Jamie Iannone, our Chief Executive Officer; and Steve Priest, our Chief Financial Officer. We’re providing a slide presentation to accompany our commentary during the call, which is available through the Investor Relations section of the eBay website at investors.ebayinc.com. Before we begin, I’ll remind you that during this conference call, we will discuss certain non-GAAP measures related to our performance. You can find the reconciliation of these measures to the nearest comparable GAAP measures in our accompanying slide presentation. Additionally, all growth rates noted in our prepared remarks will reflect FX-neutral year-over-year comparisons and all earnings per share amounts reflect earnings per diluted share, unless indicated otherwise. As we fully lap the TCG Player acquisition at the end of October 2023, our organic and total FX-neutral growth rates for Q4 have largely converged. During this conference call, management will make forward-looking statements, including, without limitation, statements regarding our future performance and expected financial results. These forward-looking statements involve known and unknown risks and uncertainties. Our actual results may differ materially from our forecast for a variety of reasons. You can find more information about risks, uncertainties and other factors that could affect our operating results in our most recent periodic reports on Form 10-K, Form 10-Q in our earnings release from earlier today. You should not rely on any forward-looking statements. All information in this presentation is as of February 27, 2024. We do not intend and undertake no duty to update this information. With that, I’ll turn the call over to Jamie. Jamie Iannone: Thanks, John. Good afternoon, everyone, and thank you all for joining us today. I’m incredibly proud of the progress we made in 2023 against our vision of reinventing the future of e-commerce for enthusiasts and our goal of returning eBay to long-term sustainable growth. Let’s go over a few highlights from the full year. First, despite significant macro pressure on discretionary spending across our major markets, we saw organic year-over-year GMV growth improved during each quarter of 2023, resulting in GMV growth down roughly 1% for the full year. Focus category GMV grew by nearly 4%, outpacing the remainder of our business by roughly 7 points, and we exited 2023 at approaching 30% penetration. We stabilized our active and enthusiast buyer count as acquisition, reactivation and retention improved year-over-year. Our revenue grew 3% organically to over $10 billion. driven by continued momentum in first-party advertising, expansion of our financial services offerings and the launch of eBay International Shipping. And we made significant investments in tech talent and marketing to support our strategic pillars, including making meaningful strides towards establishing eBay as a leader in generative AI for e-commerce. These results have demonstrated that we have the right strategy which has put us on a path to building a stronger, more resilient company. In service of that goal, last month, we announced significant organizational changes focused on removing layers and simplifying execution in order to better meet the needs of our customers. This involved the difficult but necessary decision to reduce our workforce by approximately 1,000 roles and begin to scale back our alternative workforce contracts. This restructuring better aligns our expenses with the growth of our business and I’m confident it will enable us to accelerate innovation while delivering long-term value for shareholders. Now turning to the fourth quarter. We generated $18.6 billion of gross merchandise volume in Q4, nearly flat versus the prior year. Revenue grew 3% to $2.6 billion. Our non-GAAP operating margin was 26.7%, and we delivered $1.07 of non-GAAP earnings per share resulting in $4.24 of EPS for the full year. Our focus category strategy remained a significant driver of underlying growth during Q4. We focused category GMV outpaced the remainder of our marketplace by approximately 6 points, growing roughly 4% for the third straight quarter. Our momentum in Motors Parts & Accessories, or P&A, continued in the quarter, as volume growth held steady in the mid-single digits. Our eBay Guaranteed Fit programs have benefited buyer trust and retention across the U.S., U.K. and Germany, driving incremental GMV within P&A last year. During Q4, we began rolling out multi-warehouse shipping optimization to some of our largest U.S. P&A sellers that collectively manage millions of listings. B2C sellers can activate these tools via eBay APIs, and this enables buyers to see more accurate estimated delivery dates when purchasing from sellers with multiple warehouses, which has driven a measurable uplift in conversion for early adopters. In 2024, we plan to onboard sellers in other categories to utilize this technology and tighten delivery estimates across eBay more broadly. Our established position in P&A has led to more than 100 million vehicles being saved in the My Garage section of eBay by active customers. In addition to providing better fitment experiences, we are finding more ways to leverage this valuable data to drive utility for our customers. For example, last quarter, we introduced predictive maintenance that offers AI-driven auto part recommendations based on a vehicle’s mileage. Features like this help eBay stay top of mind for customers looking for auto parts at a great value. The work we’ve done in the eBay Authenticity Guarantee program has also been a key driver of our focused category momentum and raising the level of trust on the marketplace. In Q4, we launched our eighth authentication center in Tokyo, Japan, our first center focused primarily on cross-border trade. Our Tokyo center is currently authenticating luxury handbags and will expand to other highest categories over time. Japan is one of the largest and fastest-growing market for personal luxury goods in the world, enabling our global buyers to tap into a wealth of inventory from the world’s most exclusive brands with complete confidence. Earlier this month, we also expanded the Authenticity Guarantee Program to cover loose gemstones. This further extends our product coverage within fine jewelry with authentication from our existing partner, the Gemological Institute of America, a trusted authority for over nine decades. In addition to expanding focus categories, last year, we made a significant investment in Germany, our third largest country as measured by demand. We adopted a similar approach to our vertical playbook to address the unique needs of German consumers. These changes included language enhancements and improvements to search, SEO and recommendations, shipping and return label improvements and a complete overhaul of the local pickup experience. In January, we further improved local discovery in Germany by introducing a new MAP-based browsing experience, which services trending and recently listed items through an intuitive interface based on what’s nearby and easy to pick up. Overall, our initiative in Germany has outperformed our initial expectations. We’ve observed C2C seller NPS and customer satisfaction both up 20 points or more versus our previous baselines. Our buyer NPS also increased by double digits as buyers who sell returned to positive growth following the initiative launch. In addition, enhancements made to our QR code technology has helped reduce unpaid items by more than 50% for local pickups. And importantly, C2C volume in Germany returned to positive growth resulting in hundreds of millions of dollars of incremental GMV relative to our prior trajectory. These investments have made our business significantly more resilient to the challenging macro environment in Germany where overall e-commerce growth has been negative in recent quarters. During 2023, we also laid the groundwork to accelerate our capabilities in artificial intelligence and further embed AI throughout the customer experience and our organization. After the first commercial large language models became available from companies like OpenAI and others last year, we immediately found ways to leverage generative AI technology to improve the eBay experience across selling, buying, advertising and marketing. Within a few months, we began fine-tuning open-source LLMs using eBay’s proprietary commerce data on our own infrastructure. These models include a smaller number of parameters and thus operated faster and more cost efficiently than commercial LLM when operating at scale. But we also found these fine-tuned LLM could perform as well or in some cases, better than commercial LLM across certain dimensions and use cases, such as generating listing descriptions. To support an even more ambitious AI roadmap for 2024, by the end of Q1, we expect to have doubled our GPU capacity versus the end of last year. Importantly, this investment falls within our historical CapEx budget range of 4% to 5% of revenue. This added GPU capacity, combined with our existing infrastructure, allows us to develop LLMs from scratch pre-trained using eBay’s nearly three decades worth of e-commerce data. While we’ll continue to take a hybrid approach, leveraging both commercial and open-source LMs, we expect more generative AI services to be powered by internal LLM in 2024, helping make buying and selling on eBay simpler, faster and more magical. In terms of customer-facing features, we continue to iterate on our magical listing experience that has already been used by millions of sellers, which we believe makes it one of the most widely used Gen AI features in e-commerce to date. Generative AI descriptions have rolled out to 100% of users in our top 5 markets. Adoption trends remain healthy. Customer satisfaction continues to be at high levels as we’ve expanded outside of English-speaking countries and content acceptance rates remain above 90% through the full rollout. The next phase of our magical listing experience is currently being tested by up to 5% of C2C sellers on an opt-in basis. This experience is even more seamless as it leverages our image recognition technology and generative AI to prefill or suggest product titles, categories and other item aspects using photos alone. We are excited to make this experience available to more sellers in Q1 as early feedback from beta users has been incredibly encouraging. I’m also pleased to see the potential benefits our AI tools can have on the billions of listing images across our marketplace as high-quality products photos can have a significant impact on conversion on eBay. Last quarter, we completed the global rollout of our revamped background removal tool in our listing flows, which leverages AI to effortlessly remove background noise from their product images. This tool has enabled sellers to create cleaner, more professional product images and it has received rave reviews from our customers. Building on top of this, we’re now leveraging generative AI to make sellers product images even more compelling using our new background swap tool. This feature allows sellers to show their products alongside a wide variety of AI-generated backgrounds. For example, you can display a pair of Air Jordan sneakers on a hardwood basketball court or showcase your preowned hiking boots a top of Pictures Mountain Summit. We are currently testing this feature in beta with 1% of sellers on iOS devices, and I’m excited to see more sellers leveraging these tools to enhance their product images and drive conversion. Now turning to our advertising business, which delivered another strong quarter. Total advertising revenue grew 20% to $393 million, while first-party ads outpaced volume by 30 points. For the full year, we generated over $1.4 billion of total advertising revenue, up roughly 25% for the year and more than double our ad revenue in 2019. The over 2.9 million sellers adopted a single ad product during Q4, and we currently have over 900 million live promoted listings. Our standard cost per acquisition product remained the largest contributor to year-over-year ads growth in Q4. But notably, Promoted Listings advanced, our cost per click unit was the largest contributor to sequential advertising growth. Our CPC revenue and overall advertiser count benefited from the launch of rule-based campaigns in Q4, which allows sellers to automatically promote new listings based on rules that set for inclusion, such as price range, category, brand or condition. Additionally, during Q4, we launched a top-picks carousel for search. which provides a curated set of promoted listings ads comprised of hyper-relevant top-selling items from our highest ranked sellers. Thus far, buyers have been highly engaged with these ads providing added velocity for our sellers. Next, I’d like to share a few milestones around our sustainability efforts last year, starting with eCommerce. eCommerce continues to provide significant value for sellers and buyers during these uncertain times. In 2023, our marketplace generated nearly $4.9 billion in positive economic impact due to sale of pre-loved and refurbished goods. This activity helped avoid approximately 1.6 million metric tons of carbon emissions that would typically be used in producing new goods and kept nearly 70,000 metric tons of waste from going into landfills. Additionally, eBay remains committed to enabling more green energy on the U.S. electricity grid. As part of these ambitions, we have entered into agreements for three offsite renewable energy projects over the past four years. Our portion of the latest project is now fully operational, and the green energy produced will be roughly equivalent to the annual energy usage at our data center in Salt Lake City. Combined with our other two projects, this green energy covers over 40% of our global electricity consumption. And I’m incredibly proud that we source over 90% of our energy consumption for eBay controlled offices and data centers from renewable sources overall, and we remain on track to reaching our 100% renewable target by 2025. Now let’s turn to impact. I’m always amazed by the tremendous generosity of the eBay community. eBay for Charity enables sellers and buyers to raise more than $43 million in Q4 and nearly $162 million for the full year. The eBay Foundation granted more than $19 million in 2023 to support historically excluded entrepreneurs and through our employee gift-matching program. I’m honored to be a purpose-driven company that supports communities around the world. For the fifth year in a row, eBay was included in the Dow Jones Sustainability World and North American indices. eBay was also included once again in Just Capital and CNBC’s list of America’s most just companies which measures corporate performance and efforts in areas such as climate change, DE&I and employee wellness. I’d like to take this opportunity to thank our employees for their incredible work and bringing our strategy to life and their tireless support in our community worldwide amid ongoing challenges in the global economy. In closing, while we continue to navigate a dynamic operating environment, I’m incredibly optimistic about our roadmap for 2024. Our teams are better organized for speed, allowing us to be nimble and make critical decisions more quickly. The foundational AI capabilities we developed last year make us well positioned to unlock the power of our data assets, fundamentally change the customer experience on eBay, and drive efficiency across the company in 2024. We will continue to invest in new and existing focus categories while also improving country-specific experiences like we did in Germany last year. We expect continued momentum in first-party advertising, despite lapping outstanding growth in the prior year, while we grow our financial service offerings for customers. And from a financial standpoint, we are in a strong position to expand margins, drive robust earnings growth and deliver healthy capital returns to shareholders in 2024, while still investing in high ROI initiatives to keep us on the path towards sustainable GMV growth. With that, I’ll turn the call over to Steve to provide more details on our financial performance. Steve, over to you. Steve Priest: Thank you, Jamie, and thank you all for joining us today. I’ll begin with the financial highlights section of our earnings presentation. Next, I’ll discuss our key financial and operating metrics in greater detail. Finally, I’ll provide our outlook for the first quarter and the full year and some closing thoughts before we begin Q&A. My comments will reflect year-over-year comparisons on an FX-neutral basis, unless I note otherwise. I’m pleased that we met or exceeded expectations across our key financial metrics in Q4 despite observing a softer demand environment during the early part of the quarter. Gross merchandise volume was nearly flat at $18.6 billion. Revenue grew 3% to nearly $2.6 billion, outpacing volume by over 3 points. Non-GAAP operating margin was 26.7%. We delivered $1.07 of non-GAAP earnings per share, and we returned $379 million to shareholders through repurchases and dividends. Let’s take a closer look at our financial performance during the fourth quarter. Gross merchandise volume of $18.6 billion was nearly flat year-over-year, while foreign exchange was a tailwind of up 2 points to reported GMV growth. As we discussed last quarter, we observed softer demand for discretionary goods during the beginning of Q4 as consumers dealt with elevated inflation from higher interest rates in our key markets. Shoppers were more discerning in their purchase behavior as we approach the holidays and the promotional environment adapted to meet their expectations. However, we started to see our business improve towards the end of November, particularly in the U.S., driven by consumers looking for value to stretch their limited holiday budgets. Additionally, we believe recent product improvements modestly benefited our participation in last minute holiday shopping. These included improved accuracy of our estimated delivery dates and product changes we made in Q4 to better highlight listings with faster shipping times. Focused categories continue to drive underlying momentum in our business, growing roughly 6 points faster than the remainder of our marketplace during the quarter. P&A Refurbished and Luxury with the top three contributors to GMV growth in focused categories. P&A delivered another quarter of mid-single-digit GMV growth as improved trust from programs like Guaranteed Fit and growing shipment coverage continue to benefit the overall customer experience. Next, I’ll walk through our results on a geographic basis. U.S. GMV was nearly flat in Q4, an improvement of 1 point sequentially. The U.S. consumer demand was notably more resilient relative to our largest international markets, consistent with market benchmarks. The underlying growth was even stronger when we include U.S. buyer spending on cross-border goods. International GMV was down nearly 1% on an FX-neutral basis and up 4% as reported due to FX tailwinds. While we saw resilient demand in the U.K. and Germany over the holidays e-commerce market growth in these countries remain challenged. The progress we made in Germany to improve the seller and buyer experiences, particularly within C2C, help mitigate a tough environment where e-commerce growth has been persistently negative. In the U.K., our GMV growth narrowed the gap to market as consumers continue to look for value during the holidays. We also benefited from the lapping of the Royal Mail strikes that impacted results in Q4 of 2022. Moving to buyers. Trailing 12-month active buyers were $132 million at the end of last year. Continuing the trend of stabilization in 2023 after a period of post-COVID rationalization in recent years. Enthusiast buyers remained approximately 16 million. Spend currency enthusiast was stable quarter-over-quarter at around $3,000 annually despite continued pressure on discretionary spending across our major geographies. Turning to revenue. We generated revenue of $2.6 billion during the fourth quarter, up 3%, outpacing volume by over 3 points. Foreign exchange was a headwind of over 1 point to reported year-over-year revenue growth. Our take rate in Q4 was approximately 13.8%, down roughly 10 basis points quarter-over-quarter. The sequential decline was primarily driven by seasonal category and product mix partly offset by continued momentum in our advertising business and a modest tailwind from FX. On a year-over-year basis, our take rate was roughly flat despite nearly 0.5 point of FX headwind. Total advertising revenue grew 20% to $393 million and reached 2.1% penetration of GMV. First-party ads grew 30% and to $368 million or 30 points faster than volume. As Jamie discussed earlier, we saw a robust seller adoption of Promoted Listings advanced in Q4, driven by recent innovations like smart targeting on role-based campaigns. Moving to profitability. Non-GAAP operating margin was 26.7% during the quarter, improving 30 basis points sequentially and down roughly 3 points year-over-year. Foreign exchange was a headwind to margins of approximately 150 basis points in Q4 compared to a year ago. The remainder is largely attributable to continued investment in product development and the margin impact of recent M&A. As expected, eBay international shipping was no longer a drag on our operating margins in Q4. But this program weighed modestly on gross margins year-over-year. as its cost primarily fall within cost of revenue. Overall gross margin was down about 60 basis points year-over-year as modest headwinds from EIS were partly offset by efficiencies in cost of payments. Within G&A expense, we recognized a GAAP restructuring charge of $99 million in Q4 relating to our recent organizational changes as well as the GAAP accrual of $15 million related to pending legal matters. You will find more information on adjustments in the GAAP to non-GAAP reconciliations in the appendix of our earnings presentation. While additional details on the legal matters, will be provided in our upcoming 10-K. We generated non-GAAP earnings per share of $1.07 in Q4, roughly flat year-over-year. On a GAAP basis, our earnings per share was $1.40 for the quarter, driven by unrealized gains in our equity investment portfolio. These gains were partly offset by stock-based compensation on the aforementioned GAAP restructuring charge. Turning to our balance sheet and capital allocation. Our free cash flow was negative $3 million in Q4, consistent with our guidance for de minimis free cash flow is California’s disaster tax relief program for 2023, delayed the majority of our annual cash tax payments until October. We ended the year with cash and nonequity investments of $5.1 billion and gross debt of $7.7 billion. We repurchased $250 million of eBay shares at an average price of approximately $41 during Q4, and had $1.4 billion remaining in our buyback authorization at the end of the quarter. In addition, we paid a quarterly cash dividend of $129 million in December or $0.25 per share. Since the beginning of 2022, we have returned nearly $5.6 billion to shareholders through repurchasing dividends of roughly 134% and cumulative free cash flow over that period. Turning to our investment portfolio. Our equity investments and warrants were valued at over $5 billion at the end of Q4. Our Adevinta stake was valued at nearly $4.5 billion, up nearly $0.5 billion versus Q3. On November 21, a consortium led by Permira and Blackstone announced an offer to acquire Adevinta. This offer is proceeding as expected, and we continue to expect it to close in Q2. The public offer period expired on February 9 with 95% of shareholders accepting the offer which satisfies the requirement of at least 90% acceptance rate. We understand that the consortium is working expeditiously to achieve the remaining regulatory approvals and closes. Our add-in warrants were valued at over $360 million at the end of Q4. Our warrant value is calculated based on several assumptions, including add-in share price and the probability of vesting. Moving to our outlook. We have started the year with relatively uneven demand across our major markets, with the U.K. and U.K. markets experiencing negative GDP growth and U.S. retail sales weaker than expected in January. The dynamic nature of the operating environment has been incorporated into our GMV outlook as well as a 1 point boost to GMV growth from the extra leap year day. For the first quarter, we expect between $18.2 and $18.5 billion of GMV, representing an FX-neutral decline of 2% to flat year-over-year or spot GMV decline of 1% or flat. We expect to generate revenue between $2.5 billion and $2.54 billion in Q1, representing FX-neutral growth between flat and 2% and year-over-year. Our forecast implies revenue will outpace volume by over 2 points on an FX-neutral basis, while FX represents close to a 1 point headwind to spot revenue growth. We forecast Q1 non-GAAP operating margin between 29.6% and 30%, marking both a sequential and year-over-year improvement at the midpoint. We expect to generate non-GAAP earnings per share between $1.19 and $1.23 in the first quarter, representing EPS growth between 7% and 11% year-over-year. At current rates, FX would represent a 2-point headwind to year-over-year EPS growth in Q1. Now let me share some thoughts on the full year. Assuming no fundamental change in the macroeconomic environment this year, we expect our FX neutral GMV growth rate to turn positive in Q3 or Q4 of this year. We expect revenue to outpace GMV growth by about 2 points on an FX-neutral basis. We expect FX to represent close to a 1 point headwind to spot revenue growth. We anticipate our take rate expansion to be primarily driven by continued healthy growth in advertising revenue throughout 2024, although we do face elevated year-over-year comps starting in the second quarter, due to our acceleration in 2023, along with continued secular headwinds within our third-party ads. We expect non-GAAP operating margin to expand by 60 to 100 basis points for the full year. as we balance continued investments in tech, talent and marketing with organizational efficiencies, productivity gains and savings from our ongoing structural cost program. Our non-GAAP operating margin outlook includes a net benefit of approximately 40 basis points year-over-year, which is primarily driven by a change in accounting estimate associated to the extension of the useful life of data center equipment. Following an assessment of our servers and networking equipment in December, we determined it was appropriate to extend the accounting use for life from three years to four years. You can find more information on this policy change in our 10-K filing. Offsetting this benefit is an operating margin headwind of roughly 50 basis points year-over-year due to foreign exchange as we lapped sizable FX hedging gains in 2023. This is on top of the approximately 30 basis point year-over-year operating margin headwind we experienced in 2023 as we lap the more meaningful hedging gains in 2022. Our capital expenditures for 2024 are expected to be stable between 4% and 5% of revenue, while our non-GAAP tax rate should remain unchanged at 16.5%. We expect just under $2 billion of free cash flow in 2024, which contemplates headwinds of $99 million in restructuring charges and $234 million from repatriation tax payments. As a reminder, these repatriation tax payments will remain a temporary headwind to free cash flow through 2025, which is the final year of an 8-year repayment schedule. Details on these tax payments are in the appendix section of our earnings presentation. For Q1, we have raised our quarterly dividend by $0.02 to $0.27 per share to be paid out in March. And I’m pleased to announce that our Board recently increased our share purchase authorization by $2 billion, bringing our total remaining authorization to approximately $3.4 billion. We are targeting at least $2 billion of share repurchases for the year, though the pacing may fluctuate from quarter-to-quarter. We expect to end 2024 with cumulative repurchases and dividends representing approximately 130% of free cash flow since the beginning of 2022, above our original target of 125% for the period. Given our top line assumptions, margin outlook, and healthy capital return expectations, we forecast non-GAAP earnings per share growth of 8% to 10% year-over-year in 2024. In closing, I’m incredibly proud of our team’s execution during 2023. Despite a very challenging macro environment, we saw underlying momentum in our business as GMV trends improved gradually through the year, and we delivered non-GAAP earnings per share of $4.24, of 3% for the full year. While we are planning our business around the assumption that the macro environment, will continue to be challenging, we remain incredibly confident in our strategy and our plan for 2024. Assuming no further degradation in the environment, we expect our investments in focus categories, local market and C2C initiatives, generative AI and other site-wide improvements to turn GMV growth positive in Q3 or Q4 of this year. Although we will continue to invest in our strategic pillars, we are committed to striking the right balance between expenses and revenue growth, and continuing to lead into cost efficiencies to drive 60 to 100 basis points of operating margin expansion in 2024. Our fortress balance sheet, enables us to increase our buybacks and dividends this year, leading to total capital return, to shareholders of approximately 130% of cumulative free cash flow, from 2022 to 2024. And I’m extremely pleased this financial plan allows us to target non-GAAP EPS growth, of between 8% to 10% year-over-year, demonstrating the earnings power of our business. With that, Jamie and I will now take your questions. See also 15 States Where You’re Most Likely To Get In A Car Accident and 10 Countries with No Income Taxes in the World. Q&A Session Follow Ebay Inc (NASDAQ:EBAY) Follow Ebay Inc (NASDAQ:EBAY) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Your first question comes from the line of Nikhil Devnani from Bernstein. Please go ahead. Nikhil Devnani: Hi, thank you both for taking the question. I wanted to ask about GMV growth. Could you provide a bit more context on the potential for positive GMV growth in Q3 or Q4? Is that anchored on the timing of certain product initiatives that, should accelerate your growth? Anything on your visibility into the back half would be helpful. And then I had a follow-up on margins as well. Your Q1 outlook is quite strong, close to 30%, but it looks like for the full year you’re anticipating 28 to 28.5. So just wondering if that delta is due to seasonality, or some discretionary investments that, you see coming down the line, anything there would be helpful? Thank you. Jamie Iannone: Yes, thanks, Nikhil. I’ll cover the GMV one and then I’ll ask Steve to talk about margin. So, when we looked at the start of the year here, we talked about, January having some weather impact. You heard that from other folks as well and improvements kind of since then. You saw, January retail sales show the consumer is a bit stretched. But when we look at the overall plan that we have for the year, we feel really good about the strategy that we’re executing on. When you look at focus categories, they continue to outperform the rest of the business. For FY ’23, it was a 4% year-over-year growth, about seven points ahead of the business. We like what we saw in terms of the investments that we made in Germany and feel really good about the roadmap that we have in front of us, to drive growth in the business in Q3 or Q4, as Steve outlined. You know, I think importantly, when we look at the kind of underlying health of the business, right now we still have U.K. just in our technical recession, Germany commerce growth is still in negative territory. And so, we have those impacts from the market, but the underlying business and what’s happening in the core, we feel really good about. And that’s what makes us confident in being able to drive GMV growth as we outline there. Steve, do you want to talk about margin? Steve Priest: Yes, indeed. Good afternoon, Nikhil. You’re correct. Seasonally, Q1 has been our strongest quarter for operating margin for a while, because of the dynamics of that seasonality. A reminder, we have been driving that through a number of cost savings that we’ve been driving based on recent actions. And also the accounting policy change that we saw that we discussed in the prepared remarks. I am really pleased with the amount of diligence that we’ve gone through. The teams are leaning into cost efficiencies in the short-term while we continue to invest for the long-term sustainable growth of eBay. And we’re pleased to be in a position to, based on no change in the overall macroeconomic environment, to drive between 60 and 100 basis points of margin improvement, which is continuing to fuel the earnings growth that, we laid out earlier in the call. Nikhil Devnani: Okay. Thank you. Operator: Your next question comes from the line of Colin Sebastian from Baird. Please go ahead. Colin Sebastian: Thanks and good afternoon. Good to see the start of performance at the end of Q4. A lot of changes in e-commerce over the past couple of years. Obviously customer acquisition costs are going up a lot, and there’s more competition in the market from global players. So I was hoping, Jamie, you could talk about maybe the evolution of e-commerce as you see it and the impact of some of those changes on eBay, and if that leads you to any modifications in sort of the focus category strategy. And maybe related to that with Gen AI, across the platform and the magical innovations. Is there any way to quantify the impact of some of those tests, if not from a volume or revenue – so maybe from listings velocity, or engagement levels with sellers and buyers, testing the tools that might be helpful? Thank you. Jamie Iannone: Yes, so first let me talk about kind of the e-commerce piece. Specifically, we did customer acquisition costs. This is where eBay has a unique advantage. So first, the vast, vast majority of our traffic is organic. People coming to the eBay app or typing in ebay.com, which is a key benefit. The second is our ability to monetize users that we acquire across multiple categories, is a huge win for us. So, when you look at someone coming in into a single focus category, they end up shopping across categories on the site, usually more than they buy in other categories from that from that one initial acquisition. So our ability to kind of manage the CAC and the CLTV, is I think much different than others. And that’s just based on the scale of what we have. I think our focus on non-new and seasoned, is very unique and our drive towards refurb, luxury, authentication, and the trust we put on the marketplace is a real differentiator for us. For example, we’ve seen the fourth straight quarter now of growth in our luxury business. Our refurbished business maintained double-digit growth all in a somewhat challenging macro environment. So that’s unique. As we look at the generative AI, it’s still early days. I can give you some of the early perspectives, but when I’m having a hard day, I go read the message boards about how consumers feel about these features that they’re launching, because they just love it. They love the speed with, which it allows them to get more inventory on the site. And what we hear is, this is going to lock more of their things in their closet, and their garage, because we’re speeding up the listing process. So today, it’s already been used by millions of sellers, our first version of the magical listing process, and over 90% of customers actually take the content that we have and include it in their listing. It has a satisfaction score of 80, which is very high for a brand new release on the product, and continues to get better each day. And then, we’ve had our other products and employee beta, and now out to a single percentage point of our customers, things like the enhanced background that I talked about. And I’ve been around this business for 20 years. There is nothing that moves product, like better pictures on the marketplace. It’s why we now have larger pictures on our desktop view item. But the quality now of being able to take a picture that you take on your rug or even on your unmade bed, and put it on a beautiful background and make the product look more appealing for sale, we’re excited to be able to get features like that out. So, we’ll continue to update you on the progress, but I can tell you that the anecdotal feedback is really good, the quantitative numbers, of what we’re seeing is helpful, and the pace of innovation around AI is exciting. Colin Sebastian: Great, thank you. Operator: Your next question comes from the line of Ken Gawrelski from Wells Fargo. Please go ahead. Ken, your line is on mute. Kenneth Gawrelski: Sorry about that. Sorry, my fault. I was on mute. Sorry about that. Could you – I was hoping maybe you could talk a little bit about – you’ve talked about – some of the weakness you’ve seen and continue to see in the macro side, especially in Europe. Could you talk about if there are certain cluster segments, or even categories that you’re seeing better trends, or improving trends relative to those that might be still under pressure? Jamie Iannone: Yes. What I would say is that, if you look at both U.K. and Germany, two of our largest markets, they’re both experiencing a GDP decline. So U.K., which is our second largest market, entered a technical recession. If you look at the cost of living challenges that are happening over there, that’s obviously been a challenge. And the German business has been in recession and is still experiencing negative e-commerce growth from that standpoint. But one of the unique values of eBay is that, we offer great values on the marketplace. So, I think the reason that our refurbished business, for example, is so strong, our luxury business is so strong, is that even in challenging times, people are looking for a value on the marketplace. And so, I would say I’d call out specific areas like that. Refurbished growing double-digits, I think, is a sign of the consumer looking for value. Also, the consumer was looking for a lot of value in December, and we really lean into that, across the globe. And that’s been a big differentiator for us. And our parts and accessories business, continues to perform well. It grew mid-single digits for the fourth straight quarter, and consumers looking for a value in what we offer there. So, some puts and takes across categories, but those are the ones that, I think I would highlight, and what we see happening, especially over in Europe. Kenneth Gawrelski: Thank you. Operator: Your next question comes from the line of Justin Post from Bank of America. Please go ahead. Justin Post: Great, thank you. I guess I asked about buyers. You talk about your GMV getting back to growth. What will we see with buyers, and what are you seeing within the metrics as far as churn, or new activations that give you encouragement right now? Thank you. Jamie Iannone: Yes, our buyers are exactly where we expected them to be. When you think about our enthusiast buyers, which is what we really track and go after. We said that, we would see a stabilization, coming off of the COVID time period, and that’s what we’re exactly seeing. It was roughly flat quarter-over-quarter at $16 million. We’ve been driving, healthy buyer acquisition and buyer retention, especially in our focus categories. Our enthusiast buyers are spending over $3,000, which is essentially like membership level spends, when you think about it. So, our acquisition is healthier year-over-year. Our reactivation is healthier year-over-year, and our churn is down year-over-year. So, we’re pleased with what we’re seeing on the buyer side, and we’re continuing to lead in with new advancements and capabilities for buyers. What I called out on the call is things like, we have over 100 million vehicles stored in my garage, and we’re using now predictive maintenance, to say it’s time to change, this element for your car. Here’s the parts on eBay that fit it exactly. They’re backed by guaranteed fit. So, we continue to build new tools for buyers, to activate them onto the site and drive retention, and that’s been working very well. Justin Post: Great. Thank you. Jamie Iannone: Thanks, Justin. Operator: Your next question comes from the line of Doug Anmuth from JPMorgan. Please go ahead. Doug Anmuth: Thanks for taking the questions. Jamie, I just wanted to follow-up on generative AI. Your comments were pretty interesting on, how your large language models from scratch are working better. I was hoping you could talk a little bit more about that, some of the advantages that you’re seeing. And then, as you’re doubling GPUs through ’24, maybe, Steve, can you talk a little bit about the impact there, just on the product development bucket and how we should think about that in context of the deleverage that we saw last year on that line? Thanks. Jamie Iannone: Yes, Doug. One of the things I’m excited by is that, we’ve had this model of building in a hybrid environment, and having extremely large private cloud, which has allowed us to manage our cost infrastructure, even as we’ve grown to, now close to 2 billion listings on the marketplace. But more importantly, the benefit of being able to take our 30 years of really rich data of e-commerce and combine that in a hybrid sense, in some cases with open source LLMs. In some cases LLMs that we built, in another case with commercial LLMs, makes us able to do those, in a really efficient manner, without really massively impacting our cost structure, in any meaningful way. Also, having good latency in terms of getting it back, and also being able to fine tune the quality of the data of what’s coming back from an inference has been important for us. So, we’ve used across the board all different models. We started, in some cases, with some commercial models and then moved those to open source, or internal models and as we’ve refined them and gotten better. And that’s been working out really well for us. Like I said earlier to the question about magical listing, when we look at the scale and volume of the millions of listings that we get each day and what consumers are hitting us with. Making sure that we have, an incredible amount of quality in terms of what’s happening with the AI and ease of use. And thus far, really positive feedback from it. The models are working well. And what’s great is that the team iterates every single week, to make them better. Steve, maybe you just want to cover how we’re managing the cost. Steve Priest: Yes of course, Jamie. Hi Doug, good to speak to you. As Jamie said, we’re really excited about the opportunity, to drive further efficiencies and improve productivity, across eBay through the AI technology. We’re doubling our GPU capacity in the first quarter, which is going to give us a lot, of expanded capabilities, specifically regarding to costs. The costs associated with Gen AI, including our GPU racks, are contemplated in our full year CapEx guidance range, which we laid out. And it’s pretty much in line with historical averages. All the OpEx costs are contemplated on our guide. I think it’s fair to say, our size and scale at eBay, is a distinct advantage, when it comes to this sort of additional infrastructure investment. Jamie Iannone: The last thing I’d say is that, that refers a lot to how we’re using it with our consumers. I would say internally across the organization, we’re also pushing very aggressively, to drive productivity in the organization. So whether that be all of our engineers now using copilot tools as they do development in our customer support centers, we’ve been using AI to really change the level of engagement we have with customers and the productivity. I call it the success of our employees there, where we summarize contacts from customers to make it easier, summarize initial responses, all the things that we can do, when you think about our scale of, over a million self-service queries a week, in a customer service perspective, AI is incredibly helpful there. So those are just two examples of how we’re using it across the board, to drive productivity in the organization. Doug Anmuth: Thank you both. Very helpful. Operator: Your next question comes from the line of Lee Horowitz from Deutsche Bank. Please go ahead. Lee Horowitz: Great. Thanks for the question. So your U.S. business is stabilized at this point and is presumably set to return to growth sooner than the total. This is obviously happening in the face of U.S. e-commerce competition that has grown increasingly intense, with the introduction of low price Chinese competitors. Can you spend some time talking about, how your strategy of leading into enthusiasts and enthusiasts categories perhaps shields you, from this incremental competition. And any update holistically on maybe some of the vertical players, and some of your key focus categories, and how competition has evolved over the last year? Jamie Iannone: Yes, specifically on the low price, and if you’re referring to like the [T-Move] machine, we really haven’t seen a significant impact from them on our business. We really have a differentiated strategy, with what we’re doing with our focus categories and going after non-new in season, for the business. And years ago, we really moved away from the low ASP, low quality items on our marketplace. And that hasn’t been a focus for us for many years now. So I think, that’s the first key differentiation I’d call out. The second is that, obviously some of the competition is spending a lot of money from a marketing standpoint in the marketplace. But one of the great benefits of eBay, is just the vast amount of organic traffic we have. The vast, vast part of our traffic either comes directly to the app or types in eBay.com. So, we’re less reliant on paid from that perspective. The last thing I’d say comes back to kind of the CAC, CLTV question, which is, we can have one of the most healthiest CACs out there in the marketplace, because of our ability to drive CLTV, really driving by the moves we’ve made to not be focused on active buyers, but really on acquiring enthusiast buyers, or quickly moving new buyers up to, become enthusiast buyers. And because of the cross category shopping nature of the business allows us to drive that CLTV higher for us. And then finally, the opportunity to turn them into sellers, or to have buyers who sell on the marketplace also helps with that overall equation. And those are really key differentiators for us at business and why we feel really well positioned on a go forward basis in the e-commerce landscape. Operator: Your next question comes from the line of Tom Champion from Piper Sandler. Please go ahead. Thomas Champion: Hi good afternoon. Jamie, I’m wondering, if you could a little bit more about the C2C initiative in Germany, and maybe what’s one or two key features that allowed you to, crack the code therein in that geography. I know it’s been for a while. And then where do take this next, I mean presumably does it port to the U.K. How do you think about it, extending in other geographies? Thank you. Jamie Iannone: Yes, when you think about our focus category strategy of really kind of leaning in on this specific area, driving the CSAT to a whole double-digit level, we essentially apply that to a certain segment of our business in Germany to our C2C segment. And that’s exactly what we’re seeing, Tom is, greater than 20 point improvement in NPS in that business, which is really great for us. It’s an important business. And what we really focused on was designing around the needs of the buyer. So that’s searching SEO improvements, specifically around language needs in that market. The second was, really a focus on local and things like map based browsing in that market. Given the geography of it, we have more of that type of business in Germany than we do, for example, in our U.S. business and leaning into it. And the third is doing pricing adjustments for our C2C business there, really leaning in to being able to drive buyers, who sell and bring more C2C inventory on the marketplace. And that’s been working well for us. We’ve seen double-digit increases in buyers who sell on the platform and a really kind of healthy business there in terms of first gen listings, that type of thing. So, with everything that we do, we look at, what’s successful, what do we take to other markets, and we’ll continue to do that and look at that on a go forward basis. But overall, we feel really good about the metrics that we’re seeing in Germany, and the health of the business and the strong numbers we’re putting up despite negative e-commerce growth in that marketplace. Thomas Champion: Thank you. Operator: Your next question comes from the line of Michael Morton from MoffettNathanson. Please go ahead. Michael Morton: Hi. Thank you for the question. Two, if I could. Just following up on the opportunities around AI, there’s a view in the market that it allows you to run more sophisticated campaigns when you have large SKU offerings for big e-commerce platforms. So wondering, if you’re seeing a benefit of that now, or if it’s something that’s always been a part of your business. 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We use it in our marketing to do much more personalized marketing, things like subject lines that can be really tailored based on what’s happening on the business. When I think about our CBT business, it remains very strong on the marketplace. So, we’ve built more and more features to make CBT easier for both buyers and sellers. I’d call out the work that we did in payments on buyer and seller FX, really making that seamless. We’ve talked over the last two quarters about eBay international shipping with the concept of really opening up the 190 different geographies that we have around the world, to our sellers from that perspective. And so, it will continue to be a focus, will continue to make it easier and easier for buyers and sellers, to interact across borders and drive that strategy forward. Operator: Your next question comes from the line of Alexandra Steiger from Goldman Sachs. Please go ahead. Alexandra Steiger: Great, thank you for squeezing me in. 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Mullen Stock Price Prediction in 2030: Bull, Base and Bear Forecasts

Mullen Technologies, Inc. (NASDAQ: MULN) might play a dramatic role in the electric vehicle (EV) industry over the coming years by launching an affordable and stylish crossover SUV with innovative solid-state battery technology. Based in California, Mullen’s mission is to democratize electric mobility from the affluent to the average American. Indeed this is an ambitious […] The post Mullen Stock Price Prediction in 2030: Bull, Base and Bear Forecasts appeared first on 24/7 Wall St.. Mullen Technologies, Inc. (NASDAQ: MULN) might play a dramatic role in the electric vehicle (EV) industry over the coming years by launching an affordable and stylish crossover SUV with innovative solid-state battery technology. Based in California, Mullen’s mission is to democratize electric mobility from the affluent to the average American. Indeed this is an ambitious vision.  It comes with tough challenges to stand up massive manufacturing operations and deliver on its lofty expectations. Established automakers have taken notice, and the contest to take a little aspiring startup to a power player in the automotive industry has already started. The Mullen FIVE crossover has a polymer battery technology which is right in the thick of the fight. Investors will know by 2030, if the FIVE crossover and the company’s proprietary polymer battery technology will push Mullen into an electric vehicle market leadership position. Bull Case Famous bull in the financial district of Manhattan In a very optimistic scenario, the stock could rise to well over $50 per share by the end of the decade. The bullish case centers around Mullen’s reach into the electric vehicle market and commercial successes in battery technology. The FIVE crossover already has over 150,000 preorders and has the potential to take over a sizable market share north of 5% of the U.S. electric vehicle market. Revenues of $5 billion across 2030 would follow and offer a staggering 138%, five-year compound annual growth rate (CAGR). Improvements to the company’s traveled business trajectory are already apparent as net losses will decrease from $44 million in 2021 to $739 million in 2022 before material vehicle deliveries are reached. A 25% net margin in the bullish case would move to $1.25 billion in net income on $5 billion in revenue. Assuming a 650 million share count and an extra 150 million to allow for dilution means diluted earnings per share of $8.33. Even factoring a P/E of 25, that could push the stock above $200. This would represent an incredible amount of growth for Mullen. Base Case Traders patiently waiting With steady growth, capturing 2% of the U.S. EV market share and the manufacturing of more than 50,000 vehicles per year, Mullen could see its stock price in the $15 – $30 range by 2030. By this time, with a stable base of revenue, it is estimated that revenue will be under $2 billion assuming a moderate growth trajectory with a 76% five-year CAGR.  The company could have similar 5% net margins to viable established automakers which would yield a net income of $100 million. With this and an estimated 150 million diluted shares, that makes for an EPS of $0.67. Put a P/E of 20 on that stock and it could see a realistic price of about $13, which would make for a solid investment return without overly optimistic growth assumptions. Bear Case Trader in shock after price plunge With significant sales and manufacturing setbacks, Mullen’s stock could struggle to maintain above $5 by 2030. Any delays in entering the market for its EVs are likely to be costly as there is a risk of losing critical market segments to competitors. If Mullen can only manage $500 million, with break-even 0% margins  or worse, while potentially increasing its share count of 500 million or so by 2030, there is unlikely to be much in the way of earnings per share. The stock may linger below $5, as risk factors and uncertainties mount up for Mullen.  Without positive earnings, a meaningful valuation is hard to achieve. Competition from Tesla Inc. (NASDAQ: TSLA) is a big threat to Mullen.  It has a broader range of EVs in production and has established itself as a leader in the industry while Mullen is a small startup. Tesla also has a significantly higher production capacity and revenue compared to Mullen. Both companies aim to leverage technology to improve their vehicles, but Tesla has a demonstrated track record of innovation while Mullen’s solid-state battery technology is still in development. In terms of market position, Tesla has a dominant share of the EV market while Mullen is yet to gain any significant market share. Finally, Tesla has a much higher valuation and is a profitable company, while Mullen is not a profitable company and has a much lower market cap.  Lucid Group Inc (NASDAQ: LCID) is already in trouble.  Is Mullen next?  Final snapshot CP+ Camera Show Mullen Technologies’ journey to the top ranks of the electric vehicle space is full of difficulties and obstacles that are out of their control and ones that come from the management’s strategic and operational decision-making.  Its creative approach and product lineup carry the potential to significantly disrupt the status quo, but its ability to do so rests upon its ability to surmount major production and technology hurdles. A $15-25 stock price in 2030 is a reasonable baseline projection, with a wide array of potential variations depending upon how Mullen executes upon the milestones that underlie its strategic objectives. Investors and industry watchers will want to closely watch the company’s planned sequence of new model introductions, production ramp efforts, and battery progress to judge how well it is ultimately faring in bringing its long-range strategy to the physical world. Mullen’s path to mass electric vehicle production faces risks, but the disruptive potential exists if executed successfully. Reasonable 2030 forecasts range from $0-25 per share, with upside and downside. Potential key milestones to monitor include new model launches, production ramp-up, and battery advancements.  Here is a quantitative snapshot of the 3 scenarios:   Bull Case Base Case Bear Case 2030 Revenue $5B $2B $0.5B 2030 Net Margin 25% 5% 0% 2030 EPS $8.33 $0.67 $0 2030 P/E Ratio 25x 20x – Potential 2030 Stock Price $200+ $13.....»»

Source:  247wallstCategory: blog~37 min. ago Related News

30 American Military Guns From the 2000s

The 2000s were a defining era for the U.S. military, with invasions in Afghanistan and Iraq leading to the U.S. Global War on Terror. During this time, the U.S. military was seeking to outfit its soldiers with the most advanced gear and small arms available to effectively take out terrorists. The guns introduced and used […] The post 30 American Military Guns From the 2000s appeared first on 24/7 Wall St.. The 2000s were a defining era for the U.S. military, with invasions in Afghanistan and Iraq leading to the U.S. Global War on Terror. During this time, the U.S. military was seeking to outfit its soldiers with the most advanced gear and small arms available to effectively take out terrorists. The guns introduced and used during this time would ultimately reflect the main tactics used by U.S. Armed Forces in these wars. (These are the 26 guns in the U.S. Army arsenal.) Out of the types of guns introduced in this decade, perhaps the most prevalent were the sniper rifle or anti-materiel rifle. A variety of these rifles were introduced, along with assault carbines and designated marksmen rifles, all of which would go on to define the U.S. military during these years. To identify American military guns introduced in the 2000s, 24/7 Wall St. reviewed a catalog of small arms from Military Factory, an online database of military vehicles, arms and aircraft. We ordered these guns alphabetically. We included supplemental information regarding type of small arm, year introduced, manufacturer, firing action, caliber and feed. The Barrett M107 is one example of the anti-materiel rifles that came out during this decade. Introduced in 2008, the M107 is chambered for .50 caliber rounds (12.7x99mm NATO rounds) with a 10-round detachable box magazine. It is designed to take out materiel targets but can also be used in an anti-personnel capacity. Separately, the MPS AA-12, otherwise known as the “Sledgehammer”, entered service in 2005 as an assault combat shotgun. Chambered for 12-gauge rounds, this shotgun can be equipped with an 8-round detachable box magazine or a 20-to-32 round drum. The Sledgehammer is especially effective in urban combat zones and when breaching doors or storming buildings. (These are the 34 firearms used regularly by the U.S. military.) Here is a look at 30 American military guns from the 2000s: AIC Mag-Fed 20mm Type: Anti-materiel rifle Year introduced: 2008 Manufacturer: Anzio Ironworks Corporation Firing action: Manually-actuated bolt-action Caliber and feed 14.5mm, 20mm Vulcan, Anzio 20-50; Single-shot or 3-round detachable box magazine Barrett M107 Type: Anti-materiel / anti-personnel sniper rifle Year introduced: 2008 Manufacturer: Barrett Firearms Company Firing action: Recoil operated, rotating bolt, semi-automatic Caliber and feed .50 BMG (12.7x99mm NATO); 10-round detachable box magazine Barrett REC7 Type: Assault carbine Year introduced: 2007 Manufacturer: Barrett Firearms Company Firing action: Semi-automatic, gas-operated piston Caliber and feed 5.56x45mm NATO, 6.8 SPC; 30-round detachable box magazine FERFRANS SOAR Type: Assault carbine Year introduced: 2004 Manufacturer: FERFRANS Firing action: Gas-operated, rotating bolt, direct impingement system Caliber and feed 5.56x45mm NATO, .223 Remington; 20-, 30- or 90-round detachable box magazine Five-seveN Type: Semi-automatic pistol Year introduced: 2000 Manufacturer: Fabrique Nationale Firing action: Delayed blowback, semi-automatic Caliber and feed 5.7x28mm; 10-, 20- or 30-round detachable box magazine FN Mk 46 / Mk 48 Type: Light weight machine gun Year introduced: 2003 Manufacturer: Fabrique Nationale Firing action: Gas-operated, open bolt, full-automatic Caliber and feed 5.56x45mm NATO, 7.62×51 NATO; Disintegrating belt FN SCAR (Mk 16 / Mk 17) Type: Modular automatic assault rifle Year introduced: 2009 Manufacturer: Fabrique Nationale Firing action: Gas-operated, rotating bolt Caliber and feed 5.56x45mm NATO, 7.62x51mm NATO; 20- or 30-round box magazine H-S Precision HTR Type: Sniper rifle Year introduced: 2000 Manufacturer: H-S Precision Firing action: Manually-operated bolt-action Caliber and feed .338 Lapua Magnum, .308 Winchester, .300 Winchester Magnum; 3-, 4- or 10-round detachable box magazine Intervention Type: Bolt-action sniper rifle Year introduced: 2001 Manufacturer: CheyTac Firing action: Manually-actuated turn-bolt-action Caliber and feed .408 CheyTac, .375 CheyTac; 7-round detachable box magazine Kel-Tec PF-9 Type: Semi-automatic pistol Year introduced: 2006 Manufacturer: Kel-Tec Firing action: Semi-automatic, double action, recoil-operated, locked breech Caliber and feed 9x19mm Parabellum; 7-round detachable box magazine M110 SASS Type: Designated marksman rifle Year introduced: 2007 Manufacturer: Knight’s Armament Firing action: Gas-operated, rotating bolt Caliber and feed 7.62x51mm NATO; 10- or 20-round detachable box magazine M32 MGL Type: Six-shot grenade launcher Year introduced: 2006 Manufacturer: Milkor Firing action: Spring-driven rotating cylinder Caliber and feed 40x46mm; Six-shot non-removable rotating cylinder M39 Enhanced Marksman Rifle Type: Designated marksman rifle Year introduced: 2008 Manufacturer: USMC Armorers Firing action: Gas-operated, rotating bolt Caliber and feed 7.62x51mm NATO; 20-round detachable box magazine M4 MWS Type: Carbine rifle Year introduced: 2004 Manufacturer: Knight’s Armament Firing action: Gas-operated, semi-automatic Caliber and feed 5.56x45mm NATO; 30-round detachable box M4-Type Type: Assault carbine Year introduced: 2000 Manufacturer: Bushmaster Firearms International Firing action: Gas-operated rotating bolt, semi-automatic or selective-fire Caliber and feed .223 Remington, 5.56x45mm NATO, 6.8mm Remington SPC, 7.62x39mm; 26- or 30-round detachable box magazine Mk 14 Mod 0 EBR Type: Designated marksman rifle Year introduced: 2004 Manufacturer: Smith Enterprises Firing action: Gas-operated, rotating bolt, semi-automatic Caliber and feed 7.62x51mm NATO; 20-round detachable box magazine Mk 47 Striker AGL Type: Automatic grenade launcher Year introduced: 2006 Manufacturer: General Dynamics Firing action: Short-recoil, belt-fed Caliber and feed 40x53mm; Belt MPS AA-12 (Sledgehammer) Type: Assault combat shotgun Year introduced: 2005 Manufacturer: Military Police Systems Firing action: Selective-fire, gas-operated, locked breech Caliber and feed 12-gauge; 8-round detachable box, 20- or 32-round drum Navy Mk 12 SPR Type: Designated marksman rifle Year introduced: 2002 Manufacturer: Knight’s Armament / Colt Manufacturing / ArmaLite Firing action: Gas-operated, rotating bolt Caliber and feed 5.56x45mm NATO; 20- or 30-round detachable box magazine PDW Type: Compact assault rifle Year introduced: 2006 Manufacturer: Knight’s Armament Firing action: Gas-operated, rotating bolt Caliber and feed 6x35mm; 30-round detachable box magazine PSRL-1 (RPG-7) Type: Anti-armor / anti-personnel shoulder-fired rocket launcher Year introduced: 2009 Manufacturer: AirTronic Firing action: Rocket propelled grenade Caliber and feed 40mm; Single-shot, reusable launch tube Ruger SR Type: Semi-automatic pistol Year introduced: 2007 Manufacturer: Ruger Firing action: Short-recoil, locked breech, semi-automatic Caliber and feed 9x19mm Parabellum, .40 S&W, .45 ACP; 9-,10-,15-, or 17-round detachable box magazine Ruger SR-556 Type: Semi-automatic rifle Year introduced: 2009 Manufacturer: Ruger Firing action: Gas-operated, rotating bolt, semi-automatic Caliber and feed .223 Remington, 5.56x45mm NATO, 6.8mm Remington SPC; 30-round detachable box magazine Smith & Wesson Model 500 Type: Six-shot revolver Year introduced: 2003 Manufacturer: Smith & Wesson Firing action: Hammer with rotating cylinder, double-action Caliber and feed 12.7mm (.50 caliber); 5-round rotating cylinder Springfield XD(M) Type: Semi-automatic pistol Year introduced: 2006 Manufacturer: Springfield Armory Firing action: Striker-fired, semi-automatic, short recoil-operated Caliber and feed 9x19mm Parabellum, .40 S&W, .45 ACP; Detachable box magazine Stealth Recon Scout A1 (SRS-A1) Type: Bullpup bolt-action sniper rifle Year introduced: 2008 Manufacturer: Desert Tactical Arms Firing action: Manually-actuated bolt-action system Caliber and feed .308 Winchester, .338 Lapua Magnum, .300 Winchester Magnum; 5-, 6- or 7-round detachable box magazine TAC-338 Type: Sniper rifle Year introduced: 2005 Manufacturer: McMillan Tactical Products Firing action: Manually-actuated bolt-action Caliber and feed .338 Lapua Magnum, .338 Norma Magnum; 5-round magazine TAC-416 Type: Anti-materiel rifle Year introduced: 2005 Manufacturer: McMillan Tactical Products Firing action: Manual bolt-action, single-shot Caliber and feed .416 Barrett; Single-shot TAC-50 Type: Anti-materiel / sniper rifle Year introduced: 2000 Manufacturer: McMillan Tactical Products Firing action: Manually-operated bolt-action Caliber and feed .50 BMG (12.7x99mm NATO); 5-round detachable box magazine XL79 Type: Grenade launcher Year introduced: 2009 Manufacturer: Defcom Firing action: Breech-loading, double-action Caliber and feed 40x46mm; Single-shot Sponsored: Tips for Investing A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit. The post 30 American Military Guns From the 2000s appeared first on 24/7 Wall St.......»»

Source:  247wallstCategory: blog~37 min. ago Related News

7 Bagel Brands to Avoid

What is your go-to bagel? Perhaps you enjoy the simple things in life, such as a lightly toasted bagel topped with nothing more than a small pat of butter. Or maybe cream cheese is your topping of choice. Do you prefer to turn your bagel into a sandwich with egg, cheese, and bacon? (We’re starting […] The post 7 Bagel Brands to Avoid appeared first on 24/7 Wall St.. What is your go-to bagel? Perhaps you enjoy the simple things in life, such as a lightly toasted bagel topped with nothing more than a small pat of butter. Or maybe cream cheese is your topping of choice. Do you prefer to turn your bagel into a sandwich with egg, cheese, and bacon? (We’re starting to get hungry now.) Or is the Jewish delicacy of bagels and lox your ride-or-die? Along with virtually unlimited topping possibilities, bagels also come in a wide variety of flavors, from plain to cinnamon raisin to onion to the very popular everything bagel. No matter how you take your bagel, the chewy, bready goodness is a delightful way to start your day. However, as with most good things in life, not all bagels are created equal. We set out to find some bagel brands that do not measure up. (And while we’re on the subject of breakfast, here are six coffee brands to avoid.) 24/7 Wall St. consulted five different food review websites, blogs, and vlogs. Using an aggregate scoring system, we found seven bagel brands that were consistently rated as subpar. There was also one very clear winner or, more accurately in this case, loser. Here is a look at the seven bagel brands to avoid.  First Things First People walking by a Pick-a-Bagel, a bagel shop in Manhattan As we get started, it must be noted that we only included store-bought bagels in our survey. Any bagel aficionado will tell you that no store-bought bagel can compete with the bagels made in a legit bagel shop. Some bagel purists even refuse to call these store-bought bread products “bagels.” One of the main reasons for the disparity between store-bought and artisan bagels is the cooking process. In a true bagel shop, the bagels are hand-rolled. Then they are boiled before they are baked. The crust is cooked during the boiling, which gives it a nice, chewy texture. Store-bought bagels are typically not boiled. They are steam-baked, which adds a little moisture to the product while it bakes. The difference is stark, though. As one Redditor put it, “Bagels are supposed to be boiled. If you buy them from a bagel store fresh, then they are probably real bagels. Grocery stores on the other hand don’t have boiled bagels…just bagel-shaped bread trying to lie to you.” As we evaluate these bagel brands, we readily admit that no store-bought bagel is on the same level as one from a bagel shop. However, if you don’t live near a New York City or Montreal bagel shop, then a grocery store bagel might be your only option. If so, there are some pretty good choices available to you. As we searched for bagel brands to avoid, we also found some brands that scored rather well with our reviewers. Aunt Millie’s, Costco’s Kirkland Signature, and Dave’s Killer Bread Plain Awesome Organic Bagels received high praise from the critics. If you must opt for a store-bought bagel, give these brands a shot. However, the following seven brands did not fare as well in our survey. Prices may vary depending on the retailer and location. 7. Thomas’ Thomas’ bagels on display Product: Plain Bagels, 6-count Expected Price: $4.18  Thomas’ Bagels Review Thomas’ Cinnamon Raisin Bagels Thomas’ bagels are larger than many other store-bought bagels. They are also not refrigerated or frozen, but instead are found in the bread aisle at the grocery store. One rather harsh review compared the taste to a “decent store-bought hamburger bun.” Other reviewers were a bit more generous in their critiques. One noted that the bagel featured a slight sweetness which made for a more pleasant experience. However, in the end, it is a store-bought bagel without any real appeal. Thomas’ English Muffins are some of the best you will find at your local grocery store. Buy them, for sure. However, if bagels are on your list, Thomas’ won’t “wow” you in any way. It also doesn’t help that they are among the priciest bagels on this list. 6. Whole Foods 365 Whole Foods 365 logo Product: Plain Bagels, 6-count Expected Price: $2.69  Whole Foods 365 Bagels Review Whole Foods bag Reviewers noted that these bagels were small. One compared them to the size of a hockey puck. However, the size could be overlooked if they tasted like a quality bagel. Sadly, that is not the case. These bagels are quite bland. One reviewer said that a Whole Foods 365 bagel reminded them of “the type of bagel that would be sitting in a plastic case at a motel’s free continental breakfast.” There is nothing overtly offensive about these bagels. The same cannot be said about some of the other bagels on this list. However, Whole Foods 365 bagels are also wholly unremarkable. Given Whole Foods’ reputation for quality, shoppers can and should expect more than these bagels deliver. 5. L’Oven Fresh L’Oven Fresh plain bagels Product: Plain Bagels, 6-count Expected Price: $2.15  L’Oven Fresh Bagels Review L’Oven Fresh plain bagels Aldi is the fastest-growing grocery store chain in the U.S. Shoppers seem more than willing to “rent” grocery carts for a quarter and bag their own groceries in return for the significant savings offered by this off-beat grocery chain. More than 90% of products sold at Aldi are private label, many of which can easily go toe-to-toe with pricier major brands. The L’Oven Fresh bagels, however, are not among them. One reviewer described it as more of a roll than a bagel. A slightly strange aftertaste was also noted. 4. Lender’s Lender’s Bagels Product: Plain Bagels, 6-count Expected Price: $2.74 Lender’s Bagels Review Lender’s Bagels Lender’s was founded in 1927. The company pioneered the frozen and the pre-cut bagel. These innovations allowed the company to mass-market its product, though bagel purists may find such things abhorrent. Lender’s bagels were described as “bland and pillowy” by one reviewer. They lack the chewy texture that is the hallmark of a high-quality bagel. Another reviewer was even harsher in their criticism, saying the bagel simply tasted like enriched white bread and it “should only be used as a conduit to get cream cheese into your face.” 3. Pepperidge Farm Pepperidge Farm Mini Bagels Product: Mini Bagels, 12-count Expected Price: $4.78 Pepperidge Farm Bagels Review Pepperidge Farm Mini Bagels Pepperidge Farm produces a wide variety of cookies named after European cities such as Milano, Brussels, and Bordeaux. However, it is perhaps most famous for its Goldfish crackers. This childhood favorite is still going strong more than 60 years after its initial release. Pepperidge Farm has a long line of products to be proud of, but its bagels cannot be counted among them. One of our reviewers described these bagels as “dry and chalky, even dusty.” This critic went on to say that cream cheese was a necessary “throat lubricant” just to swallow the bagel. Is that an overstatement? Possibly. Are there better bagels than Pepperidge Farm? Definitely. 2. Sara Lee Sara Lee logo Product: $2.18 Expected Price: Plain Bagels, 5-count Sara Lee Bagels Review Sara Lee desserts Sara Lee’s longtime advertising mantra said, “Everybody doesn’t like something, but nobody doesn’t like Sara Lee.” Well, several of the critics we consulted would take issue with that statement, because they certainly did not like Sara Lee’s bagels. The consistency of these bagels was compared with that of a Kaiser roll. One reviewer even noted a chemical-like taste. Sara Lee is certainly a go-to brand for pies and pound cakes. For bagels, though, consider looking elsewhere. Oh, and it’s also just bad form to offer 5-count packs instead of the usual 6-count. C’mon, Sara. Do better. 1. Trader Joe’s Trader Joe’s storefront Product: Cinnamon Raisin Bagels, 6-count Expected Price: $2.99 Trader Joe’s Bagels Review Trader Joe’s sign Trader Joe’s was clearly the least favorite among the bagel critics in our survey. When a reviewer refers to this bagel as “all out abysmal,” that probably tells you all you need to know. Reviewers noted the interior of the bagel was “jagged and shaggy.” The dry texture was compared to sawdust. The taste was likened to water crackers, with one reviewer calling it “vaguely cardboardy.” Another critic compared these bagels to “really thick toast made with unsatisfactory bread.” Yet another reviewer said that, after toasting, the bagel’s texture was “extremely crumbly” and the taste was exceedingly bland. We could go on, but you get the point.  On its website, Trader Joe’s claims that its cinnamon raisin bagels are “really good bagels.” We couldn’t find a single reviewer that agreed with this assessment. There are plenty of good, even amazing, products available at Trader Joe’s. The bagels? Not even close. URGENT – New Seats Available (sponsored) Top financial advisors are now accepting new clients for 2024! Finding the right advisor can be the difference between retiring early, or working forever. Don’t waste a moment matching with the right advisor for you. Every moment today can mean riches tomorrow, with the right advisor by your side. Use the advisor match tool below, or click here now, to find your financial freedom! The post 7 Bagel Brands to Avoid appeared first on 24/7 Wall St.......»»

Source:  247wallstCategory: blog~37 min. ago Related News

CEO Dumps 20 Million Ginkgo Bioworks Shares

Why did Ginkgo Bioworks CEO Jason Kelly chop 20 million shares from his stake in the company? Is no turnaround for the shares coming? The post CEO Dumps 20 Million Ginkgo Bioworks Shares appeared first on 24/7 Wall St.. Investors can learn a lot by observing how corporate insiders handle positions in their own companies. There are many reasons insiders may sell shares, such as buying a house, paying for college, or estate planning. Yet, they generally buy shares for only one reason: they believe they will make more money. Often, one of the largest and best-informed shareholders in any company is the chief executive officer. Let’s see whether Ginkgo Bioworks Holdings Inc. (NYSE: DNA) CEO Jason Kelly has been increasing or decreasing his share count over the past year and whether he knows something we don’t. What You Need to Know About Ginkgo Bioworks Biological production Ginkgo Bioworks develops platform for cell programming. Its platform is used to program cells to enable biological production of products, such as novel therapeutics, food ingredients, and chemicals derived from petroleum. The company serves various end markets, including specialty chemicals, agriculture, food, consumer products, and pharmaceuticals. (These 25 American industries are booming.) The biotechnology company was founded in 2008 and is headquartered in Boston, Massachusetts. That is also home to American Tower Corp. (NYSE: AMT), DraftKings Inc. (NASDAQ: DKNG), and General Electric Co. (NYSE: GE). Competitors of Ginkgo Bioworks include CRISPR Therapeutics AG (NASDAQ: CRSP) and Editas Medicine Inc. (NASDAQ: EDIT). Kelly has been chief executive at Ginkgo Bioworks since he co-founded it in 2008. The company posted annual revenue of about $315.0 million and has a market capitalization near $2.8 billion. Shares hit a 52-week low of $1.12 last month and were last seen down about 16% year to date but less than 4% lower than a year ago. The Nasdaq’s gain in the past year is more than 40%. How the CEO at Ginkgo Bioworks Is Trading Buying or selling? One year ago, Kelly owned more than 108.2 million shares, worth over $337.6 million. On last look, he owed more than 88.1 million shares, a stake of more than 4%. The stake was reduced by about 20 million shares, and its value decreased around 67.8% to near $108.6 million as the share price dropped. Shares a Year Ago Shares Today % Change 108,213,460 88,152,333 −18.54% As mentioned, CEO Jason Kelly might have sold shares for many reasons. Is it fair to interpret this reduction as a lack of confidence about a turnaround? The stock is down over 87% since a short seller report in late 2021. Earnings results fell short of expectations in the past few quarters. Only two of eight analysts recommend buying shares. However, they have a consensus price target of $3.08, which indicates they see the stock doubling in the next 12 months. Additional insiders to watch include the other co-founders: Austin Che (head of strategy), Reshma Shetty (president and chief operating officer), and Barry Canton (chief technology officer). Each has a stake a little larger than Kelly’s.   URGENT – New Seats Available (sponsored) Top financial advisors are now accepting new clients for 2024! Finding the right advisor can be the difference between retiring early, or working forever. Don’t waste a moment matching with the right advisor for you. Every moment today can mean riches tomorrow, with the right advisor by your side. Use the advisor match tool below, or click here now, to find your financial freedom! The post CEO Dumps 20 Million Ginkgo Bioworks Shares appeared first on 24/7 Wall St.......»»

Source:  247wallstCategory: blog~37 min. ago Related News

The US Navy’s Newest Ships

The United States leads the world with the most powerful military across all service branches – Army, Navy, Air Force, and  Marines.  Although the U.S. military is not the largest, it still takes the number one spot in a review of 145 nations, according to Global Firepower. Due to a variety of factors, which include […] The post The US Navy’s Newest Ships appeared first on 24/7 Wall St.. The United States leads the world with the most powerful military across all service branches – Army, Navy, Air Force, and  Marines.  Although the U.S. military is not the largest, it still takes the number one spot in a review of 145 nations, according to Global Firepower. Due to a variety of factors, which include elite forces in each branch, military expenditures, and a large array of combat units, the U.S. is most likely to remain at the top of its game. The American Navy is also regarded as the most powerful naval fleet across the globe and maintains its dominance by constantly introducing new ships or submarines into the fleet and decommissioning older ones that are not up to par with its technological requirements. In recent years the United States has introduced a handful of new vessels, each further adding to its naval superiority. (It may come as a surprise to learn that this country has the most military submarines.) Some of the recent additions are the Arleigh Burke-class destroyers, Virginia-class attack submarines, and Independence-class littoral combat ships. The U.S. Navy also expects to continue adding to these classes in the coming years. As it stands now, most of the U.S. naval fleet consists of destroyers, accounting for roughly 30% of all of its vessels. The newest destroyer is the Zumwalt-class, which is said to be the most technologically advanced surface combatant in the world and is currently comprised of three ships in service – the USS Zumwalt, the USS Michael Monsoor, and the USS Lyndon B. Johnson. Submarines are also a major component of the fleet, and these account for another quarter of the force. The rest of the fleet is filled with littoral combat ships, cruisers, amphibious assault ships, and aircraft carriers. The Navy announced it will be decommissioning some of its Nimitz-class aircraft carriers in the next few years, and will replace them with the new Ford-class aircraft carriers. The USS John F. Kennedy aircraft carrier is expected to replace the USS Nimitz in 2025, and the USS Enterprise is expected to replace the USS Dwight D. Eisenhower in 2028. (These are the 19 ships and submarines of the U.S. Navy fleet.) To determine the U.S. Navy’s newest ships, 24/7 Wall St. reviewed the military data site World Directory of Modern Military Warships’ directory of all active ships in the U.S. and cross-referenced it with data from the Naval Vessel Register. We compiled data on all ships and submarines — 32 in total — that have been commissioned in the service of the U.S. Navy for five years or less and ranked them by age. It should be noted that this list is current as of October 15, 2023. Here is a look at the newest ships in the U.S. Navy: 32. USS Tulsa Commission date: 2/16/2019 Unit type: Littoral combat ship Class: Independence-class 31. USS Charleston Commission date: 3/2/2019 Unit type: Littoral combat ship Class: Independence-class 30. USS Paul Ignatius Commission date: 7/27/2019 Unit type: Destroyer Class: Arleigh Burke-class 29. USS Billings Commission date: 8/3/2019 Unit type: Littoral combat ship Class: Freedom-class 28. USS Cincinnati Commission date: 10/5/2019 Unit type: Littoral combat ship Class: Independence-class 27. USS Independence Commission date: 10/26/2019 Unit type: Littoral combat ship Class: Freedom-class 26. USS Hershel “Woody” Williams Commission date: 3/7/2020 Unit type: Expeditionary mobile base Class: Lewis B. Puller-class 25. USS Delaware Commission date: 4/4/2020 Unit type: Attack submarine Class: Virginia-class 24. USS Vermont Commission date: 4/18/2020 Unit type: Attack submarine Class: Virginia-class 23. USS Kansas City Commission date: 6/20/2020 Unit type: Littoral combat ship Class: Independence-class 22. USS Tripoli Commission date: 7/15/2020 Unit type: Amphibious assault ship Class: America-class 21. USS St. Louis Commission date: 8/8/2020 Unit type: Littoral combat ship Class: Freedom-class 20. USS Delbert D. Black Commission date: 9/26/2020 Unit type: Destroyer Class: Arleigh Burke-class 19. USS Oakland Commission date: 4/17/2021 Unit type: Littoral combat ship Class: Independence-class 18. USS Miguel Keith Commission date: 5/8/2021 Unit type: Expeditionary mobile base Class: Lewis B. Puller-class 17. USS Mobile Commission date: 5/22/2021 Unit type: Littoral combat ship Class: Independence-class 16. USS Daniel Inouye Commission date: 12/8/2021 Unit type: Destroyer Class: Arleigh Burke-class 15. USS Savannah Commission date: 2/5/2022 Unit type: Littoral combat ship Class: Independence-class 14. USS Frank E. Peterson Jr. Commission date: 5/14/2022 Unit type: Destroyer Class: Arleigh Burke-class 13. USS Minneapolis-Saint Paul Commission date: 5/21/2022 Unit type: Littoral combat ship Class: Freedom-class 12. USS Oregon Commission date: 5/28/2022 Unit type: Attack submarine Class: Virginia-class 11. USS Montana Commission date: 6/25/2022 Unit type: Attack submarine Class: Virginia-class 10. USS Fort Lauderdale Commission date: 7/30/2022 Unit type: Amphibious transport dock Class: San Antonio-class 9. USS Santa Barbara Commission date: 4/1/2023 Unit type: Littoral combat ship Class: Independence-class 8. USS Cooperstown Commission date: 5/6/2023 Unit type: Littoral combat ship Class: Freedom-class 7. USS Lenah H Sutcliffe Higbee Commission date: 5/13/2023 Unit type: Guided-missile destroyer Class: Arleigh Burke-class 6. USS Carl M. Levin Commission date: 6/24/2023 Unit type: Destroyer Class: Arleigh Burke-class 5. USS Canberra Commission date: 7/22/2023 Unit type: Littoral combat ship Class: Independence-class 4. USS Marinette Commission date: 9/16/2023 Unit type: Littoral combat ship Class: Freedom-class 3. USS Augusta Commission date: 9/30/2023 Unit type: Littoral combat ship Class: Independence-class 2. USS Jack H. Lucas Commission date: 10/7/2023 Unit type: Destroyer Class: Arleigh Burke-class 1. USS Hyman G. Rickover Commission date: 10/14/2023 Unit type: Attack submarine Class: Virginia-class Sponsored: Tips for Investing A financial advisor can help you understand the advantages and disadvantages of investment properties. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. Investing in real estate can diversify your portfolio. But expanding your horizons may add additional costs. If you’re an investor looking to minimize expenses, consider checking out online brokerages. They often offer low investment fees, helping you maximize your profit. The post The US Navy’s Newest Ships appeared first on 24/7 Wall St.......»»

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Protocol Village: Max Howell"s Tea Protocol Aims to Address Challenges in OSS Development

The latest in blockchain tech upgrades, funding announcements and deals. For the period of Feb. 29-March 6......»»

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Coinbase Adds "Smart Wallet" Feature, So Lengthy Seed Phrases Aren"t Needed

The smart wallet will be an addition to Coinbase Wallet SDK, and the embedded wallets feature will be powered by "wallet as a service.".....»»

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Hungary"s Viktor Orbán to visit former president Donald Trump at Florida home next week

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Navy wife wrongfully arrested, jailed in Virginia Beach

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3-Year-Old Among ‘Victims’ in Lauren Boebert’s Son’s Alleged Crime Spree

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The most terrifying thing about Putin is not that he’s delusional, but that he might be right

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Cowboys owner Jerry Jones ordered to take DNA test in paternity case

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Texas seized part of the US-Mexico border and blocked federal Border Patrol agents. Here’s what happened next

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Nikki Haley can"t win the Republican primary with 40%. But she can expose some of Trump"s weaknesses

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Watch: Missing girl found in Florida swamp after police spotted her from drone

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Bitcoin Surpasses $62,000 Following PCE Data; Bonk Emerges As Top Gainer

Bitcoin (CRYPTO: BTC) moved higher, with the cryptocurrency prices topping the key $62,000 level on Thursday. Ethereum (CRYPTO: ETH) also recorded gains, trading above the key $3,400 mark this morning. read more.....»»

Source:  benzingaCategory: blog~49 min. ago Related News
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Craft Cannabis Co. Grown Rogue Reports Gross Profit Increase In 2023, CEO Signals Expansion

Grown Rogue International Inc. released its audited 2023 results, displaying a robust 32% revenue growth to $23.4 million and a significant 102% spike in operating cash flow to $6.4 million year-over-year. CEO Obie Strickler attributes these achievements to the company's profitable scalability, cost control measures, and dedication to providing top-notch cannabis products. The financial highlights of 2023 include a gross profit of $12.7 million, increased from $8.1 million, with total expenses rising to $8.4 million. Income from operations rose to $4.2 million from $957,149. Adjusted EBITDA stood at $7.6 million, with free cash flow hitting $2.8 million. Operationally, Grown Rogue expanded its reach into new markets like New Jersey through strategic partnerships and investments, culminating in the closure of $8.0 million in convertible debentures. The company's 2024 outlook involves further operational enhancements, expansion into new markets, and continued market share growth, underscoring its commitment to sustained growth and excellence in the cannabis industry. read more.....»»

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Nasdaq Gains 100 Points Following PCE Data

U.S. stocks traded mostly higher this morning, with the Nasdaq Composite gaining around 100 points on Thursday. Following the market opening Thursday, the Dow traded down 0.07% to 38,923.11 while the NASDAQ rose 0.65% to 16,051.57. The S&P 500 also rose, gaining, 0.30% to 5,084.74. read more.....»»

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Immunic And 2 Other Stocks Under $2 Insiders Are Buying

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Top 3 Health Care Stocks You May Want To Dump In Q1

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NVIDIA To Rally Around 27%? Here Are 10 Top Analyst Forecasts For Thursday

Top Wall Street analysts changed their outlook on these top names. For a complete view of all analyst rating changes, including upgrades and downgrades, please see our analyst ratings page. Latest Ratings for NVDA DateFirmActionFromTo Mar 2022Goldman SachsReinstatesNeutral Feb 2022Summit Insights GroupDowngradesBuyHold Feb 2022MizuhoMaintainsBuy View More Analyst Ratings for NVDA View the Latest Analyst Ratings read more.....»»

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Tom Skilling delivers emotional final forecast on WGN-TV

Joined by colleagues past and present, Skilling’s poignant farewell broadcast took over the entire 10 p.m. news. Retiring WGN-TV meteorologist Tom Skilling delivered his final weather report Wednesday night, and the forecast was unseasonably warm and fuzzy. After violent storms turned summer back into winter Tuesday night, temperatures are expected to climb back into the 70s this weekend. But Skilling, long the face of Chicago weather, will not be back on the air to tell us about it. Joined by colleagues past and present, Skilling’s poignant farewell broadcast took over the entire 10 p.m. news, with recollections and video highlights from his nearly half century at the station. “What’s especially amazing about WGN is the bond between this television station and you, our viewers,” Skilling said in his sign-off address Wednesday. “Thank you from the bottom of my heart, because in this line of work, if no one watches us, we don’t have a job. So thank you for 45 extraordinary and loyal years of viewership.” While the finale was a nostalgic celebration of a remarkable career, the penultimate weathercast Tuesday was classic Skilling.  After near-record highs during the day, an arctic cold front swept into Chicago, bringing with it golf ball-sized hail, thunderstorms and 11 tornado touchdowns, along with a 50-degree temperature plunge. The extreme weather event — including the rare February tornadoes — preempted WGN’s prime time programming Tuesday evening, giving Skilling hours to monitor the storm in real time on weather maps packed with lightning bolts, isobars and a swirling red wall of precipitation. “When we get into this northwest flow, it’s ‘Katy, bar the door,’ Skilling explained, using one of his favorite folksy phrases. “It’s going to get cold, and fast.” Skilling had plenty of help Tuesday night from Demetrius Ivory, 48, a 10-year veteran of the station and his successor as chief meteorologist. Other Chicago TV stations also broke away from regular programming to report on the extreme weather. But it was a fitting coda for Skilling, 72, who kept calm and carried on tirelessly for hours, as viewers huddled in their basements and rode out one last storm with Chicago’s longest-tenured TV weathercaster. Vintage Chicago Tribune: 10 facts about Tom Skilling’s long and storied career WGN found time to celebrate their retiring star Tuesday, presenting him with an official Skilling bobblehead during the 5 p.m. news, and playing a video tribute from Oprah Winfrey after the 9 p.m. weathercast. But Wednesday night, the news was all about honoring Skilling, with friends, family and WGN alumni packing the studio to pay tribute to their former colleague. WGN-TV chief meteorologist Tom Skilling stands beside his celebratory cake after his final broadcast during the 10 p.m. news on Feb. 28, 2024. (Chris Sweda/Chicago Tribune) Most gathered in the renamed WGN Tom Skilling Weather Center, where its namesake logged long hours every day gathering data and refining his forecasts. “This weather office has never had so many souls in it at one time,” Skilling said, as he was feted with a weather cake adorned with colorful isotherms. The in-studio cheering section included former WGN mainstays such as anchors Steve Sanders and Mark Suppelsa, and sportscaster Dan Roan, all of whom retired from the daily TV news grind ahead of Skilling. Roan offered absolution for Skilling’s notoriously detailed and sometimes lengthy weathercasts. “When sports was on after weather, and for all those times you ate into my time…you’re forgiven,” Roan joked. Skilling paid tribute to Chicago TV weathercasters who preceded him, including Harry Volkman, John Coleman, John Coughlin, Jerry Taft and P.J. Hoff. His own career is already the stuff of broadcasting legend. WGN-TV chief meteorologist Tom Skilling is toasted while standing in front of a chair featuring his likeness as family, friends, and current and former colleagues celebrate his career following Skilling’s final broadcast on Feb. 28, 2024. (Chris Sweda/Chicago Tribune) Growing up in west suburban Aurora, Skilling hit the local airwaves as a 14-year-old weathercaster on radio station WKKD, adding a local Aurora TV station to his resume while still in high school. After graduating from the University of Wisconsin at Madison, Skilling built a following in Milwaukee at WITI-TV, where he was paired with the station’s longtime weather sidekick, a wisecracking puppet named Albert the Alley Cat. On  Aug. 13, 1978, he joined WGN as a solo act, and became a Chicago broadcasting institution for nearly half a century. As to the final forecast itself, Skilling called for mostly sunny skies and a high of 49 degrees, warming up to 73 by Sunday. rchannick@chicagotribune.com.....»»

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Kate Middleton hasn"t been seen in public since last year. Now, social-media users are suspicious.

Kate Middleton hasn't been seen in public since Christmas. In January, Kensington Palace announced that she underwent a "planned abdominal surgery." Kate Middleton hasn't been seen in months.Max Mumby/Indigo/Getty ImagesKate Middleton hasn't been seen in public since Christmas.Kensington Palace announced she underwent a planned abdominal surgery in January.The palace says she'll be recovering until after Easter, but social-media users are suspicious.Kate Middleton has been absent from the public eye for months now.The Princess of Wales underwent a "planned abdominal surgery" in January and is still recovering, as Kensington Palace previously announced.But as her absence continues, royal watchers have taken to social media to question her whereabouts and condition online. The palace, however, said she was doing well as recently as Thursday.Here's everything we know so far.Kate Middleton made her most recent public appearance on Christmas Day. The royal family on Christmas Day 2023.Samir Hussein/WireImage/Getty ImagesKate joined the royal family for their annual walk from Sandringham in Norfolk, England, to attend a church service on Christmas Day.The Princess of Wales walked with her children and husband to the Church of St. Mary Magdalene in one of her signature coatdresses, much like she did in years past.On January 17, Kensington Palace announced Kate was in the hospital for "a planned abdominal surgery." View this post on Instagram A post shared by The Prince and Princess of Wales (@princeandprincessofwales) Kensington Palace said in its statement that Kate would remain in the hospital, The London Clinic, for up to two weeks following the procedure."Her Royal Highness The Princess of Wales was admitted to hospital yesterday for planned abdominal surgery," the statement read. "The surgery was successful, and it is expected that she will remain in hospital for ten to fourteen days, before returning home to continue her recovery. Based on the current medical advice, she is unlikely to return to public duties until after Easter."Kensington Palace provided no additional information about what procedure Kate underwent, though the palace told the Associated Press the princess didn't have cancer.The statement also said Kate hoped "her personal medical information remains private" to help provide her children with "normality.""Kensington Palace will, therefore, only provide updates on Her Royal Highness' progress when there is significant new information to share," the statement went on to say.Prince William was photographed visiting Kate at the hospital the following day.Kensington Palace said on January 29 that Kate had returned to Windsor Castle.Kate Middleton in November.Karwai Tang/WireImage/Getty Images"The Princess of Wales has returned home to Windsor to continue her recovery from surgery," the statement shared on Instagram said. "She is making good progress."William and Kate went on to thank the staff at The London Clinic in the statement, as well as those who sent them well wishes.The same day, Buckingham Palace announced King Charles was returning home after having a procedure for a benign prostate enlargement.Buckingham Palace announced on February 5 that King Charles has cancer. King Charles III during the state tour of France in September 2023.Samir Hussein - Handout/Getty ImagesBuckingham Palace said in a statement that "a separate issue of concern was noted" during the king's prostate procedure, and additional testing disclosed he has cancer. The palace didn't disclose what form of cancer he was diagnosed with, though they said it wasn't prostate cancer.The statement also said that the king "commenced a schedule of regular treatments" and that although he would still be working from home, he would "postpone public-facing duties" per medical advice.The palace didn't specify how long the king would forgo public-facing work."His Majesty has chosen to share his diagnosis to prevent speculation and in the hope it may assist public understanding for all those around the world who are affected by cancer," the statement also said.Prince William returned to public duty on February 7.Prince William in March 2023.Max Mumby/Indigo/Getty ImagesWilliam paused his royal engagements amid Kate's surgery and recovery, returning to work on February 7 for an investiture ceremony at Windsor Castle.The same day, he attended a gala raising money for the London Air Ambulance, and he thanked the public for their messages of support for Kate, Town & Country reported."I'd like to take this opportunity to say thank you, also, for the kind messages of support for Catherine and for my father, especially in recent days," he said, adding that "it means a great deal to us all."He has attended a handful of public events since. The public was predicted to look to William in Charles and Kate's absences, as he represents the monarchy's future as heir to the throne."It's an opportunity for him to communicate on behalf of the royal family," Eric Schiffer, the chairman of Reputation Management Consultants, said.In addition, the public generally responds to younger royals more favorably. Without Kate, as well as Prince Harry and Meghan Markle, William's youth could be a boon for the monarchy, as Kristen Meizner, a royal watcher, told BI."They are most focused on the royals when they are of courtship age, getting married, having babies, that kind of thing," she said. "They're not necessarily considered as dazzling or as exciting to the public when they're 60 or 70 or whatnot."Kate was reported on February 9 to have traveled to Norfolk to continue her recovery. Kate Middleton in 2023.Max Mumby/Indigo/Getty ImagesOn February 9, the Daily Mail reported that Kate had joined her family at their home in Sandringham, Anmer Hall, for her children's half-term holiday.The outlet also reported that her recovery was going well at the time.Kate wasn't photographed during her trip from Windsor to Sandringham.King Charles was photographed a few times throughout February, while Kate remained unseen. King Charles and UK Prime Minister Rishi Sunak at Buckingham Palace on February 21.ONATHAN BRADY/POOL/AFP via Getty ImagesAlthough he isn't taking on public-facing duties, King Charles has still been photographed a few times since his cancer diagnosis and the beginning of his treatment.On February 11, he and Queen Camilla were spotted going to church in Sandringham, and he was photographed meeting with Prime Minister Rishi Sunak on February 21 at Buckingham Palace.Kate, on the other hand, remained absent, as Kensington Palace released no photos or videos of her.William released a rare solo statement on February 20. A statement from The Prince of Wales pic.twitter.com/LV2jMx75DC— The Prince and Princess of Wales (@KensingtonRoyal) February 20, 2024 Typically, William and Kate have released statements as a pair since they got married.But on February 20, Kensington Palace released a statement on only William's behalf regarding the conflict in Gaza, in which he said he remained "deeply concerned about the human cost of the conflict in the Middle East since the Hamas terrorist attack on 7 October.""I, like so many others, want to see an end to the fighting as soon as possible," the statement said. "There is a desperate need for increased humanitarian support to Gaza."William also said he continued "to cling to the hope that a brighter future can be found, and I refuse to give up on that."In addition to speaking for only William, the statement had a "W" seal at the top rather than the crown featured on messages from the Prince and Princess of Wales as a unit.William missed a service of thanksgiving on Tuesday because of an unnamed personal matter. Prince William didn't attend his godfather's service of thanksgiving. Kin Cheung - WPA Pool/Getty ImagesOn Tuesday, members of the royal family attended a service of thanksgiving for King Constantine of Greece, King Charles' second cousin and close companion. He was one of William's godfathers.William was set to attend the event alongside Queen Camilla and other family members but missed the service because of a personal matter, Kensington Palace told Business Insider.A palace representative also told BI that Kate was doing well, but they didn't elaborate on what caused William to miss the event.Following his absence, chatter about Kate's prolonged absence from the public eye erupted on social media, with users speculating about why she hasn't been seen in months. The princess was trending on X, and thousands of people posted about her on TikTok. "Kate Middleton" was also sixth on Google's list of trending search terms on Tuesday, highlighting how high public interest got in her absence.Kensington Palace reiterated that Kate was "doing well" as William returned to public duty on Thursday.Prince William speaking to a Holocaust survivor, Renee Salt, at the Western Marble Arch Synagogue on Thursday.Toby Melville - WPA Pool/Getty ImagesOn Thursday, Prince William resumed public duty, visiting the Western Marble Arch Synagogue to learn about the Holocaust Educational Trust, as Kensington Palace shared on Instagram.He sat down with a Holocaust survivor, Renee Salt. Rebecca English, a royal editor for the Daily Mail, reported on X that during the conversation, he spoke on behalf of himself and Kate."Both Catherine and I are extremely concerned about the rise in antisemitism," English quoted the prince as saying to Salt. "That's why I'm here today to reassure you all that people do care and people do listen, and we can't let that go."Kensington Palace also reiterated that Kate was "doing well" in a statement sent to BI on Thursday."We gave guidance two days ago that The Princess of Wales continues to be doing well," the statement said. "As we have been clear since our initial statement in January, we shall not be providing a running commentary or providing daily updates."As of Thursday, Kensington Palace hadn't released any new photos or videos of the princess.Read the original article on Business Insider.....»»

Source:  nytCategory: world~1 hr. 21 min. ago Related News

Putin just made one of his most explicit threats of nuclear war yet

The Russian president said that the West was risking "the destruction of civilization." Russian President Vladimir Putin delivers his annual state of the nation address at the Gostiny Dvor conference centre in central Moscow on February 29, 2024.ALEXANDER NEMENOV via GettyRussia's Vladimir Putin menaced the West with the prospect of nuclear war. It came after France's president suggested NATO troops could be stationed in Ukraine. The Russian president said that the West was risking "the destruction of civilization." Russia's President Vladimir Putin menaced the West with the prospect of a nuclear attack over its support for Ukraine.Putin made the remarks on Thursday in the opening minutes of his annual state-of-the-nation speech to Russian lawmakers and top officials. He alluded to a recent suggestion by France's President Emmanuel Macron that NATO could send troops to Ukraine to support its fight against the Russian invasion."(Western nations) must realize that we also have weapons that can hit targets on their territory. All this really threatens a conflict with the use of nuclear weapons and the destruction of civilization. Don't they get that?" said Putin, according to Reuters.The remarks are some of the Russian president's most explicit threats to the West since the Ukraine invasion, in which the US and European countries have provided Ukraine with billions in aid to fight Russia.But with billions in US aid blocked by Republicans, Russia is making incremental gains against Ukraine, prompting Macron in his remarks last week to call for Europe to intensify its support.Putin has previously been accused of bluffing in making nuclear threats, suggesting that attacks on the occupied Crimea peninsula would be treated as an attack on Russia itself in 2022 and could prompt a nuclear response.The peninsula has been targeted several times by Ukraine using missiles and other weapons, and Russia has not launched a nuclear attack in response.However, leaked Russian military files obtained by The Financial Times and published this week, showed the Kremlin has considered a broad range of scenarios for when the country should go nuclear.The 29 leaked files pertain to tactical nuclear weapons and are dated from 2008 to 2014, meaning they're at least 10 years old. They outline conditions for how much of Russia's military defense system needs to be destroyed to trigger nuclear warfare, per the FT.Read the original article on Business Insider.....»»

Source:  nytCategory: world~1 hr. 21 min. ago Related News

Homebuyers need to earn 80% more than they did pre-COVID to comfortably afford a house in this market, Zillow says

Home prices are getting expensive, up 42% since January 2020, while median incomes haven't matched the rise, up 23% in the same time frame. Homebuyers have to earn 80% more than they did pre-covid to comfortably afford a house today.Getty Images Homebuyers need to earn 80% more than they did pre-COVID to comfortably afford a house in the current market, Zillow found. Housing costs have soared, and wages haven't kept up, data in a new report showed. "The math has changed for hopeful buyers, who are more often partnering with friends and family or 'house hacking' their way to homeownership," a Zillow analyst wrote. Home prices have soared, and household earnings haven't been able to keep pace.According to a new report from Zillow, homebuyers today need to make north of $106,000 to comfortably afford a house in this market. That's $47,000 — or 80% — more than they needed in January 2020, pre-COVID."The math has changed for hopeful buyers, who are more often partnering with friends and family or 'house hacking' their way to homeownership," the report said.Today, home prices are 42.4% more expensive than they were prior to the pandemic, with a typical home costing about $343,000. And at the same time, median incomes have risen only 23% to $81,000.But it's more than just home prices. Monthly mortgage payments have nearly doubled. From January 2020, they are up 96.4% to $2,188 a month (assuming a 10% down payment).Back then, mortgage rates on a 30-year loan were around 3.5%. Today, they're at 6.9%, per Freddie Mac.According to the report, it would now take a household earning a median income 8.5 years — a year longer 2020 estimates — to save up enough to put 10% down on a typical US home."It's no wonder, then, that half of first-time buyers say at least part of their down payment came from a gift or loan from family or friends," Zillow said.There is also a geographic dispersion at play here. Some housing markets in the US have become wildly more unaffordable than others. For example, there are seven housing markets, including cities like San Francisco, San Jose, Seattle, and New York, where a household's income must be $200,000 or more to comfortably afford a typical home.On the other end of that spectrum are cities where the affordability bar is much lower, like Cleveland ($70,810) and Pittsburgh ($58,232).Read the original article on Business Insider.....»»

Source:  nytCategory: world~1 hr. 21 min. ago Related News

Video shows a Russian soldier surrendering by following written instructions dropped from a drone

Ukraine has innovated the use of drones for a range of military tasks, including directing the surrender of enemy troops. "If you want to live, follow the bird across the field," reads a note dropped by a drone to a surrendering Russian soldier.Ukrainian militaryA video appears to show a Russian soldier surrendering to a drone. "If you want to live, follow the bird across the field," reads the message, according to a translation from Russian. Drones have been used innovatively for a range of military tasks by Ukraine.A Ukrainian military video appears to show a Russian soldier surrendering by following instructions dropped from a drone.The video, posted by Ukraine's specialist 'Eidelweiss' drone unit, appears to show a Russian soldier crouching by a wrecked armored vehicle near the dead or injured body of another soldier. He has his hands raised in surrender.The drone then appears to drop a capsule, and the soldier begins to run away as though fearing it might be an explosive. Then, when it doesn't blow up, he picks up the capsule and finds a note inside."If you want to live, follow the bird across the field," says the note.The drone then guides the soldier across a battlefield marked with shell craters into a trench, where Ukrainian troops apparently accept his surrender, according to the footage.Business Insider has been unable to verify the authenticity of the video, and it's unclear where or when it was filmed.A caption posted with the video reads: "They are afraid. They want to live. Another Russian surrendered to a drone; he understands that this is not his war. Ukraine will reclaim all territories."It isn't the first time Ukraine has used drones to direct the surrender of Russian troops.A drone commander told the Kyiv Post earlier in February how they use the drones for the job.The commander told the publication a drone "drops a note like: 'Go surrender, you won't be killed, and they will feed you.' And sometimes, a (Russian) soldier raises a white flag himself or signals with gestures or raised hands."Ukraine has innovated the use of cheap, airborne drones during the Russian invasion for a range of tasks, including surveillance, dropping bombs, and being fitted with explosives and driven into targets.It is fighting to resist intensifying Russian attacks, with Ukrainian soldiers experiencing serious ammunition shortages amid an aid block by Republicans in Congress.But despite its advantages, morale among Russian troops is extremely low on parts of the front line, reports say, with units experiencing high casualties, inept officers, and poor equipment.Read the original article on Business Insider.....»»

Source:  nytCategory: world~1 hr. 21 min. ago Related News

Uber"s CEO just unlocked a big prize

Uber CEO Dara Khosrowshahi has been offered 1.75 million shares after turning things around at the ride-hailing giant. Dara Khosrowshahi, Uber CEO.Spencer PlattUber CEO Dara Khosrowshahi was offered a massive trove of stock after surpassing performance goals.The stock is worth over $130 million.He's ushered in a turnaround at the ride-hailing giant over the past year.After steering Uber past a $120 billion valuation, CEO Dara Khosrowshahi just unlocked the opportunity to purchase a massive trove of stock in the ride-hailing company.Khosrowshahi's offer came after he surpassed goals set by an equity incentive plan in 2017, according to an SEC filing from earlier this month.The filing says Khosrowshahi would be offered to buy the shares if Uber maintained a $120 million valuation over a 90-day trading period.That feat was achieved on Feb. 6, and Khosrowshahi was given the option to buy 1.75 million Uber shares at an exercise price of $33.65, according to the filing. Uber is trading at about $78 now, meaning the stock is worth about $136.5 million.According to the filing, Khosrowshahi plans to take advantage of the stock offer, but not within the next 90 days.The targets were set before the company's IPO in 2019, The Financial Times notes. And while Uber struggled in the wake of its public debut, Khosrowshahi has helped usher in a turnaround over the past year by cutting costs, abandoning non-core businesses like self-driving cars, and finding new revenue streams in advertising.Earlier this month, Khosrowshahi announced Uber's first annual operating profit of $1.1 billion and unveiled a $7 billion share buyback plan for investors.In addition to Khosrowshahi, Uber Chief Legal Officer Tony West and Chief People Officer Nikki Krishnamurthy also earned the right to buy 2.25 million shares in Uber under the incentive plan, according to The Financial Times.The Financial Times notes Khosrowshahi package isn't unique among top tech execs. Alphabet CEO Sundar Pichai was paid $226 million in 2022 thanks to major stock rewards, while Amazon chief Andy Jassy pocketed $200 worth of stock in the company after succeeding founder Jeff Bezos.Read the original article on Business Insider.....»»

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The 10 stocks that have gone the longest without a 20% bear market sell-off

These companies have achieved "elite" status for not experiencing a 20% decline in years, even when considering the 2022 bear market. Xinhua/Wang Ying/ Getty ImagesThere are "elite" companies that have gone years without experiencing a 20% bear market decline, Ned Davis Research says.The firm compiled the S&P 500 companies that have gone the longest without a bear market.Blue chip companies like PepsiCo, McDonald's, and Waste Management top the list.Resilience in the stock market is a valuable trait for companies as investors seek out relative safety during bear market declines.Some companies are in "elite" status for not experiencing a 20% decline in years, even when considering the 2022 bear market in which the S&P 500 declined by about 25%, according to a recent note from Ned Davis Research.Ned Davis Research compiled the S&P 500 companies that have gone the longest without suffering a bear market, with some approaching 1,000 trading days, or about four years.These are the 10 companies that haven't experienced a bear market decline in many years.10. Arthur J. GallagherMarkets InsiderTicker: AJGDays w/o 20% correction: 989Days since recent peak: 639. McDonald'sMcDonalds retaurant exterior.John Greim/LightRocket via Getty ImagesTicker: MCDDays w/o 20% correction: 989Days since recent peak: 268. WW GraingerMarkets InsiderTicker: GWWDays w/o 20% correction: 989Days since recent peak: 167. McKessonJustin Sullivan/Getty ImagesTicker: MCKDays w/o 20% correction: 989Days since recent peak: 16. CencoraMarkets InsiderTicker: CORDays w/o 20% correction: 989Days since recent peak: 15. Marsh & McLennanMarkets InsiderTicker: MMCDays w/o 20% correction: 989Days since recent peak: 34. Republic ServicesPeopleImages/Getty ImagesTicker: RSGDays w/o 20% correction: 989Days since recent peak: 23. Waste ManagementApprentice garbage man Corey Lever collects trash outside a school in Oakland, Calif.AP/Eric RisbergTicker: WMDays w/o 20% correction: 989Days since recent peak: 22. PepsiCoAP Photo/Paul SakumaTicker: PEPDays w/o 20% correction: 990Days since recent peak: 1981. TravelersGlassdoorTicker: TRVDays w/o 20% correction: 992Days since recent peak: 3Read the original article on Business Insider.....»»

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A countdown timer for the threatened release of Trump court documents disappeared from hacker website before it ticked down to zero

The ransom countdown timer for Fulton County disappeared from a hacking group's website before it was set to expire Thursday morning. Donald Trump appearing in Manhattan civil court.Pool/Getty Images.The ransom countdown timer for Fulton County disappeared from a hacking group's website.It was set to expire Thursday morning.The ransomed documents included court records from where Trump has his Georgia criminal case.The countdown timer hackers used to threaten the release of Fulton County government documents — including what they claimed were documents from former President Donald Trump's criminal case in Georgia — disappeared from the group's website before it expired.The hacking group, LockBit 3.0, had a timer set for 8:49 a.m. ET Thursday to publish the documents on its website — a deadline it had jumped forward, after previously setting a March 2 deadline.Sometime on Wednesday afternoon, the timer disappeared.LockBit 3.0's website still lists ransom timers for its other hacks. As of Thursday morning, it had 12 other timers counting down simultaneously. The timer for Fulton County was no longer among them.The group took down Fulton County services in a ransomware attack in January. It threatened to release sensitive files from multiple government services, including its court system.But the group was disrupted on February 20 as part of a series of coordinated raids involving law enforcement agencies from more than 10 different countries. The FBI took over LockBit's website and bragged about taking them down. The same day, the Justice Department unsealed indictments against two Russian nationals it alleges worked for the group.On Saturday, LockBit 3.0 returned. It posted a new countdown timer for the Fulton County documents initially set for March 2. It later jumped the timer forward, leaving it to expire on Thursday.LockBit 3.0's website no longer lists fultoncountyga.gov as one of the document caches it's holding for ransom.LockBit 3.0/ScreenshotIn a message trumpeting its return, the group claimed the FBI snapped into action because "the stolen documents contain a lot of interesting things and Donald Trump's court cases that could affect the upcoming US election." Court filings show that the FBI's investigation into LockBit — a notorious and long-running hacking group — and coordination with international law-enforcement agencies has been ongoing for years.Before the raid, the group said, they had been in negotiations over a ransom for the Fulton County documents."Personally I will vote for Trump because the situation on the border with Mexico is some kind of nightmare, Biden should retire, he is a puppet," the group said in the message.LockBit 3.0's website does not show any new messages since then.A spokesperson for Fulton County declined to comment on the disappearance of the timer or whether a ransom was paid. Representatives for the FBI didn't respond to requests for comment sent Thursday morning.The disappearance may signal ransom negotiationsAlthough the February 20 raid disrupted the group, many of Fulton County's services still aren't fully operational, including its court website.The hack has taken national significance because of Fulton County District Attorney Fani Willis's criminal case against Trump. In a grand jury indictment, prosecutors accused Trump and more than a dozen of his allies of illegally conspiring to overturn the results of the 2020 presidential election in Georgia. Trump, the frontrunner for the Republican nomination in the 2024 presidential election, has pleaded not guilty. Several of his co-defendants have already entered guilty pleas and are expected to testify against him at trial.LockBit 3.0 works on a leasing model, where it develops sophisticated hacking tools and then allows other hacking groups to use it in exchange for a cut of the ransom. It has been fantastically successful in the hacking world, garnering over 2,000 victims and $120 million in ransom funds over the past several years, according to the Department of Justice. It's not clear which group it's working with for the Fulton County hack and ransom.The timer for Fulton County had previously disappeared from LockBit 3.0's site ahead of the February 20 raid. Such removals normally happen when extortion targets pay a ransom or are in negotiations to pay it, according to cybersecurity journalist Brian Krebs.But a Fulton County official said at a press conference on February 20 that no ransom was paid. On Tuesday, a county spokesperson reiterated to the Atlanta Journal-Constitution that it would not pay a ransom."Our focus remains on safely restoring services for our citizens and we continue to work in close coordination with law enforcement," the spokesperson said.It's also possible that LockBit 3.0 may just be blustering about ransom negotiations to shore up credibility with its affiliates, according to Dan Schiappa, the chief product officer of cybersecurity firm Arctic Wolf."Lockbit built its image on being loud and garnering the attention of other groups that wanted assurance that they could conduct business with them unhindered," Schiappa said. "The law enforcement action presents a threat to that narrative."It's not clear if LockBit 3.0 is in possession of any court records in the Trump case that have not already been made public. Atlanta-based independent journalist George Chidi reported that sealed records in unrelated cases were included in a sampling of files published by LockBit.It's not clear how much money — or what else — LockBit 3.0's affiliate in the hack wants. The amounts are often negotiated in private, Schiappa told Business Insider.Read the original article on Business Insider.....»»

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6 products that Apple killed before they could launch, from "Project Titan" to its long-rumored TV

Apple killed projects working on a TV, wireless charging mat, and a hybrid fax machine before they were released. Apple hasn't announced many products that have ended up being shelved, but there are a few unreleased experiments that stand-out.AppleApple abandoned its efforts to make a self-driving EV car to focus on generative AI.It's not the first time the tech giant cancelled a product in the making. These are 5 products that Apple killed in the past before they were launched.Apple has killed its decade-long effort to build its own car.Under the name "Project Titan," the tech giant was working on building an electric vehicle with self-driving features.But as of Tuesday, the project was canceled thanks to production challenges and concerns around low profit margins, Bloomberg reported, citing anonymous sources.Executives told the 2,000 employees on the EV team that they'll be moved to roles around the company's generative AI products, according to Bloomberg. Some may soon be laid off, the outlet reported.But this isn't the first time Apple abandoned a project.Here are 6 products the tech giant abandoned before they got the chance to hit the market:The Frankenstein machine Former Apple CEO Gilbert R. Amelio (R) and Apple co-founder Steve Jobs on stage in 1996.MediaNews Group/The Mercury News via Getty ImagesThe Apple Paladin was set to combine a computer, fax machine, scanner, and phone — all in a single product. It included a screen and a phone handset attachment, photos of the prototype show.The project was discontinued in the mid-90s for undisclosed reasons, Engadget reported.The 90s precursor to the iPhone First unveiled in 1993, the Apple W.A.L.T phone (short for Wizzy Active Lifestyle Telephone) was another fax machine combo, this time with a phone.The unreleased phone included a touchscreen, caller ID, an internal address book, and a stylus, according to tech reviewer Sonny Dickson. It also had features like online banking access, ringtone customization, and handwriting recognition.Only a handful of prototypes were built before the project ended, according to Dickson.A charger for three devices — at once.AppleAirPower, a charging mat able to wirelessly power three devices at a time, was unveiled alongside the iPhone X in 2017. It was set for a 2018 launch but was delayed by technical issues, reportedly stemming from its heat management. The delays sparked plenty of speculation about its fate and Apple finally pulled the plug on the AirPower in 2019. But it wouldn't be the company's last foray into wireless chargers.The MagSafe charger that never was.Apple never announced its "Magic Charger," but several people who managed to obtain it posted images of the unreleased device to Twitter (now X).Courtesy of @KosutamiSanUndeterred by its AirPower experiment, Apple introduced the MagSafe line of wireless chargers in 2020. A few years later, images began to circulate online of an unreleased MagSafe product, apparently known as the "Magic Charger." It was essentially a foldable metal stand with an integrated MagSafe puck, allowing you to charge your iPhone while upright.It's not clear what happened to the Magic Charger. The Verge speculated that Apple saw it as impractical; it was bulky and could only hold an iPhone in landscape orientation.In any case, plenty of other MagSafe stands are now available on the market.Apple's forgotten i-HDTV?Instead of an HD display, Apple's television ambitions pivoted to the AppleTV box (pictured).Apple via The Washington PostApple reportedly spent over a decade developing an ultra-high-definition television set before canceling the project indefinitely in 2015. The tech giant decided it'd be hard to set itself apart from top-level competitors like Samsung, despite rumored features like a transparent glass screen with a laser-generated image, according to the Wall Street Journal.Instead, the company pivoted to developing a microconsole media player, AppleTV. Its streaming platform, Apple TV+, is part of CEO Tim Cook's focus on growing the tech giant's services business.Project Titan ran out of gas.Apple envisioned a fully-autonomous electric vehicle, but decided to call it quits once the project looked like it had run out of road.EDGAR SU/ReutersIn 2024, Apple abandoned its project to build its own car, Bloomberg reported.The tech company's multibillion-dollar effort — a decade in the making — aimed to build a fully autonomous electric vehicle. In January, Bloomberg reported that Apple was scaling back features and delaying its launch date.Previously, Tim Cook had said that Apple saw the autonomy of a self-driving EV as a "core technology" worth exploring. But he added an important caveat."We investigate so many things internally," Cook said. "Many of them never see the light of day."Read the original article on Business Insider.....»»

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Jacksonville University receives $3.1 million permit for law school build-out

With city funds, the law school will set up its new location just a few blocks away from its current site at the VyStar Tower......»»

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URI president Marc Parlange gets new five-year term

The university's 12th president has crafted a "forward-looking strategic vision," said board chair Margo Cook......»»

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Longtime Steelers radio broadcaster, Bill Hillgrove announces retirement

After 30 years, Hillgrove is moving away from the microphone......»»

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$2 million in opioid settlement funding available for local nonprofits

Montgomery County nonprofits can soon apply for funding to help combat the ongoing battle against the opioid crisis......»»

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JPMorgan Chase opening Greater Dayton branch

JPMorgan Chase, one of the region’s largest banks, is opening a new branch south of Dayton......»»

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Potawatomi Hotel & Casino opening $17M permanent sportsbook in May

Potawatomi Hotel & Casino will open its permanent $17 million sportsbook on May 3, the company's CEO, Dominic Ortiz, said Thursday at the Milwaukee Business Journal's Power Breakfast event. Find out more details about the new sports betting venue......»»

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$211M for behavioral health initiatives moves forward in Oregon Legislature

The funding bill is the budget vehicle for House Bill 4002, which ignited a firestorm of controversy......»»

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Here"s how airfares are trending at PTI — and what to expect for the summer

When travel roared back to life post-pandemic, airfares rose at many airports. Here's how local airfares are trending and what to expect as the summer travel season approaches......»»

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Valley-based Fox Restaurant Concepts reports more revenue gains in 2023

Fox Restaurant Concepts, the Phoenix-based restaurant company that is a subsidiary of The Cheesecake Factory (Nasdaq: CAKE), increased its annual revenue from 2022 to 2023 by more than $26 million, according to regulatory filings......»»

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My dad almost paid a ransom after being told I was kidnapped — but it was all a scam

A daughter says her dad got a call saying she had been kidnapped. The scam demanded thousands in ransom. She explains how to avoid these fake threats. Basak Gurbuz Derman/Getty ImagesIn 2017 my dad called me panicked in the middle of the night. He begged me to turn on my phone camera and show him where I was. It turned out he almost got scammed into paying a ransom for me, while I was asleep and safe. I remember vividly the sound of my dad's voice asking me to turn on the camera on my phone. He was in a panic; I was dead asleep and didn't understand what was happening."Where are you?" he kept repeating. My answer that I was at home with my boyfriend did not satisfy him. He didn't explain what was happening until he saw my sleepy face in the middle of my Brooklyn apartment."I almost got scammed," he said. "I thought you were kidnapped."Phone and online scams are increasingly sophisticated. Even people who think they are smart enough to avoid getting scammed are vulnerable, as a recent article in The Cut pointed out. For older adults who aren't necessarily that tech-savvy, the risks are even greater.Scammers called him in the middle of the nightThe next day, my dad explained what had happened. Someone called him in the middle of the night and told him I had been kidnapped and he needed to pay a ransom if he wanted to see me again.He said they put the phone over to "me" and that the person sounded like the real me. He said he kept trying to ask if I was OK and started yelling at the person on the phone, waking up my mom.The person on the phone made it clear they had to wire money if they wanted me released. My dad was ready to do it when — in a second of clarity — he realized the kidnappers were talking in Spanish.I lived in New York City, and they lived in Argentina. While there are many Spanish speakers in NYC, the people on the phone were also Argentine. Something seemed off.My dad called me at 2 a.m.My dad gave my mom the phone and asked her to get the wire transfer information from them. He then grabbed my mom's phone and called my American cellphone. He called my then-boyfriend when I didn't pick up — because I had left my phone in another room. Confused, he told me it was my mom on the phone. I feared for the worse.When I answered all I could hear was his panicked voice asking me if I was OK. I said yes, I was sleeping and what was up. He kept asking me to turn on my camera because he needed to verify that I was OK.Once he saw me in my apartment, he calmed down. He grabbed the phone from my mom and told the scammers to go fuck themselves.It wasn't the last time someone attempted to scam themThis is a common scam in Argentina. It's so popular that I know at least a handful of friends' parents and grandparents who have fallen for it and transferred thousands of dollars to strangers.These scams have become so common that my parents were targeted again in December 2023 with a different storyline.This time, it was someone pretending to be me at the bank. The woman said that she had run out of money and needed my parents to transfer some money so she could make it to the end of the month.My dad, knowing it was not me, decided to play along and asked for her ID number and bank information. Once he had everything, he hung up and reported it to the bank.I'm grateful for my dad's quick thinking, but I also worry about them as they get older and scams become more complex. Whenever he gets an email he doesn't feel good about, he forwards it to me. Nine out of 10 times, I need to tell him it's phishing.The FBI recommends people don't pick up calls from phone numbers they don't recognize, something many millennials and Gen Zers avoid anyway. They also suggest that if you receive a call from a family member asking for money, call that person before making any transfers.Based on my parents' experience, they now know to call me first for anything, and they know I will always pick up their phone calls — even in the middle of the night.Read the original article on Business Insider.....»»

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Bill Gates and Mark Zuckerberg are among the CEOs and celebs set to attend a 3-day pre-wedding party being thrown by an Indian tycoon worth $113 billion

Other guests expected to attend the lavish celebrations include Sundar Pichai, Bob Iger, and Ivanka Trump, reports say. Radhika Merchant and Anant Ambani, the son of billionaire Mukesh Ambani.Getty ImagesA son of the Indian billionaire Mukesh Ambani is due to get married in July. Bill Gates and Mark Zuckerberg are among those set to attend the pre-wedding celebrations in March.The three-day celebrations are set to take place in India.Some of the world's top business leaders are expected to attend the pre-wedding celebrations of Anant Ambani in India.Ambani is a son of billionaire Mukesh Ambani, the chairman of the Fortune 500 company Reliance Industries and who has an estimated net worth of $113 billion, according to Bloomberg's Billionaires Index.While Ambani is due to get married to Radhika Merchant in July, the celebrations will kick off in March, and tech heavyweights such as Bill Gates and Mark Zuckerberg are among the 1,200 guests set to attend the festivities, the Guardian reported. The star-studded list of invitees also includes Alphabet CEO Sundar Pichai and Samsung Electronics executive chairman Jay Y. Lee, The Times of India reported.Rihanna and illusionist David Blaine are also set to perform at the event, Reuters reported. Here's a look at some of the other business chiefs and celebrities rumored to be attending the celebrations.Microsoft cofounder Bill GatesBill Gates at the World Economic Forum in Davos.Fabrice Coffrini/Getty ImagesMukesh Ambani's wife joined forces with Gates last year when Nita Ambani's Reliance Foundation and the Bill & Melinda Gates Foundation unveiled an initiative to support one million women entrepreneurs.Meta boss Mark ZuckerbergMark Zuckerberg, now terminally online like the rest of us.JOSH EDELSONFacebook invested nearly $6 billion for a minority stake in Jio Platforms, whose parent company is Ambani's Reliance Industries, in 2020, Forbes reported. Zuckerberg held a virtual discussion with Ambani in 2020 as part of a Facebook Fuel For India event, where the pair discussed how technology could boost economic progress.Alphabet CEO Sundar Pichai Christoph Soeder/picture alliance via Getty ImagesPichai has crossed paths with Ambani before, as the pair both attended the White House's State Dinner for India's prime minister Narendra Modi last June, video footage from the event shared by The Tribune showed.Samsung Electronics executive chairman Jay Y. LeeSamsung COO Jay Y. LeeReutersLee and Ambani are among Asia's richest families. Samsung and Jio Platforms entered a joint project in 2017 to boost network coverage and capacity across India, per a press release at the time.Adobe CEO Shantanu Narayen MintThe Indian-American businessman is the chair and CEO of the software company Adobe.Disney CEO Bob Iger Bob Iger shut down the idea that ABC was for sale at the DealBook Summit on Wednesday.Slaven Vlasic/Getty ImagesDisney announced an $8.5 billion merger of its India media assets with Ambani's Reliance this week, Reuters reported. Bollywood star Shah Rukh KhanJohn Phillips/Getty ImagesSome of Bollywood's top stars like Shah Rukh Khan and Salman Khan are also set to attend the celebrations, Reuters reported.Ivanka Trump Ivanka Trump at her father's fraud trialMichael M. SantiagoThe daughter of former US President Donald Trump is also on the invite list, per the Guardian.Read the original article on Business Insider.....»»

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US stocks climb as the Fed"s preferred inflation gauge rises in-line with estimates

Excluding food and energy, the PCE price index rose 0.4% for the month, and 2.8% compared to the same time last year. The PCE data came in as expected on Thursday.REUTERS/Brendan McDermid Stocks climbed and the Fed's preferred inflation gauge was in line with expectations Excluding food and energy, the PCE price index increased 0.4% month-over-month in January.  The reading should boost the outlook for Fed rate cuts, as inflation doesn't look to be reaccelerating.  US stocks climbed Thursday as investors took in fresh inflation data for January. The US Department of Commerce reported that the personal consumption expenditures price index, the Federal Reserve's preferred inflation gauge, climbed 0.3% month-over-month and 2.4% compared to the same time last year. Both figures matched consensus estimates. Core PCE, which excludes the more volatile food and energy costs, climbed 0.4% from December to January, and 2.8% compared to a year ago.The fact that inflation doesn't appear to be reaccelerating should boost the outlook for looser monetary policy. In a note after the data release, Capital Economics's chief North America economist Paul Ashworth said the figures were no surprise following the hot CPI and PPI reports, and it contributes to the case for pushing interest rate cuts back.And given that first-quarter GDP growth is on track to hit between 2.5% and 3.0%, he said the Fed's preferred inflation gauge doesn't change the broader narrative."Adverse weather in January has been creating a lot of noise in the economic data for the month we have seen so far, whether it's the retail sales figures or the industrial production numbers; it is also likely today's personal income and spending data was similarly impacted," said Richard de Chaza of William Blair. "Nevertheless, it continues to look as though both consumer spending and income growth are decelerating, even outside this noise"Here's where US indexes stood as the market opened at 9:30 a.m. on Thursday: S&P 500: 5,092.14, up 0.44% Dow Jones Industrial Average: 39,038.09, up 0.23% (+ 89.07 points)Nasdaq Composite: 16,075.07, up 0.78%Here's what else is going on: "Boomer nation" runs the US, and investors should focus on three sectors to capitalize, according to a money manager.El Salvador's President Nayib Bukele said the country's bitcoin holdings are up more than 40%.New home listings see the biggest jump in almost three years.The stock market is only 50% through its current bull rally based on historical data, NDR said.Russia's energy trade with India could be strained amid fresh sanctions, a report said.In commodities, bonds, and crypto: Oil prices moved mixed, with West Texas Intermediate up 0.09% to $78.59 a barrel and Brent crude, the international benchmark, down 0.14% to $83.56 a barrel.Gold edged higher 0.7% to $2,057.30 per ounce.The 10-year Treasury yield moved lower one basis point to 4.256%.Bitcoin climbed 4.62% to $63,077.Read the original article on Business Insider.....»»

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I swapped my high-end skincare products for Trader Joe"s finds under $10. Here"s what I"m keeping in my routine.

I'll pay extra for quality skincare, but I've found great serums, sunscreens, and cleansers at Trader Joe's that I like better than my high-end picks. A ton of highly-coveted cleansers, serums, and moisturizers from Trader Joe's live up to the hype.Andrea McHughI will pay extra for quality skincare products, but I've found some great ones at Trader Joe's.Its zinc-oxide mineral sunscreen and facial cleansing pads with tea-tree oil are staples for me.I really like Trader Joe's microdermabrasion scrub and serums.As someone who's always searching for game-changing skincare products, I'm willing to — and have — spent the extra money on high-end stuff.I have sensitive skin and seek out products with high-quality ingredients that lean into clean beauty, that get excellent reviews, or that are ride-or-die recommendations by close friends.Fortunately, I've found that not every great product also has a high price tag. In fact, some of them can be found at a grocery store.Here are some affordable beauty products from Trader Joe's that I love so much they've become part of my routine.Trader Joe's microdermabrasion scrub, $5Trader Joe's microdermabrasion scrub feels a bit like a facial to me. Andrea McHughI avoid harsh exfoliants, but I love the feeling of a deep-cleaning spa facial — and Trader Joe's microdermabrasion scrub feels like the happy medium between the two.At just $5, this 2-ounce tube packs a big punch. It has a light, cream base, and fine grain. I can feel it removing dead skin cells even when applying it gently.I don't think it's oily, and I like that it doesn't have a strong scent. It's my go-to when I want my skin to feel smooth and seemingly appear brighter.I use this about twice a week, often as part of my nighttime skin routine.Trader Joe's SPA facial-cleansing pads with tea-tree oil, $5Makeup-removal wipes are the lazy girl's skincare go-to, but Trader Joe's facial-cleaning pads take easy cleaning to the next level for me.The textured surface of these soft, circular pads makes them ideal for removing grime and oil from my skin without stripping it.The pads stay moist in the little round container, and have a gentle, natural scent from the tea-tree oil. Plus, I get 50 of them for $5. Using them leaves my skin feeling clean and refreshed, which makes sense since tea-tree oil is known for being antibacterial and anti-inflammatory.Trader Joe's hyaluronic moisture-boost serum, $10As one of the most coveted product categories in skincare, facial serums can come with a hefty price tag, but many from Trader Joe's are $10 or less.I've probably heard the most people recommend Trader Joe's hyaluronic moisture-boost serum. The medium-thick gel glides on smoothly, and I think it hydrates beautifully, leaving my skin feeling plump and supple.I've found that it settles nicely on my sensitive skin when I use it at night, and it helps my makeup glide on when I apply it during the day.It's also a great travel serum because if I leave it behind, I feel better replacing a $10 serum instead of a $99 one.Trader Joe's SPA face wash with tea-tree oil, $6Give this face wash adequate real estate on your product shelf because it's going to stay a while.Andrea McHughTrader Joe's SPA face wash with tea-tree oil comes in an 8.5-ounce bottle with a pump dispenser for just $6. It's become a staple for me, and I've found that one pump can be used to wash my entire face, neck, and decolletage.The product comes out as a thin liquid but offers a liberal lather from the start. Again, I like that it contains tea-tree oil, which gives my skin a refreshing tingly feeling that isn't too harsh.Trader Joe's zinc-oxide mineral-sunscreen spray — SPF 30, $10As a fair-skinned girl who is always lathering on SPF, I have tried a ton of sunscreens.Although I don't love how mineral sunscreens often seem heavier than their chemical counterparts, I do love that they reflect UV rays, whereas chemical sunscreens absorb them. Mineral sunscreens feel more like a shield to me.Trader Joe's zinc-oxide mineral-sunscreen spray is the best zinc-based sunscreen I've found that still feels light and rubs in clear instead of white.I also give it points for being fragrance-free and including soothing ingredients like aloe vera, grapefruit oil, and vitamin E.At just $10 a bottle, it's cheaper than other mineral-sunscreen sprays I've found, so I stock up whenever I'm at Trader Joe's.Read the original article on Business Insider.....»»

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BlackRock"s bitcoin ETF draws $520 million in a day as latest rally pumps up investor enthusiasm

BlackRock's bitcoin fund saw an influx of $520 million in a single day, the second-largest inflow for a US ETF, per Bloomberg BlackRock expects to lay off 3% of its workforce.Leonardo Munoz/VIEWpress BlackRock's iShares Bitcoin Trust drew $520 million in a single day on Tuesday, per Bloomberg. The surge marked the second-largest daily inflow for a US ETF.  Bitcoin is climbing toward its previous all-time high, trading around $62,000 on Thursday.  Bitcoin's latest rally toward all-time highs fueled the second-largest daily inflow into a US exchange-traded fund this week. BlackRock's iShares Bitcoin Trust (IBIT) absorbed $520 million in a single day on Tuesday, marking not only the largest daily influx among ETFs tracking the world's top cryptocurrency but also the second-largest daily cash infusion for a US ETF, according to data compiled by Bloomberg.The rush of money came as bitcoin stages a fresh rally back toward it's previous all-time high of $69,000. The token was up another 5% on Thursday, trading around $63,000. The nearly dozen spot bitcoin ETFs in the market were approved in early January, and touted as an easier access point for investors looking for exposure to the token without having actually to buy it. BlackRock's ETF  has seen inflows for 32 days in a row. Analysts told Bloomberg that the rally was "definitely" driven by retail traders with a growing appetite for the slate of bitcoin ETFs, and their robust demand is pushing up the price of the underlying crypto. Also bolstering the rally this month is anticipation for bitcoin's halving event this spring. In April, the amount of bitcoin rewarded to miners will be reduced by half. The periodic event drives the scarcity narrative that's at the heart of the long-term bull base as the crypto marches toward its supply cap of 21 million. Previous halving events were followed by new all-time highs within 12 months. Read the original article on Business Insider.....»»

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Kate Middleton hasn"t been seen in public since last year. Now, social media users are suspicious.

Kate Middleton hasn't been seen in public since Christmas. In January, Kensington Palace announced she underwent a "planned abdominal surgery." Kate Middleton hasn't been seen in months.Max Mumby/Indigo/Getty ImagesKate Middleton hasn't been seen in public since Christmas.Kensington Palace announced she underwent a planned abdominal surgery in January.The palace says she'll be recovering until after Easter, but social media users are suspicious.Kate Middleton has been absent from the public eye for months now.The Princess of Wales underwent a "planned abdominal surgery" in January and is still recovering, as Kensington Palace previously announced.But as her absence continues, royal watchers have taken to social media to question her whereabouts and condition online. However, the palace said she was doing well as recently as Tuesday.Here's everything we know so far.Kate Middleton made her most recent public appearance on Christmas. The royal family on Christmas 2023.Samir Hussein/WireImage/Getty ImagesKate Middleton joined the royal family for their annual walk from Sandringham in Norfolk to attend a church service on Christmas.The Princess of Wales walked with her children and husband to the Church of St. Mary Magdalene in one of her signature coatdresses, much like she did in years past.On January 17, Kensington Palace announced Kate was in the hospital for "a planned abdominal surgery." View this post on Instagram A post shared by The Prince and Princess of Wales (@princeandprincessofwales) Kensington Palace said in its statement that Kate would remain at The London Clinic for up to two weeks following the procedure."Her Royal Highness The Princess of Wales was admitted to hospital yesterday for planned abdominal surgery," the statement read. "The surgery was successful, and it is expected that she will remain in hospital for ten to fourteen days, before returning home to continue her recovery. Based on the current medical advice, she is unlikely to return to public duties until after Easter."Kensington Palace provided no additional information about what procedure Kate underwent, though the palace told the Associated Press the princess does not have cancer.The statement also said Kate "hoped her personal medical information remains private" to help provide her children with "normality." "Kensington Palace will, therefore, only provide updates on Her Royal Highness' progress when there is significant new information to share," the statement went on to say. William was photographed visiting Kate at the hospital the following day.Kensington Palace said Kate returned to Windsor Castle on January 29.Kate Middleton in November 2023.Karwai Tang/WireImage/Getty Images"The Princess of Wales has returned home to Windsor to continue her recovery from surgery," the statement shared on Instagram said. "She is making good progress."William and Kate went on to thank the staff at The London Clinic in the statement, as well as those who sent them well wishes.The same day, Buckingham Palace announced that King Charles was returning home after having a procedure for a benign prostate enlargement.Buckingham Palace announced King Charles has cancer on February 5. King Charles III during the state tour of France in September 2023.Samir Hussein - Handout/Getty ImagesBuckingham Palace said in a statement that "a separate issue of concern was noted" during the king's prostate procedure, and additional testing revealed he has cancer. The palace did not disclose what form of cancer he was diagnosed with, though they said it was not prostate cancer.The statement also said that the king "commenced a schedule of regular treatments" and that although he would still be working from home, he would "postpone public-facing duties" per medical advice.The palace did not specify how long the king would forgo public-facing work."His Majesty has chosen to share his diagnosis to prevent speculation and in the hope it may assist public understanding for all those around the world who are affected by cancer," the statement also said.Prince William returned to public duty on February 7.Prince William in March 2023.Max Mumby/Indigo/Getty ImagesWilliam paused his royal engagements amid Kate's surgery and recovery, returning to work on February 7 for an investiture ceremony at Windsor Castle.The same day, he attended a gala raising money for the London Air Ambulance, and he thanked the public for their messages of support for Kate, according to Town & Country."I'd like to take this opportunity to say thank you, also, for the kind messages of support for Catherine and for my father, especially in recent days," he said, adding that "it means a great deal to us all."He has attended a handful of public events since. Experts told BI that the public would look to William in Charles and Kate's absence, as he represents the monarchy's future as heir to the throne."It's an opportunity for him to communicate on behalf of the royal family," Eric Schiffer, the chairman of Reputation Management Consultants, said.In addition, the public generally responds to younger royals more favorably. Without Kate, as well as Prince Harry and Meghan Markle, William's youth could be a boon for the monarchy, as Kristen Meizner, a royal watcher, told BI."They are most focused on the royals when they are of courtship age, getting married, having babies, that kind of thing," she said. "They're not necessarily considered as dazzling or as exciting to the public when they're 60 or 70 or whatnot."Kate went to Norfolk to continue her recovery on February 9. Kate Middleton in 2023.Max Mumby/Indigo/Getty ImagesOn February 9, The Daily Mail reported that Kate joined her family at their home in Sandringham, Anmer Hall, while her children had a half-term holiday. The outlet also reported her recovery was going well at the time. Kate was not photographed during her trip from Windsor to Sandringham. King Charles was photographed a few times throughout February, while Kate remained unseen. King Charles and Rishi Sunak at Buckingham Palace on February 21, 2024.ONATHAN BRADY/POOL/AFP via Getty ImagesAlthough he isn't taking on public-facing duties, King Charles has still been photographed a few times since his cancer diagnosis and the beginning of his treatment.On February 11, he and Queen Camilla were spotted going to church in Sandringham, and he was photographed meeting with Prime Minister Rishi Sunak on February 21 at Buckingham Palace.Kate, on the other hand, remained absent, as Kensington Palace released no photos or videos of her.William released a rare solo statement on February 20. A statement from The Prince of Wales pic.twitter.com/LV2jMx75DC— The Prince and Princess of Wales (@KensingtonRoyal) February 20, 2024 Typically, William and Kate have released statements as a pair since they got married.But on February 20, Kensington Palace released a statement on only William's behalf regarding the conflict in Gaza, in which he said he remains "deeply concerned about the human cost of the conflict in the Middle East since the Hamas terrorist attack on 7 October.""I, like so many others, want to see an end to the fighting as soon as possible," the statement said. "There is a desperate need for increased humanitarian support to Gaza." William also said he continues "to cling to the hope that a brighter future can be found and I refuse to give up on that." In addition to only speaking for William, the statement had a "W" seal at the top rather than the crown featured on messages from the Prince and Princess of Wales as a unit.William missed a Service of Thanksgiving on Tuesday because of an unnamed personal matter. Prince William didn't attend his godfather's Service of Thanksgiving. Kin Cheung - WPA Pool/Getty ImagesOn Tuesday, members of the royal family attended a Service of Thanksgiving for King Constantine of Greece, King Charles' second cousin and close companion. He was one of William's godfathers.William was set to attend the event alongside Queen Camilla and other family members but missed the service due to a personal matter, as Kensington Palace told Business Insider.A palace representative also told BI that Kate was doing well, but they did not elaborate on what caused William to miss the event.Following his absence, chatter about Kate's prolonged absence from the public eye erupted on social media, with users speculating about why she hasn't been seen in months. The princess was trending on X, and thousands of people posted about her on TikTok. "Kate Middleton" was also sixth on Google's list of trending search terms on Tuesday, highlighting how high public interest got in her absence.Kensington Palace reiterated that Kate is "doing well" as William returned to public duty on Thursday.Prince William speaks to Holocaust survivor Renee Salt at the Western Marble Arch Synagogue on February 29, 2024.Toby Melville - WPA Pool/Getty ImagesOn Thursday, Prince William resumed public duty, visiting the Western Marble Arch Synagogue to learn about the Holocaust Educational Trust, as Kensington Palace shared on Instagram.He sat down with Holocaust survivor Renee Salt. During their conversation, he spoke on behalf of himself and Kate, as Rebecca English, a royal editor for The Daily Mail, reported on X."Both Catherine and I are extremely concerned about the rise in antisemitism," he told Salt, according to English. "That's why I'm here today to reassure you all that people do care and people do listen, and we can't let that go."Kensington Palace also reiterated that Kate is "doing well" in a statement sent to BI on Thursday."We gave guidance two days ago that The Princess of Wales continues to be doing well," the statement said. "As we have been clear since our initial statement in January, we shall not be providing a running commentary or providing daily updates."As of Thursday, Kensington Palace had not released any new photos or videos of the princess.Read the original article on Business Insider.....»»

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Bradley Cooper said he didn"t know if he loved baby his daughter at first. Dads struggling to connect with their kids is more than you might think.

Bradley Cooper said he didn"t know if he loved baby his daughter at first. Dads struggling to connect with their kids is more than you might think......»»

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The housing market just saw its biggest inventory spike in nearly 3 years

In the four weeks to February 25, new home listings surged 12.9% compared to a year ago, while total inventory also showed improvement. Housing inventory is showing signs of improvement.Richard Newstead/Getty Images New listings for homes for sale climbed 12.9% year-over-year in February, Redfin data shows. Total inventory also improved, as total homes for sale did not decline for the first time in nine months. Demand remains weak, with mortgage-purchase applications down for four weeks in a row. The frozen US housing market is showing some signs of loosening this month. In the four weeks to February 25, new listings of US homes for sale surged 12.9% compared to the same time a year ago, hitting 79,354, according to data from Redfin. That's the sharpest spike in nearly three years. Total inventory, meanwhile, remained flat year-over-year, the first time in nine months the figure didn't move lower.Redfin's Homebuyer Demand Index, which measures requests for tours and services from Redfin real estate agents, also climbed 10% compared to last month, and is at its highest level since last September. New listings of homes jumped 13% year-over-year in February.Redfin"House hunters are out there, and competition picks up every time mortgage rates decline a bit," said Brynn Rea, a Redfin agent in Spokane, Washington. "I'm telling buyers who can afford it to look now while they have more breathing room and less competition. They have a good chance of negotiating the price down or getting some concessions from the seller, which could make up for getting a 7% mortgage rate instead of 6%." Mortgage rates are still hovering above 7% and home prices remain high. Mortgage-purchase applications have dropped for four consecutive weeks, and pending sales dipped 8%, the steepest drop in five months.The median sale price in February hit $365,888 in the four weeks up to February 25 — 5.4% higher than a year ago, and the largest increase since October 2022 except for the four weeks up to February 11. Read the original article on Business Insider.....»»

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