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F5, Inc. (NASDAQ:FFIV) Q2 2023 Earnings Call Transcript April 19, 2023 F5, Inc. beats earnings expectations. Reported EPS is $2.53, expectations were $2.42. Operator Good afternoon. And welcome to the F5, Inc. Second Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will […] F5, Inc. (NASDAQ:FFIV) Q2 2023 Earnings Call Transcript April 19, 2023 F5, Inc. beats earnings expectations. Reported EPS is $2.53, expectations were $2.42. Operator Good afternoon. And welcome to the F5, Inc. Second Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]Also, today’s conference is being recorded. If anyone has any objections, please disconnect at this time. I will now turn the call over to Ms. Suzanne DuLong. Thank you, ma’am. You may begin.Suzanne DuLong Hello and welcome. I am Suzanne DuLong, F5’s Vice President of Investor Relations. François Locoh-Donou, F5’s President and CEO; and Frank Pelzer, F5’s Executive Vice President and CFO, will be making prepared remarks on today’s call. Other members of the F5 executive team are also on hand to answer questions during the Q&A session.A copy of today’s press release is available on our website at f5.com, where an archived version of today’s audio will be available through July 24, 2023. The slide deck accompanying today’s discussion is viewable on the webcast and will be posted to our IR site at the conclusion of the call.To access the replay of today’s webcast by phone, dial 877-660-6853 and or 201-612-7415 and use meeting ID 13737373. The telephonic replay will be available through midnight Pacific Time, April 20, 2023. For additional information or follow-up questions, please reach out to me directly at s.dulong@f5.com.Our discussion today will contain forward-looking statements, which include words such as believe, anticipate, expect and target. These forward-looking statements involve uncertainties and risks that may cause our actual results to differ materially from those expressed or implied by these statements. We have summarized factors that may affect our results in the press release announcing our financial results and in detail in our SEC filings.In addition, we will reference non-GAAP metrics during today’s discussion. Please see our full GAAP to non-GAAP reconciliation in today’s press release and in the appendix of our earnings slide deck. Please note that F5 has no duty to update any information presented in this call.With that, I will turn the call over to François.François Locoh-Donou Thank you, Suzanne, and hello, everyone. Thank you for joining us today. Our team delivered second quarter revenue at the midpoint of our guidance range and earnings per share above the high end of our range. These results come despite persistent macro uncertainty, which has led to broader and more severe customer budget scrutiny, impacting both our software and hardware demand.We have strong conviction that customers constrained spending is a temporary headwind and that we are well positioned as a trusted and innovative partner for customers as they look to secure, scale, modernize and simplify their hybrid and multi-cloud application environments.In my remarks today, I will speak to the quarter’s results, the near-term spending dynamics we are seeing and why we remain confident in our positioning and growth opportunities longer term.First, on our Q2 performance. We delivered 11% revenue growth in Q2 as a result of stronger-than-expected system shipments and strong maintenance renewals. Our systems revenue grew 43%. As positive as this is for the quarter, it is more a reflection of our team completing comprehensive board redesign efforts ahead of plan than it is a demand marker.You will recall that last year, rather than just wait for supply chain to improve, we initiated multiple board redesigns with a goal of designing out the hardest to get components and opening up new supply. The successful completion of this work is making it possible for us to fulfill waiting customer orders sooner than we anticipated, and as expected, we have seen no order cancellations in the process.Our Global Services revenue grew 8%, driven by continued strong renewal rates, which improved across nearly all cohorts.Wrapping up our Q2 results, we also delivered OpEx within guidance and non-GAAP EPS of $2.53 per share, above the top end of our guidance range. So the quarter’s results were strong, but they obscure underlying customer spending patterns.Since our December quarter, we have seen customers scrutinizing budgets and deferring spend for anything except the most urgent projects. These dynamics were even more pronounced in Q2 when we saw previously approved projects going through multiple additional levels of approvals. In some cases, approvals are reaching the C suite or Board level only to be delayed or downsized.The impact of this extreme spending caution is most evident in our Q2 software revenue which declined 13% year-over-year. This was well below our expectations for the year and our long-term growth expectations.We believe there are several reasons why we are seeing this kind of impact in our software revenue. Photo by Christina @ wocintechchat.com on Unsplash These include the relative size of the software projects we tend to be involved in and the percentage of our software revenue derived from term subscriptions.First, the majority of our software growth to-date has come from transformational type projects of size, often six-figure or seven-figure deals. We are seeing larger projects come under more scrutiny, resulting in delays, sometimes by multiple quarters or downsizing into smaller, more incremental additions.Second, the majority of our software revenue comes from term-based subscriptions, which have upfront revenue recognition. As a result, when we see a decline in new term-based subscriptions as we have in the last few quarters, it is immediately evident in our software revenue and much more so than it would be if our software was predominantly ratable or SaaS driven.Now there is some good news to point to in software. We have a base of software renewals, which is growing. Our renewals consist primarily of second term multiyear term subscriptions, and similar to Q1, in Q2 our software renewals performed largely as expected. In addition, our SaaS and managed services revenue is growing and we expect it will become a more significant and predictable contributor to our software revenue over time.The spending patterns I have described were not limited to our software demand. We also experienced softer systems demand in the quarter as customers push the capacity of their existing systems, sweat their assets and work to deploy delivered systems into production.We expect these headwinds on both software and systems will persist at least through the end of this fiscal year. As a result, we now expect low-to-mid single-digit revenue growth for FY 2023. This is down from the 9% to 11% growth we previously forecasted.I will now speak to my third point, why we are confident that current demand environment is temporary and why we are uniquely positioned to help customers simplify their hybrid multi-cloud challenges.We are confident that current demand levels are temporary for several reasons. First, because of the direct commentary we are getting from customers. Customers are telling us that the delays we are seeing are a matter of budgets and approvals, not competitive pressures or architectural shifts.During Q2, I met personally with roughly 100 customers and partners. It was clear from my discussions with customers that they expect F5 will be a key part of their future hybrid and multi-cloud architectures as the only company capable of securing and delivering applications and APIs in all environments. Partners too are leaning into the new F5 and our rapidly expanding set of distributed cloud services are accelerating that movement.Second, because of our win rates. While the direct customer commentary is reassuring, we also consistently analyze our win rates. When we look at the first half of FY 2023 compared to the first half of FY 2022, we see broadly steady win rates across our theaters and product lines, confirming we continue to win our fair share of the deals we are involved in.Third, our factored pipeline, which accounts for the probability of a deal closing is up from where it’s been in the last couple of quarters, suggesting customer activity is increasing and deals are reaching a higher level of maturity. This too is encouraging, but given what we have seen in the first half, we believe it is prudent to remain conservative on expected conversion of respective pipeline.Fourth, our strong maintenance renewal signal customers are delaying purchasing decisions by sweating assets. We see this in the substantial attach rate increase on all the deployments where you would expect the behavior of sweating assets would be most pronounced.We also are seeing a substantial increase in deferred maintenance revenue compared to prior year trends. This behavior is consistent with what we have seen during past periods of macro uncertainty, with apps and APIs continuing to grow. However, customers can only postpone investment so long if they want those apps and APIs to remain performant and secure.In the meantime, we are focused on controlling the things we can control, including operating with discipline and ensuring we are prepared for when customer spending resumes. This includes reducing our cost base. We are reducing our global headcount by approximately 620 employees or approximately 9% of our total workforce.We expect these actions, combined with other cost reductions, including rationalizing our technology consumption, applying additional scrutiny to discretionary projects and reducing our facilities footprint will drive ongoing operating leverage. In addition, we are substantially reducing the size of our corporate bonus pool in 2023 and further reducing travel.As a result, we expect to deliver FY 2023 non-GAAP operating margins of approximately 30% and non-GAAP earnings growth of 7% to 11%. Further, the leverage from these cost reductions, combined with our anticipated gross margin improvement, positions us to deliver meaningful non-GAAP operating margin expansion and double-digit non-GAAP earnings growth in FY 2024.While customers are spending only were critical near term, they continue to face significant challenges ahead, including creating engaging digital experiences, managing resource constraints and addressing technical debt. Their business velocity and long-term growth will rely on finding ways to connect and protect applications and APIs across distributed environments.With our unique ability to secure and deliver applications and APIs across all environments, we are differentiated in our ability to help customers with these challenges. We believe this position will drive sustainable long-term growth.As we have evaluated and adjusted our business in addition to reducing cost, we have also intensified our investments in areas we believe will drive the highest mid- and long-term impact for our customers, including software and hybrid and multi-cloud.Now I will turn the call to Frank. Frank?Frank Pelzer Thank you, François, and hello, everyone. I will review our Q2 results before I speak to our third quarter outlook and provide additional color on our FY 2023 expectations. We delivered Q2 revenue of $703 million, reflecting 11% growth year-over-year. Global Services revenue of $363 million grew a strong 8% due to the high maintenance renewals and the impacts of the price increase introduced in Q4 of last year.Our revenue remained roughly split between Global Services and product with Global Services representing 52% of total revenue. Product revenue grew 14% year-over-year, reflecting strong system shipments against an easier comparison in the year ago quarter.As François described, our successful redesign efforts enabled systems revenue of $209 million, representing growth of 43% year-over-year. At $132 million, Q2 software revenue was down 13% compared to last year.Let’s take a closer look at our software revenue, which is comprised of subscription and perpetual license sales. Subscription-based revenue, which includes term subscriptions, our SaaS offerings and utility-based revenue totaled $109 million or 83% of Q2’s total software revenue. Within our Q2 subscription business, as François described, near-term subscriptions performed significantly below plan in the quarter.In contrast, and similar to last quarter, software renewals continued to perform largely in line with our expectations. Perpetual license sales of $23 million represented 17% of Q2’s software revenue. Revenue from recurring sources contributed 65% of Q2’s revenue. This includes subscription-based revenue, as well as the maintenance portion of our services revenue.On a regional basis, we saw growth across all theaters, though I’d note that these trends are more reflective of shipments in the quarter than current demand. Revenue from Americas grew 7% year-over-year, representing 54% of total revenue; EMEA grew a strong 22%, representing 27% of revenue; and APAC grew 9%, representing 18% of revenue.Looking at our major verticals. During Q2, enterprise customers represented 67% of product bookings, service providers represented 13% and government customers represented 20%, including 6% from U.S. Federal.I will now share our Q2 operating results. GAAP gross margin was 77.9%. Non-GAAP gross margin was 80.4% in line with our guidance for the quarter. GAAP operating expenses were $441 million. Non-GAAP operating expenses were $374 million, in line with our guided range.Our GAAP operating margin was 15.1%. Our non-GAAP operating margin was 27.2%. Our GAAP effective tax rate for the quarter was 25.1%. Our non-GAAP effective tax rate was 20.8%.Our GAAP net income for the quarter was $81 million or $1.34 per share. Non-GAAP net income was $154 million or $2.53 per share, above the top end of our guided range of $2.36 per share to $2.48 per share. This reflects improved operating margins from strong cost discipline, as well as a benefit to our tax rate in the quarter.I will now turn to cash flow and the balance sheet, which remains very strong. We generated $141 million in cash flow from operations in Q2. Capital expenditures for the quarter were $11 million.DSO for the quarter was 62 days, flat with Q1 and up from historical levels, primarily due to strong service maintenance contract renewals in the quarter and, to a lesser degree, back-end shipping linearity.Cash and investments totaled $760 million at quarter end. We did not repurchase any shares in Q2. We remained out of the market as we analyze the potential impacts of the cost-saving measures we discussed previously, as well as the changes we were seeing in the demand environment and its effects on our outlook.Deferred revenue increased 12% year-over-year to $1.8 billion, up from $1.76 billion in Q1. This increase was largely driven by substantially higher maintenance renewals on our installed base of products sold four-plus years ago.Finally, we ended the quarter with approximately 7,100 employees. This number does not reflect the reductions we announced today. We expect these headcount reductions will result in annualized savings of approximately $130 million. We expect to incur approximately $45 million in severance and benefits costs and other charges related to these actions in FY 2023.I will now share our outlook for Q3. Unless otherwise stated, my guidance comments reference non-GAAP operating metrics. We expect Q3 revenue in the range of $690 million to $710 million, with gross margins of approximately 82%.With the partial quarter impact of our announced cost reductions, we estimate Q3 operating expenses of $348 million to $360 million and our Q3 non-GAAP earnings target is $2.78 per share to $2.90 per share. We expect Q3 share-based compensation expense of approximately $60 million to $62 million.Finally, we plan to repurchase at least $250 million worth of shares during Q3. We remain committed to returning cash to our shareholders and continue to expect to use at least 50% of our annual free cash flow towards share repurchases.I will now speak to our FY 2023 expectations. We expect low-to-mid single-digit revenue growth in FY 2023. Given our first half results and the environment for new software projects, we no longer see a path to 15% to 20% software growth in FY 2023 and are not offering guidance for the second half product revenue mix at this time.Based on current visibility and our earlier than anticipated systems recovery, we expect to see lower systems revenue in Q3 and Q4 than in Q2. We expect that we will continue to substantially work down our systems backlog over the second half of FY 2023.We expect FY 2023 non-GAAP operating margins of approximately 30% and non-GAAP earnings growth in the range of 7% to 11%. Incorporating our year-to-date results, we have narrowed our estimate for our FY 2023 effective tax rate to 21% to 22% for the year.I will now turn the call back over to François. François?François Locoh-Donou Thank you, Frank. Like last quarter, I’d ask that you take away three things from this call. We believe the current demand environment is temporary and while we cannot predict when it will recover, we are confident it will for the very simple reason that applications and APIs continue to grow.We are also confident that as customers resume more normal levels of investment and begin to take on the challenges associated with hybrid multi-cloud environments, we will be a differentiated partner for them.And finally, while we have implemented cost reductions and continue to strive to achieve double-digit earnings growth, we also have intensified our investment in areas we believe will be most impactful for our customers over the medium- and long-term, including software and hybrid and multi-cloud.Operator, please open the call to questions. See also 15 Biggest Private Oil Companies in the World and Top 10 Growth Stocks in Biotech. Question-and-Answer Session Operator Thank you, sir. [Operator Instructions] And our first question comes from the line of Sami Badri with Credit Suisse. Please proceed with your question.Sami Badri Thank you. I had two questions. First thing, maybe, Frank, you could help us just understand modeling parameters for the year, and the reason why I ask that is, we were not really forecasting a fairly large growth contribution from services revenue, and that’s clearly looking like that’s changing as of fiscal 2Q and into the second half of the year. What should we be assuming for services growth now, given things have changed and customers are fitting assets? And then kind of backing into product, how should we be — I think you made a comment saying you weren’t going to make guidance for software growth into the second half of fiscal year 2023 for software. But I kind of just need a little bit more color on that, just given the systems commentary as well? And then I have a follow-up after this.Frank Pelzer Yeah. Sure, Sami. So we did not update the mid-single-digit outlook that we did update in Q1 on services. Obviously, we outperformed that in Q2, and for all the dynamics that you highlighted, we continue to think services contribution is going to be strong through the course of the year as customers continue to sweat assets and particularly when we look at some of the aged assets and their decisions around that. And so, we don’t have an update, but I think that mid-single-digit is well intact and we will see what happens.Specifically, we did not give any guidance on mix and product, and the results of looking at that services growth to what the product growth will be in that mix, I will leave that to you to model. But we are not giving any specific guidance to what we think software growth is going to be for the balance of the year and our systems growth for the balance of the year.Sami Badri Okay. Got it. And maybe a question for François. I think one thing we really kind of want to know is, if you were to think about which customer industry group really caused the majority of the drag or the impact to the revision of the guide for fiscal year 2023, which customer cohort or customer vertical really kind of caused that if you could put your finger on one?François Locoh-Donou Thanks, Sami. For a couple of indicators on that. The first is, what we have seen in our second fiscal quarter is, this pullback in spending has been broader and more severe, frankly, across all verticals and all geographies, and so I would say all protocols and geographies are affected at this point.If I had to pull out a couple, I would say, the financial services in the — especially in the second half of March, where we saw a number of our deals being pulled out, delayed or downside or delayed by multiple quarters. Financial services was impacted prior to the collapse of SVB, but we did see even more caution in the financial services industry after that, and we expect that will persist.The other vertical Sami, that I would call out is service providers, where we had a number of customers that had expectations around their budget, I would say, in our fiscal Q1 or calendar Q4 and when the budgets were settled in the February timeframe, the budgets were a lot less than they expected.And that’s driven by, I think, in some cases, certainly in the MSO sector, cable sector worries about our service provider customers perhaps losing or reducing the growth on the highest margin customers and we are seeing that also in with certain mobile operators around their planned spend on 5G.So that’s — I would say those are the two verticals that perhaps have been where we have seen perhaps the strongest differential between where they were in Q1 and where they are today.Sami Badri Got it. Thank you.Operator And the next question comes from the line of Ray McDonough with Guggenheim Securities. Please proceed with your question.Ray McDonough Great. Thanks. Two if I could. The first one, François, can you comment or maybe even for, Frank, can you comment on how or if new business declines accelerated from last quarter, I believe. And with that, I also believe a part of the renewals that you expected to come in came from the true forwards. How have they performed versus expectations from the beginning of the year and is the move towards optimizing cloud spend from customers impacting those true forwards at all given pricing is somewhat based on what customers consume per year in those contracts?Frank Pelzer Ray, I will start, and certainly, François, wants to pick up he can. I think we saw a challenge in new business sales in both Q1, as well as Q2. Did it accelerate in Q2? Probably slightly versus our expectation, but not necessarily when you take a look at the raw number. So that’s how I’d answer that one for you.I think in terms of your second question around spend. On the true forwards that we saw, those were slightly below our expectation level. We do keep that in the renewal bucket. And so when we said that it largely performed to our expectation, that was the one piece that did not perform to our expectation where we think that people are being a bit more critical around their consumption and being much closer to what they had planned to consume and not going over and that’s not what we experienced up until this year.Ray McDonough Okay. That makes sense. And then maybe a follow-up, Frank, for you. Can you help us on the direction of cash flow margins for this year and where you think that can go? You have the benefit of supply chain challenges subsiding somewhat at least. You are lapping the initial cohort of term license renewals and now you have the benefit or will have the benefit of some of the cost reductions hitting this year that you are putting in place. So is it reasonable to think that a mid-20% cash flow margin is achievable this year or is there still some noise in the model that would preclude you from hitting that sort of target or range?Frank Pelzer Yeah. Ray, so we don’t specifically guide to cash flow and I think the dynamics that you mentioned are the similar ones to the ones that we are experiencing......»»

Investments in technology solutions that enhance communications experience are likely to aid the Zacks Audio Video Production industry participants. However, High competition from low-priced device importers is a concern for Sony Corporation (SONY), Dolby Laboratories (DLB) and GoPro (GPRO). The companies within the Zacks Audio Video Production industry are concentrating on the premium segment of the branded products market for business growth. Sony Corporation SONY, Dolby Laboratories DLB and GoPro GPRO are likely to benefit from investments in cutting-edge technology solutions that create better communications experience. Easing supply chain issues are likely to aid the performance of these companies. However, muted consumer demand amid a weak macroeconomic environment globally remains a concern at least in the near term. Fierce competition from importers of comparatively low-priced devices puts pressure on these industry players. Online accessibility of recording equipment and the availability of distribution channels on the Internet are a headwind.Industry DescriptionThe Zacks Audio Video Production industry comprises television, speaker, video player and camcorder manufacturers. It includes companies that offer gaming consoles, drones and high-end cameras for individuals and industrial markets. These firms provide state-of-the-art audio, imaging and voice technologies that enhance entertainment and communication experiences. Some industry participants develop audio and imaging products, including digital cinema servers and products for film production and entertainment industries. Apart from providing theatrical and television production services for cinema exhibitions, broadcast and home entertainment, these companies work with film studios, content creators, broadcasters and video game designers. Some prominent players are present in the music and image-based software markets worldwide.What's Shaping the Future of Audio Video Production IndustryTechnological Advancement to Spur Growth: Over the years, the shift to digital technology has catered to the demand for high-resolution video, reduced the problems of radio frequency and electromagnetic interference, making audio-visual systems more data-network friendly. Wireless transmission has enabled the broadcast of audio and video signals through wireless data networks seamlessly while enhancing productivity. The industry players have been offering services to diverse media producers. That said, easy online accessibility of recording equipment and the widespread availability of distribution channels on the Internet pose challenges.Increasing Demand for Premium Entertainment: The industry has performed well despite drastic changes in how media is consumed and distributed. The rise in demand for premium entertainment from record labels, TV producers, and advertisers is likely to stoke profitable growth. Demand for video post-production services will increase in the coming days as the downstream market continues to grow. Strong demand across all regions with a more direct-to-consumer, subscription-centric model bodes well for the industry participants.Aggressive Competition: In the United States, smart-connected televisions, microphones and speaker enclosures are customers’ most popular electronic devices. But the U.S. manufacturers of audio and video systems persistently face intense competition from importers of comparatively low-priced devices, particularly from China, Vietnam and Mexico. The firms face stiff competition across all end markets, often leading to intense price wars and margin contraction. The companies will likely benefit from investments in cutting-edge technology solutions that create a seamless communications experience.Macroeconomic Headwinds Likely to Hurt Consumer Demand: The global macroeconomic weakness owing to the Ukraine war and inflationary pressure is likely to affect consumer demand, especially discretionary purchases. While the companies keep investing for market share gains and supply chain resilience, a shortage of critical hardware components due to supply chain disruptions (although disruptions are easing somewhat) is expected to hurt revenues in the near term. Unit volume shipments across end markets and devices are expected to decline. Fluctuations in commodity pricing for different components are additional concerns.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Audio Video Production industry is housed within the broader Zacks Consumer Discretionary sector. It currently has a Zacks Industry Rank #68, which places it in the top 27% of more than 248 Zacks industries.The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.Before we present a few audio-video production stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500, Outperforms the SectorThe Zacks Audio Video Production industry has outperformed the broader Zacks Consumer Discretionary sector but lagged the S&P 500 composite in the past year.The industry has plunged 15.6% over this period against the S&P 500’s decline of 13.5%. The broader sector has declined 23.3%.One-Year Price Performance Industry's Current ValuationPrice-to-sales is commonly used for valuing audio-video production stocks. The industry has a trailing 12-month P/S of 1.07X compared with the S&P 500’s 3.47X. It is below the sector’s trailing 12-month P/S of 1.90X.In the past five years, the industry has traded as high as 1.43X and as low as 0.63X with a median of 0.93X, as the chart below shows.Price-to-Sales TTM Ratio (Past Five Years) 3 Audio Video Production Stocks to Keep an Eye onSony: Headquartered in Tokyo, Japan, Sony designs, manufactures and sells several consumer and industrial electronic equipment. The company’s product roster comprises audio and video equipment, televisions, displays, semiconductors, electronic components, gaming consoles, computers, computer peripherals and telecommunication equipment. Sony actively produces, acquires and distributes motion pictures and television programming and operates television and digital networks. Further, the company has a global presence in the music and image-based software markets.Sony’s performance benefited from improving sales in the company’s Games & Network (GN&S) segment. The company now expects to sell more than 19-million-unit sales for its PlayStation 5 in the current year. Also, continued strength in Music and Entertainment, Technology & Services (ET&S) segment augurs well. The company’s Music segment benefited from higher recorded music and music publishing sales from paid subscription streaming services. Frequent product launches and strategic collaborations bode well.At present, Sony carries a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.   The Zacks Consensus Estimate for its current-year earnings is pegged at $5.36 per share. The long-term growth rate stands at 5.9%.Price and Consensus: SONYGoPro: Headquartered in San Mateo, CA, GoPro is one of the world’s leading manufacturers of handy cameras. GoPro’s performance is benefiting from an increasing its subscriber base and expanding direct-to-consumer business.The company’s subscriber base is gaining from the increased conversion of retail customers into GoPro subscribers through the GoPro app. In the fourth quarter, the company’s subscriber base rose 43% year over year to 2.25 million. The company plans to invest heavily in synced mobile, cloud and desktop software in 2023 to boost its subscriber engagement and float a higher-priced subscription tier. Frequent product launches are expected to act as tailwinds. However, the company expects channel inventory to decline owing to inventory tightening by retail and distribution partners in the near term.At present, GPRO carries a Zacks Rank #3 (Hold). The consensus estimate for its current-year earnings is pegged at 26 cents per share.Price and Consensus: GPRO Dolby Laboratories: San Francisco, CA-based Dolby Laboratories specializes in audio noise reduction and audio encoding/compression technologies to revolutionize entertainment and communications at theaters, home, work and mobile devices. Dolby’s performance is benefiting from the increasing adoption of Dolby Atmos, Dolby Vision, and new imaging patents. The company expects revenues from these businesses to grow in the range of 15-25% in fiscal 2023, driven by continued momentum in broadcast, mobile and other markets. The company is likely to benefit from Dolby.io, which enables developers to build immersive online experiences. However, lower shipments in PC, broadcast, consumer electronics and gaming are denting Dolby’s performance. As a result, the company expects its audio revenues to decline by mid-single digits during fiscal 2023.At present, Dolby carries a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings is pegged at $3.44 per share. The long-term growth rate stands at 16%.Price and Consensus: DLB  Infrastructure Stock Boom to Sweep America A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made. The only question is “Will you get into the right stocks early when their growth potential is greatest?” Zacks has released a Special Report to help you do just that, and today it’s free. Discover 5 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How To Profit From Trillions On Spending For Infrastructure >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dolby Laboratories (DLB): Free Stock Analysis Report GoPro, Inc. (GPRO): Free Stock Analysis Report Sony Corporation (SONY): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

It is important to consider price when shopping for a gift. It becomes especially important when your holiday shopping list is long. Along with your personal finances and the number of people you’re shopping for, you can stay within budget in a number of ways. Since the holidays are already a stressful time, here are […] It is important to consider price when shopping for a gift. It becomes especially important when your holiday shopping list is long. Along with your personal finances and the number of people you’re shopping for, you can stay within budget in a number of ways. Since the holidays are already a stressful time, here are 101 Christmas gift ideas that are under $40. You don’t have to purchase these exact items. At the very least, though, they can inspire you to purchase thoughtful and practical gifts without breaking the bank. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2022 hedge fund letters, conferences and more   Gifts for Coworkers and Employees Whether you consider them a friend, your “work family,” or just want to show you your appreciation, giving coworkers or employees a gift at the end of the year is a give-in. At the same time, it can be challenging to buy gifts for coworkers and employees. Generally, these gifts should be thoughtful but not too personal. And the following suggestions strike that balance. Office Yoga Mug Featuring yoga poses such as “salute to the server” and “printer warrior 2,” your colleagues will love displaying this yoga desk mug. For your convenience, it comes pre-wrapped in a gift box. And, it only costs $17 Yeti Rambler This 18 oz. is perfect for both daily commutes and outdoor adventures. Thanks to the double-wall vacuum insulation, their water will stay cold throughout the day. You can even customize the bottle if you want. A pretty solid present for $30, in our opinion. Coffee Gift Card I know. Gift cards don’t always make for the most exciting or thoughtful gifts. But, for those who can’t live without their morning cup of Joe, then definitely appreciate this gift. Bonus points if you get them a gift card from their favorite coffee shop. DavidsTea Holiday Teas Variety Pack There’s something for every tea drinker here, from chocolate to fruity to spicy holiday blends. Sleigh Ride, Organic Orange Spice, Hazelnut Chocolate, and Caramel Shortbread are included in this $12 set. Coffee Mug Warmer Have you ever poured a cup of hot coffee in the morning only to have it sit on your desk for hours? To fix that, you can gift your colleagues a mug warmer, like the $25 Kin Element Mug Warmer and Lid Set. There are three temperature settings ranging from 104 to 140 degrees. By touching the front-facing sensor, you can switch between settings. In addition to changing color, the sensor indicates whether the temperature is high, medium, or low. Harry & David Thanks a Bunch Treats Tin What’s the point of buying just one gift when you can get an entire basket? Whether your colleague likes wine, sweets, savory snacks, fruit, or all of them, there’s a Harry & David gift basket that’s perfect for them. Here’s an affordable option we recommend: Thanks a Bunch Treats Tin. It’s filled with cookies and pretzel clusters for just $30. Zen Garden Research consistently shows plants increase productivity and decrease stress in the workplace. With that in mind, we think that this fresh succulent garden for $28 will accomplish just that. Additionally, it comes in a beautifully crafted planter gift box, and one garden sold provides six months of safe water for a developing country. Desktop Vacuum Cleaner Crumbs are inevitable if you eat at your desk. With a mini vacuum, you can help a coworker clean their desktop. With an included brush and nozzle, this one can reach hard-to-reach places and is USB chargeable. And it will set you back 15 bucks. Wireless Charger and UV Sanitizer Let’s face it, your phone is filthy. This small UV sanitizer kills 99 percent of bacteria and germs, so you can provide a germ-free workplace for your co-workers. In addition to keys and sunglasses, it can be used for earbuds and other small items that are frequently used. And it’s only $18. Two-Tone Pen Holder Designed after Japanese tea cups, this pen pot features a simple, minimalist design and natural colors. All materials used in its manufacture are 100% natural and sustainable. And it costs only $26. Stationery Sets At every meeting, you will find two types of coworkers: those who take notes and those who doodle. With some fresh stationery, you can cover all the bases either way. Their desk will immediately look brighter with Poppin Soft Cover Notebooks and Rifle Paper Co. pencils, while keeping track of tasks will be easier with the to-do list notepad and gel highlighters. Daily Planner Pad This notepad over at Etsy sorts tasks by top priority, later, and tomorrow to make work easier for your coworker. Also, it has an affordable $14 price tag. Moleskine Classic Notebook For coworkers who prefer classic notetaking, this Moleskine is a great office accessory. They can jot down meeting notes, reminders, and to-do lists on ruled, dotted, double layout, or plain pages. And, this classic notebook is $23. Bento Lunch Box Container Is your coworker always bringing lunch to work, or does he or she prepare meals at home? Food can be kept fresh and organized neatly in this bento box set. There are two stackable containers included, as well as a three-piece utensil set. Not bad for $15, right? The Work Wellness Deck There are 60 cards in this deck that contain daily actions that may help bring more balance to your colleague’s work life and health. Depending on what card they pull, they might need to practice breathing exercises, network, or be grateful. You can snag these cards over at Uncommon Goods for $19. Perfect Gifts for People That You Don’t Know Very Well It’s challenging to pick out a gift for someone you don’t know well, whether it’s a coworker, distant cousin, or neighbor. Choosing a gift that’s both neutral and useful while still being fun is the key to getting a gift that will please everyone. Holga Camera Would you like to print photos with Instagram filters? You can do that with the Holga camera, believe it or not. These popular Hong Kong-made cameras make a great gift for photographers. They also cost far less than today’s high-end digital SLR cameras. Case in point, this one is $40. A Take-It Everywhere Speaker This Bluetooth speaker is perfect for anyone, no matter what their favorite band is. Whenever and wherever they want to listen to music, they can do so. For charging, the speaker comes with a USB cable. And it’s only $20. Passport Holder and Luggage Tag Set Passport protectors and luggage tags are essential for international travelers. These handmade leatherette luggage tags and passport cover sets can also be personalized with the recipient’s monogram. It only costs $18 to boot Echo Friendly Reusable Straws Increasingly, towns and cities are banning plastic straws, so these silicone alternatives are useful gifts to give. In addition, each straw comes with its own portable carry case that can be folded and stored. A set of five costs just $19. Burt’s Bees Gift Set During the winter, your lips, hands, and feet become itchy and dry. Winter is a great time to gift a Burt’s Bees kit to rejuvenate their lips and skin. And it’s only $12. Mini Buddha Board Art Set Taking a cue from Etch A Sketch, Buddha boards are a relaxing, modern alternative. Whether you’re a kid or an adult, you’ll enjoy drawing your own creations and watching them slowly disappear. There’s something surprisingly meditative about it. And you can’t beat the $18 price tag. Slippers Seriously. Who doesn’t enjoy a pair of slippers to get their feet cozy and warm? Also, you don’t need to break the bank. For example, both Dream Pairs Women’s Cable Knit Faux Fur Slippers and RockDove Men’s Original Memory Foam Slippers are only $22. Sleep Mask When you don’t know the recipient very well, giving a practical gift is a smart way to be thoughtful. And this cotton sleep mask is certainly considerate after they get a great night’s sleep. Plus, it’s only ten bucks. Hair Towel Wrap For quick hair drying, these short fiber hair towels are made from a super-absorbent microfiber towel. Using a microfiber hair towel, you can dry your hair quickly without damaging it. And a 3-pack is only $14. Elmer Knit Beanie The snug fit of Herschel beanies makes them ideal for cooler weather. Besides being gender-neutral, they’re affordable enough that you can buy matching sets for your family and friends. You can snag it for $25. Magnetic Wristband During any DIY project, this magnetic wristband comes in handy. With its 10 strong magnets, things like screws, nails, bolts, and drill bits can be corralled for ease of use while you are doing home improvement projects. Best of all? It’s only $15. Beauty Sponge With plenty of awards and a cult following among makeup lovers, Beautyblender sponges make a great gift for beauty buffs. These edgeless, reusable sponges, foundation, powder, and other products will apply evenly. And it is just $20. Dog Treat Maker Those who own dogs will appreciate the convenience of making homemade, healthy treats with this nonstick press. As of this writing, you can grab this for $25 over at Amazon. Cable Organizer We cannot keep up with the clutter of cords and chargers as electronics proliferate. As a practical gift, this tech accessories case solves that problem, which, at this point, is a fairly universal one. It’s also under $20. Theme Baskets A gift can be designed to suit those on your gift list if you know what they like. Consider creating a gift basket based on a theme. For instance, get a set of mixing bowls, utensils, and a cookbook for the aspiring cook over at Half Price Books. Gifts like this show respect for someone’s interests and encourage them. And, you can dictate the price point. White Elephant Gifts In most cases, white elephant gift exchanges are just a funny way to break the ice during a gathering. You can purchase a fun gift or a cool gift that your coworkers will appreciate, or a sentimental present that a loved one can treasure. 100 Movies Scratch Off Poster They can reveal cool designs by scratching off the square each time they watch one of the iconic movies listed on the poster. And it’s a cool $15 at Uncommon Goods. Slinky When in doubt, some childhood nostalgia never hurts! There is nothing better than the Original Slinky, and it would cost you next to nothing to purchase it. Hot Dog and Bun Toaster Double the fun by toasting two hot dogs and their buns simultaneously! The retro-styled hot dog toaster is available in three colors: white, cream, or yellow, inspired by Oscar Mayer. It’s lightweight and easy to use. And it’s under $25 on Amazon. Mistaken Lyrics Coasters You’ll have them doing a double-take when they see these coasters. There are questionable lyrics stamped on each one of these. For instance, “Hold me closer, Tony Danza.” Totally worth the $28. Mini Bowling Game Set Presented as a white elephant gift, this Mini Bowling Game Set is fun and exciting. This set is perfect for those who need a stress-relieving desk game. Plus, it’s budget-friendly at just $12. Wacky Wavy Mini Tube Guy White elephant gifts can be hilarious, and this one is sure to stand out. Like your favorite car dealership decoration, this miniature motorized tube guy dances, wiggles, and shakes – only it fits right on your desk. And it’s under $20. Head & Scalp Massager After a long day, a scalp massager can help reduce stress and anxiety. Due to its small size and lightweight design, they can easily carry it wherever they go! Also, it’s just around $10. Bluetooth Karaoke Microphone With this microphone, you can transform every commute or gathering into a karaoke session. You can stream music straight from Spotify, iTunes, YouTube, or other streaming services with the microphone connected to any Bluetooth-enabled device. As of this writing, it’s $25 on Amazon. Silicone Wine Glass Holder Make someone’s day by giving them the gift of relaxation. Using this silicone wine glass holder, they can sip while showering or bathing. It doesn’t require adhesives, suction cups, or wall mounting. If they’re not into wine, consider a shower beer holder. Both are around $15. Food Dice With these innovative Foodie Dice, they can finally put an end to meal indecision. In total, 186,000 meal combinations are possible with each set, which includes nine dice dedicated to cooking methods, proteins, carbs, herbs, bonuses, and seasonal produce options. A pouch set is $24. Touchscreen Gloves In the winter, nothing is more frustrating than trying to use a touchscreen phone. Either you’re holding it with gloves on, or your fingers are numb. These Moshi Digits Touchscreen Gloves keep hands warm in the cold, and their unique grip patterns prevent phones from slipping out. You can buy a pair for $30. Cocktail Kit Besides a bartender’s spoon and muddler, three cocktail picks, and a hand-knit cocktail napkin, each kit includes ingredients for an Old Fashioned, Margarita, and Moscow Mule. You can take these kits on your next adventure in your back pocket, pack, or duffel. Each kit is $22 a pop. A Game of Cat and Mouth With this hectic pinball-like game, you will have hours of fun catapulting balls at one another. And it’s priced fairly at $20. Sneaker Balls The advantage of white elephant gift exchanges is that you don’t give someone these sneaker balls directly. Getting it through a game might make it more useful, but if you give it to your friend, they might take offense. They’re also only $15. White Elephant Ring Holder Yes. It’s literally a white elephant. This will definitely win you the award for the most cringe-worthy White Elephant gift. But hey, at least it’s useful. And, it’s a measly ten bucks. Gift Ideas for the Home If you’re shopping for someone who loves their house, give them something that will make it even better. 3-in-1 Avacado Slicer Avocado prep made easy. An easy-to-use, dishwasher-safe tool that facilitates everything from slicing to pitting. For $12, you might as well pick one up for yourself as well. Breakfast Sandwich Maker You can make breakfast, lunch, or dinner sandwiches in just minutes with this sandwich maker. With this breakfast maker, you can customize your sandwich by choosing your favorite bread, cheese, eggs, and meats. Plus, it will only set you back $30. Mini Waffle Maker Dash’s waffle maker whips up tiny 4″ waffles in no time. Furthermore, it’s available in a variety of fun colors and even in a heart-shaped design. And, it’s just $13. Crock Pot Give your friend or loved one an easy-to-make, mess-free slow cooker. Seriously, I can’t live without mine. You can buy a 4.5-quart size slow cooker for $25. W&P The Popper W&P’s collapsible popcorn bowl makes four cups of fresh popcorn. Plus, the lid doubles as a measuring cup. And it costs only $20. Milk Frother When making cappuccinos and other coffee drinks containing milk, a milk frother is essential. In addition, it can be used at home to aerate and froth cocktails. It’s available at Amazon for $25. Eco-Friendly Dishcloth Towels Colorful dish towels never go out of style, and these cheerful ones boast playful patterns and bright colors. Towels made of 100% cotton can be used to clean dishes, pans, and appliances and reduce paper usage. A set of 4 costs $11. Silicone Baking Mats Baking enthusiasts will appreciate these nonstick silicone baking mats that are safe for ovens, dishwashers, and freezers. They give home kitchens a professional vibe. And, a set of 2 is only $16. Compost Bin This compost bin is stylish, so they won’t mind leaving it out. In addition to a form-fitting lid that keeps out odors, it has a rotating handle that makes transporting it easy. It is, however, $33. Garden in a Bag Herbs are a favorite among chefs. This Garden in a Bag-Basil from Potting Shed Creations is just $10.50 and will let the chef in your life grow, tend, and use their own basil. Sherpa Throw Blanket It is crucial to have a warm blanket in the colder months of the year, and this sherpa option fits the bill perfectly. For cold nights, keep the blue plaid rug at the foot of the bed or on the living room couch. And, it’s just $18 at Target. Personalized Christmas Ornament Establish a new holiday tradition by giving a personalized ornament as a gift. If you head over to Personal Creations, you can do this for $20. White Noise Machine This well-rated sound machine helps promote self-care by helping you get a good night’s sleep. There are six sounds included: rain, brook, thunder, white noise, ocean, and summer night. The timer can also be set to automatically turn the device off with the help of an included AC adapter or batteries. It’s on sale for $24. Vertical Photo Holder It is said that a picture is worth a thousand words. It is especially easy for grandparents to fall in love with updated pictures of their adorable grandchildren. This Kikkerland Photo and Card Holder in Black is a great way to keep lasting memories close. Make sure to print off some great photos to include as well. Butane Torch It’s the perfect tool for grilling or crème brûlée enthusiasts. And, it’s only $20. Gadget Gift Ideas For your tech-savvy friends and family members, there are a number of gifts in the $40 or below range. KZED Deep Tissue Massager A good massage relaxes muscles, relieves muscle stiffness, and improves soreness after exercise, and this massage gun by KZED does just that. You can customize the vibrations for a lighter or a deeper massage using the six types of massage heads. And, it’s a bargain at $36. iFixit Jimmy Those who constantly disassemble, hack, and mess around with their electronics will surely appreciate this gift. With the Jimmy tool from iFixit, you can wedge, pry, or shimmy open just about anything with its thin strip of steel. Besides scraping stickers and paint, it’s also useful for adjusting and repairing areas. For DIYers, it’s a must-have. And, it’s only $8. Wyze Cam V3 A home security camera is a must if you want to know what’s happening in your yard or if someone you know is concerned about porch pirates. If you are on a budget, Wyze sells a variety of affordable outdoor security cams. Among the Wyze Cam V3’s features are color night vision, intelligent motion detection, voice control, and a built-in siren — all for under $30. S1 Stealth Wallet With its minimalist design and water-resistant DTEX build, the S1 Stealth wallet from Dango Products is a great gift option. There are six card slots, as well as a pocket for a key or memory card, in this slim accessory. The S1’s RFID-blocking technology also protects users from identity theft and credit card fraud. It’s currently on sale for $20. Mini Drone This mini drone from Holy Stone is an excellent gift idea for beginners at $36. This drone is cleverly designed with protective shells around its rotors, is capable of a number of in-flight tricks, and has a flight time of about 20 minutes per charge. A trio of batteries and an intuitive controller are included. BoostCharge Fast Wireless Charging Pad Wireless chargers are great tech gifts under $40, and Belkin’s is one of the best. This compact accessory can rapidly charge iPhones and Android smartphones with a maximum power output of 15 watts. Signature M650 Wireless Mouse The Logitech Signature M650 wireless mouse is hands down the best under $40 gift you can give to a coworker, family member, or friend. Featuring a precise scrolling wheel and silent button, the gadget will leave a lasting impression. Spectra Infinity Xbox Controller Any Xbox or PC gamer will immediately enjoy the PowerA Spectra Infinity wired gaming controller. A high-quality knob with mappable keys, colorful LED lighting, and a handy volume dial make this accessory a must-have. Warranty coverage is provided by PowerA for two years. FosPower Emergency Solar Radio You can hear emergency broadcasts, charge your electronics with the sun, and have a reliable source of light with the FosPower Emergency Solar Radio. For peace of mind, this is definitely $31 well spent. Band 7 Fitness & Health Tracker This fitness tracker has design and hardware features that belong in a much higher price range, making it a fantastic under-$40 gift. A sophisticated sensor measures the heart rate and oxygen level continuously. This budget-friendly gadget tracks over a hundred activities and workouts, as well as sleep patterns and stress levels. Echo Wall Clock If you’re looking for a gift for someone who already uses an Amazon Alexa device, then the Echo Wall Clock is a great choice. With its built-in LEDs, this minimalist wall clock can display the progress of various timers you set with Alexa. You can use it to set timers for food, laundry, homework, and whatever else you can think of. Pretty cool for $30, if you ask me. GE Full-Color Direct Connect Smart Bulbs These GE Full Color Direct Connect Smart Bulbs for just $13 make it easy for friends and family to set the mood in their rooms. With no additional hardware required, you can choose from millions of color options. Using Alexa or Google Assistant, the bulbs can be dimmed or controlled from away from home. Dime Mini Multitool Gearheads will appreciate the compact, feature-rich Gerber Dime, a multitool crafted entirely in the United States. Among the 12 onboard tools are a flat-head screwdriver, a tiny plain-edge blade, a box opener, and scissors. It is backed by a lifetime warranty from Gerber. Not shabby for around $20. Justin Case Commuter Car Emergency Kit This roadside emergency kit includes jumper cables, a flashlight with batteries, a tow strap, a rain poncho, knit gloves, a first-aid kit, and Justin Case Roadside Assistance for 365 days, making it a perfect gift for anyone who forgets to leave their car lights on or forgets to turn it to E. Not too shabby for $24. Simply complete the enclosed membership form and mail it in to receive roadside assistance. After a few weeks, you will receive a one-year enrollment card in the mail. There is no membership fee. Best Buy Gift Card Not the most original gift. But, at least the recipient can buy the gadget they’ve asked Santa for. Inexpensive Gift Ideas for Kids If you’re looking to stretch your budget when shopping for the baby, child, or teen in your life, here are some gift suggestions. Lego Classic Creative Blocks While this classic, colorful Lego set comes with a few ideas for small projects, it promotes open-ended play. A brick-shaped storage container is a nice touch too. A great gift for just $12. View-Master Boxed Set As a kid, you probably enjoyed clicking through one of these – now you can share the joy with your own children, grandchildren, or niece or nephew. You can think of it as the original VR headset. But, for only $22. Carson BugView Finder By using this catch-and-release bug magnifier kids can explore the outdoors in a humane manner. Plus, it’s only $13. Tookyland 16 Pcs Wooden Soring Stacking Balancing Stone Rocks In addition to being more eco-friendly than plastic toys, wooden toys are more popular among minimalist parents. While helping kids develop hand-eye coordination, these Areaware-esque rainbow woodblocks look nice enough to display. And, it’s a steal at $16. Zutano Unisex-Baby Newborn Cozie Fleece Booties This pair of Zutano Cozie Fleece Baby Booties with Cotton Lining is soft, cozy, and perfect for wiggly feet. With an adjustable snap closure and a gentle ankle elastic, the baby booties stay securely on your child’s feet thanks to a fleece shell lined with interlock cotton. Prices range from $18 to $25. Think Wing Baby Teething Toys 5-Pack The set contains giraffes, bananas, and other fruit shapes as teething toys. And, it’s on sale at Amazon for $10. Doodle Bear This sweet stuffed animal is perfect for kids to scribble and scrawl all over-then toss it in the laundry when they’re done. To draw on this stuffed toy, three washable markers are included. Not bad for $22. Eeboo Our Solar System Puzzle As you complete this cosmically cool solar system puzzle, your kid will learn about outer space and explore the universe. Illustrations and amazing facts about the universe fill this puzzle as well. An out-of-this-world present for $16. Novie Interactive Smart Robot Kids will love learning fun tricks from this interactive robot toy. There are 75 tricks or commands that Novie can do, as well as interacting with other Novie robots when controlled by hand gestures. It’s available at Amazon for $29. Money Maze Bank This is a great way to give cash or a gift card – enclose them in a money maze and watch the recipient figure it out. Once the initial gifting is over, the Money Maze can be turned into an actual piggy bank with built-in security. Definitely a unique gift for $8. Selfie Ring Light Selfie rings are absolutely worth the investment if your teen enjoys taking selfies and takes high-quality photos. This is under $19 and comes with a tripod and phone holder. Fanny Pack Despite what you may think, fanny packs are very popular right now. This Patagonia bag sits at the waist for easy access to essentials or can be slung over the shoulder. The “light, comfy, and durable” features make it a favorite among reviewers. Apple AirTag This tag can be attached to a backpack, wallet, keys, or other easily lost items so your teenager can easily track them down with the Find My app whenever they lose them. Using the app, they can make the tag play a sound until they find their misplaced item. Totally worth the $29. Panasonic ErgoFit Earbuds If they’re still plugging in their headphones, like the cool kids area, get them a pair of Panasonic in-ears for like $10. Their sound is pretty good, and they are comfortable, with soft ear-hugging tips. Bombas Socks During the holidays, it’s basically your civic duty as a parent to buy socks for your teenager. Bombas socks are more comfortable and stylish than your local department store’s six-pack. In addition to feeling great on their feet, they give back to the community with every purchase. Subscriptions/Experiences Instead of material possessions, why not give the timeless and memorable gift of subscriptions or experiences? Meal Kit Delivery Service Are there any friends or family members who enjoy cooking but can never get to the grocery store? Perhaps they want to take their culinary skills to the next level, but aren’t sure where to start. Subscription food services provide the precise ingredients (premeasured) required for varied recipes, delivered right to your door. Using the instructions, anyone can cook a quality meal by simply opening the box. Home Chef, for example, allows you to send a $25 gift card. Speciality Food or Coffee As an example, a box of authentic New Orleans beignet mix would make a great gift for your family or friends for just five bucks. You can also add Café du Monde coffee and chicory to make the perfect gift. Sports Game or Concert Tickets Around the holiday season, there are all sorts of college bowl games and other sporting events. They will love the experience and you won’t usually have any trouble finding tickets. Make your music lover’s day by taking them to a show. Not sure what type of music they enjoy? Usually, you can find ideas on their Spotify or social media accounts. Theater Tickets Although the cinema is also great, I’m not talking about the movies. I’m talking real theater for an off-Broadway show, opera, ballet, or other fine arts performance. The cost of production tickets may be less than $25 at smaller, local theaters. For your friend or family member, it will be an unforgettable experience. Museum, Art Show or Tour Tickets Your gift recipient may not have experienced everything there is to do in a big city — even if they live there. The perfect gift could be tickets to an experience, whether it is a museum or city bus tour or even the aquarium downtown they visited as a kid. Tickets for CityPASS cost more than $40. You can, however, get some ideas of what to buy from the site itself. Annual Magazine Subscription It is likely that there is a magazine dedicated to the hobby of your friend or loved one. Purchasing a hard copy of the current issue will give you something to wrap along with your subscription. For instance, 12 issues of National Geographic for $39, or $20 for Kindle version. Book of the Month A new hardcover title is chosen by the BOTM team every month. If you’d rather skip the month, pick the book you’d like, or let the editors surprise you, you can do so. Adding up to two additional hardcovers to your order is only $9.99 each if you can’t get enough reading material. For 3 months, this will cost you $50. But, this is the gift that keeps giving. Groupon $30 & Under Experiences If you head over to Groupon, you can find a wide range of affordable experiences, including bowling, paintball, whale watching, or art classes. Donation in Their Name You may want to consider giving a charitable gift in honor of somebody who has everything they need. You will most likely receive something nice from a charitable organization for the recipient. It’s an excellent gift for your minimalist friend; you won’t mess up their home. Contribute to a Child’s 529 Make a contribution to the child’s 529 plan. It’ll be necessary to check to see if the parents have set one up, and if they have, you can contribute to the child’s college tuition. Any bit will help, given how expensive school has become these days. There is a tax advantage to setting up a 529 savings account in which the money is invested until the child’s tuition is due. It is possible to set up a 529 for a child without one already in his/her name. But you will need the child’s social security number. Give the Gift of Stocks and Index Funds You can easily purchase stocks of publicly traded companies with SparkGift, and easily gift those stocks to anyone. Following that, the recipient receives instructions via email on how to set up a brokerage account or add funds to an existing one. Whether it’s for newborns, teens, grandparents, or adults, SparkGift is perfect for everyone. For users under 18 years of age, a custodial account is set up to protect them from selling the farm. FAQs What should I get someone as a gift? If you are looking for a gift for someone, the best advice is to work out your budget within the $40 range and then determine what is still within your price range. After that, knowing the gift recipient and what they like to receive will definitely help. What is proper gift-giving etiquette? Cultures around the world have different protocols for giving gifts. Do not hesitate to ask your in-laws, family, or friends what you should do if they practice gift-giving differently than you do. If you want to know how to behave properly in various cultures, you can always do some research online. As long as your gift is thoughtful and you are genuine in your giving, the receiver will likely be pleased with whatever you give. Who is the recipient? Are they members of your immediate family? Is it a bestie or a new friend? A significant other? A co-worker? A gift’s personality and size will likely be determined by how close you are to the recipient and how close you feel to them. So, even if your new friend needs to relax, you don’t have to book a spa package for them. Stress balls are a good place to start. Is a gift card ever acceptable? Gift certificates that say, “go have a nice dinner at this fancy restaurant,” are definitely acceptable if they are thoughtful. The trick is to choose an amount that won’t force the recipient to spend too much money. However, as long as you keep the recipient’s preferences in mind, your gift should land. You shouldn’t spend more than you can afford. What’s your holiday budget? Choosing the perfect gift also requires knowing your budget – and sticking to it. By doing this, you will know where to shop and what to look for. Don’t forget that buying the perfect gift doesn’t have to break the bank. The truth is that this isn’t always the case. The best gift you can give, besides the affordable items listed as handmade, are gift vouchers. Article by John Rampton, Due About the Author John Rampton is an entrepreneur and connector. When he was 23 years old, while attending the University of Utah, he was hurt in a construction accident. His leg was snapped in half. He was told by 13 doctors he would never walk again. Over the next 12 months, he had several surgeries, stem cell injections and learned how to walk again. During this time, he studied and mastered how to make money work for you, not against you. He has since taught thousands through books, courses and written over 5000 articles online about finance, entrepreneurship and productivity. He has been recognized as the Top Online Influencers in the World by Entrepreneur Magazine and Finance Expert by Time. He is the Founder and CEO of Due......»»

Quantum Corporation (NASDAQ:QMCO) Q4 2023 Earnings Call Transcript June 6, 2023 Quantum Corporation misses on earnings expectations. Reported EPS is $-0.09 EPS, expectations were $-0.04. Operator: Greetings. Welcome to Quantum’s fourth quarter and fiscal year 2023 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session […] Quantum Corporation (NASDAQ:QMCO) Q4 2023 Earnings Call Transcript June 6, 2023 Quantum Corporation misses on earnings expectations. Reported EPS is $-0.09 EPS, expectations were $-0.04. Operator: Greetings. Welcome to Quantum’s fourth quarter and fiscal year 2023 financial results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require Operator assistance during the conference, please press star, zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Brian Cabrera, Quantum’s Chief Administrative Officer. Thank you, you may begin. Brian Cabrera: Good morning and thank you for joining today’s conference call to discuss Quantum’s fourth quarter and fiscal 2023 financial results. I’m Brian Cabrera, Quantum’s Chief Administrative Officer. Speaking first today is Jamie Lerner, our Chairman and CEO, followed by Ken Gianella, our CFO. We’ll then open the call to questions from analysts. Some of our comments during the call today may include forward-looking statements. All statements, other than statements of historical fact, to be viewed as forward-looking, including any projections of revenue, margins, expenses, adjusted EBITDA, adjusted net income, cash flows or other financial, operational or performance topics. These statements involve known and unknown risks and uncertainties we refer to as risk factors. Risk factors may cause our actual results to differ materially from our forecast. For more information, please refer to the detailed descriptions we provide about these and additional risk factors under the Risk Factors section in our 10-Q and 10-K filed with the Securities and Exchange Commission. We do not intend to update or alter our forward-looking statements once they are issued whether as a result of new information, future events or otherwise, except of course as we are required by applicable law. Please note that our press release and our financial statements we make during today’s call and the management statements we make during today’s call will include certain financial information in GAAP and non-GAAP measures. We include definitions and reconciliations of GAAP to non-GAAP items in our press release. Now I would like to turn the call over to our Chairman and CEO, Jamie Lerner. Jamie? Jamie Lerner: Thank you Brian, and thank you all for joining us today. Earlier today, we announced our results for our fourth quarter and full fiscal 2023 with revenue results that exceeded the high end of guidance. We are pleased with the revenue results, we feel good about the supply chain, and we’re excited about recent product launches, but we have work to do in fiscal year 2024 to improve our bottom line results. Today, Ken and I will walk through actions we have taken to strengthen our company and delivered adjusted EBITDA of at least $20 million, as we described in our press release. Turning to Slide 3, here is a brief overview of the results from the quarter and the full fiscal year. We finished the quarter with $105.3 million in revenue, above the high end of guidance and an increase of 10.7% year-over-year, non-GAAP gross margin of 35.5%, adjusted EBITDA of $1 million compared to $400,000 a year ago, driven by higher revenue and improved operating performance. For the full fiscal year 2023, we delivered revenue of $412.8 million, an increase of 10.7% year-over-year primarily driven by strong demand from hyperscale customers and growth in our video surveillance business. Non-GAAP gross profit in fiscal 2023 was $147 million or 35.6% of revenue, primarily driven by a higher mix of low margin hyperscaler business along with inflationary cost pressures in our supply chain. Adjusted EBITDA in fiscal 2023 was $11.8 million. Now turning to Slide 4, I would like to share some operational insights from the quarter. We exceeded revenue and EBITDA guidance in fiscal Q4 based on another strong quarter of hyperscale sales, a sequential increase in royalty revenue, and improved operational execution. We had an incredible year of hyperscale sales with two times revenue growth versus the prior year. As we discussed, that segment is characterized by generally lower margins, so the hyperscale business has had a strong influence on our revenue and margin mix profile. In addition to strong hyperscale sales, we are pleased with the progress we are seeing in our video surveillance business and improving our efforts to sell the full portfolio of products. We continue to see improving conditions internationally and we are starting to realize the results of our transformation work, especially in the Americas. As an example, we are seeing a higher volume of large deals becoming a bigger component of our revenue mix in the pipeline. As part of the sales transformation, we are directly engaging in larger enterprise deals, especially in areas of repatriation of data back on premise from cloud providers. We also are extremely encouraged that our end-to-end portfolio of products is gaining traction supporting AIML projects and expanding deeper to other verticals. An illustration of this was a large scale deal we closed in the financial sector at one of the largest banks in Asia and a Fortune 500 company. We are also working on several OEM partnership opportunities with global technology providers. Just this past quarter, we secured an active scale OEM win at a global provider of video streaming solutions that will add to our subscription ARR in fiscal year 2024. Expanding our solution footprint at existing accounts is a key part of our strategy. It is also notable that in fiscal Q4, we were selected by a west coast Major League Baseball team to provide AI-driven analytics for their video and image content. This team is an existing Quantum StorNext customer, and we are able to drive broader engagement with them to help them catalog, analyze and enrich their content to drive better fan engagement. This is a perfect example of our end-to-end strategy coming together and represents the opportunity in front of us to move from storing data to analyzing, managing and enriching it to drive improved business outcomes. These sales highlights are just an example of our sales transformation strategy. As we focus our execution to improve revenue mix, this includes growing total annual recurring revenue. Another positive indicator in fiscal year 2023 was that we grew the subscription ARR by 81% year-over-year to $13.4 million in subscription ARR, and over $22 million in TCB bookings. We anticipate our continued innovation will accelerate future growth of subscription ARR into new markets for us, such as the high growth all-flash storage market. Driving improved operational efficiency is another part of our transformation. Our supply chain continues to stabilize and improve with greater parts availability and at lower cost, and we expect that this will carry forward into fiscal year 2024. Also, our focused efforts to improve working capital and decrease inventory yielded positive results to further strengthen our company. As we execute our strategy, it is important that we operate our company to drive profitable growth. To that end, we recently implemented a global efficiency plan and worked with our lenders to improve our strategic flexibility by securing additional liquidity through an upsizing of our existing debt. Ken will discuss these items in more detail during his prepared remarks. Turning to Slide 5, I would like to give you an update on our product innovation progress. On April 3, we announced Myriad, a new all-flash storage platform for the enterprise. This is a huge milestone for the company and introduces a totally modern software design to one of the highest growth segments in storage right now. The initial reception has been incredible, starting with phenomenal press coverage and positive reception from industry analysts and experts. We then showcased Myriad at the NAB trade show, which is the largest broadcast trade show in the world, with an opportunity for us to meet with our customers in this space. The reception from our customers and partners has been outstanding. They were frankly blown away that Quantum has been able to develop an all-new software-defined storage platform to address this space, and the innovation was recognized by the industry with Myriad winning three industry awards, including this year’s NAB Show Product of the Year. We also introduced the latest version of our unified surveillance platform software at the ISC West trade show in March. The unified surveillance platform is the culmination of our strategy to combine the best software innovation from Pivot 3 with a totally modern software platform that can run on any hardware. The unified surveillance platform has also been recognized with multiple industry awards and will be a key opportunity for us to build on the success we achieved in our video surveillance business this year. With the introduction of Myriad and the unified surveillance platform, Quantum now offers end-to-end solutions for the world’s biggest unstructured data workloads, including AI and machine learning, corporate video for entertainment, branding and communications, video surveillance, massive data lakes for archiving and digital preservation, and data protection. Only Quantum offers solutions that cover the entire data lifecycle, from high speed ingest and processing through forever data archiving, along with AI-enabled data cataloging and monitoring software for managing and enriching unstructured data. Now I’d like to turn it over to Ken to walk through our financial results in more detail. Ken? Ken Gianella: Thank you Jamie. Please turn to Slide 7 and I’ll provide an overview of the financial results, starting with our fiscal fourth quarter. As Jamie previously highlighted, strong operational execution in the fourth quarter of 2023 drove revenue above the high end of our guidance at $105.3 million. This was approximately an 11% increase year-over-year, representing our strongest fiscal fourth quarter since fiscal 2017. This growth was led by another strong quarter of secondary storage accounting for 42% of total revenue, up 1,000 basis points year-over-year on continued strong sales of hyperscalers. Adjusted EBITDA in the fourth quarter was $1 million and above our guidance. This represents a 2.5 times improvement compared with $400,000 in the prior year quarter, driven primarily by higher revenue. Now turning to Slide 8, I’ll provide a breakdown of this quarter’s revenue results and the year-over-year trends. Our presentation of revenue has been enhanced to better show the performance of our primary and secondary storage systems from both perpetual license and subscription delivery. Services on this slide is highlighted as our traditional Quantum services only and does not include subscription. Primary storage revenue was $14.4 million, down approximately 8% both year-on-year and sequentially. Secondary storage systems revenue increased 40% year-over-year and decreased 12% sequentially to $46 million, or approximately 44% of total revenue. While our sales to hyperscale customers were down sequentially, the significant traction we have achieved in the hyperscale vertical continued with 62% year-over-year growth. Looking at our services business, revenue in the fourth quarter was $29.9 million, down approximately 6% year-over-year due to a continued decline in support renewal revenue driven by end of service life on our older tape product lines. We anticipate the decline in service revenue to begin to level off in the first half of this fiscal year. Next in devices and media, while there was some sequential improvement, revenue was down approximately $600,000 or 5% year-over-year. Finally, royalties in the quarter increased sequentially and year-over-year to $4 million. Moving to Slide 9, I want to provide a review of our annual recurring revenue and subscription metrics. Total annual recurring revenue, or ARR for the full year 2023 was approximately 38% of our total revenue at $155.9 million, with a gross margin on the combined business being approximately 62%. As a company, we are focused on improving our total ARR by maximizing our Quantum service opportunities to both our partners and customers globally, combined with our strategic shift to delivering more of our solutions via software and service subscriptions. Our subscription offering is a strong proof point of the success of our business transition efforts. The subscription portion of our total ARR increased approximately 81% year-over-year and approximately 20% sequentially in the fourth quarter to $13.4 million. Today, we have over 734 cumulative active customers with over 78% of our new software sales being subscription, up from only 25% in the prior year. As a reminder, Quantum now has subscription offerings that span our full portfolio, with the exception of tape, plus we are very encouraged by the progress we are seeing in the renewal of initial subscriptions in early fiscal 2024. Now turning to Slide 10, let’s review our fourth quarter GAAP results. GAAP gross margin for the fourth quarter was 30.2%, which reflected the unique product mix that we discussed last quarter as well as a $5.3 million non-recurring inventory reserve adjustment caused by pandemic-driven excess and obsolescence of certain inventory due to legacy products being discontinued. GAAP net loss in the fourth quarter was $13.6 million or a loss of $0.15 per share. The increase in loss per share was primarily due to the previously mentioned gross margin and, as anticipated, higher operating expenses. Now turning to Slide 11 for non-GAAP metrics, non-GAAP gross margin for the fourth quarter was 35.5% compared with 38.4% in the prior year quarter and 36% sequentially. As previously mentioned, we had a large life science deal in Europe that was dilutive to gross margin but a strategic account for us to grow long term. Non-GAAP operating expenses were $37 million in the fourth quarter, which was flat year-over-year and an increase from the $34.5 million last quarter. The expected sequential increase was due to end of year commissions, seasonally higher payroll taxes, and an increased investment in sales and marketing initiatives. Non-GAAP adjusted net loss in the fourth quarter was $3.7 million or a $0.04 loss per share, and finally adjusted EBITDA in the fourth quarter was $1 million and above our guidance. Now turning to Slide 12, I’ll provide brief highlights of our fiscal 2023 results. Full year 2023 total revenues increased $40 million or by approximately 11% to $412.8 million. Growth was driven by strong performance in secondary storage systems with our hyperscale customers. For the full year 2020, adjusted EBITDA was essentially flat with the prior year at $11.8 million. This was largely a reflection of a higher mix of hyperscale business and supply chain-related headwinds in the first half of the year, which pressured gross margins. On a positive note, during the latter part of the fiscal year, supply chain headwinds and inflationary cost pressures began subsiding, and we anticipate this trend to continue into fiscal 2024. Moving to Slide 13 for a breakdown of fiscal year revenue results and the associated historical trends, primary storage revenue for the full year 2023 was $57.6 million compared to $60.7 million in the prior year. Exiting fiscal year 2023, we are seeing positive signs of recovery of our primary storage systems going forward due to increased market demand, the introduction of our Myriad platform, and our multiple year investment in our U.S. and international sales teams. Secondary storage systems revenue for the full year 2023 increased 48% or $175.5 million as we continued to see significant growth of our hyperscale business over the last two years. While we anticipate revenue in our secondary storage solutions to come down from fiscal 2023 levels, we expect our higher margin DXI, active scale object storage, and scaler tape storage solutions all to gain traction with large enterprise companies seeking a more affordable solution as repatriation of their data from cloud-based environments continues to accelerate. Next looking at our traditional Quantum services business without subscriptions totaled $123.6 million in 2023. While end of life services on older tape products have impacted our services business over the last few years, we anticipate this stabilizing in the first half of fiscal year 2024. Total device and media revenue for 2023 decreased to $42.4 million, and finally total royalties for the full year were $13.7 million, primarily reflecting the transition to the latest generation and higher capacity LTO-9 node. We anticipate this to stabilize to an annualized royalty rate of approximately $11 million to $12 million going forward. Now please turn to Slide 14 for an overview of debt and liquidity at the end of the quarter. Cash, cash equivalents and restricted cash at the end of the fourth quarter were approximately $26 million compared with $5.5 million a year ago, driven by proactive cash management and strong end of quarter collections. Outstanding debt split between term and our revolver was $91.4 million and our net debt position was $65.4 million. We anticipate our working capital will continue to improve and we are pleased with the progress on our overall cash conversion metrics. Heading into next year, we believe it is important to create greater strategic flexibility and have a clear plan for improved profitability in fiscal year 2024; as such, turning to Slide 15, I’d like to start with an overview of actions we have taken subsequent to the end of the quarter. Recently we proactively secured an additional $15 million of liquidity and received greater covenant flexibility from our current lenders to better position the company as we bring our recent product innovations to market. As Jamie discussed, our path to improved profitability is focused execution on improving revenue mix and driving global efficiencies. Improving revenue mix is a key lever to expanding gross margin and our earnings. This includes getting back to growth in our primary storage systems not only in our existing markets but expanding into new enterprise verticals with our Myriad solution. We are seeing pipeline increase in large enterprise opportunities, including repatriation of data from the cloud and expansion of enterprise AI and machine learning programs. Equally important to driving improved revenue mix is the streamlining of our operations. While we have made progress over the last year, our work is not done. To that end, there are several self-help global efficiency initiatives we are undertaking that I’d like to share with you. First, improved operational efficiency – we are actively executing on several projects, including improving manufacturing and logistics productivity, clawing back inflationary impacts from the last couple of years with value engineering efforts combined with a continued focus on reduced travel and discretionary spend. Second is leveraging our global footprint. The goal is to expand our presence and focus areas both domestically and internationally, including our growing international centers in Kuala Lumpur, Bangalore and Guadalajara. We believe investing more in focused locations will drive deeper collaboration, more effective processes, lower facility costs, and create a more effective operation as we move forward as an organization. Third is a new cost reduction initiative. Turning to Slide 16, let me provide some insight on these efforts. As we execute our vision and our strategy, it is important that we operate our company to drive profitable growth. To that end, we have begun a cost reduction action that will initially impact over 10% of our global workforce. We anticipate these actions will result in an annualized net savings of approximately $14 million fully realized exiting fiscal year ’25. With a payback in less than six months, we anticipate a fiscal year 2024 non-GAAP P&L savings of approximately $7 million from our Q4 ’23 exit run rate. As we move forward, we will continue to evaluate our performance, take measured actions as necessary while balancing a strong customer experience and level of support that ensures we continue to deliver innovation and high quality of service to our customer. Now to close out, please turn to Page 17 and I’ll review the company’s guidance for the first quarter and full fiscal year 2024. First, we anticipate total revenue in the first quarter to be $97 million plus or minus $3 million. We expect non-GAAP adjusted net loss per share for the first quarter to be breakeven plus or minus $0.02 per share, based on an estimated $93.3 million shares outstanding. Adjusted EBITDA for the first quarter is expected to be approximately $1 million. We also are introducing guidance for the full year 2024 with revenue expected to be $415 million plus or minus $10 million, non-GAAP adjusted EPS of $0.01 plus or minus $0.10, and adjusted EBITDA is expected to be at least $20 million for the full year. To add some color to our guidance, as I mentioned earlier, we do anticipate a decline in our secondary systems year-on-year due to declining hyperscale business. We also anticipate those declines being replaced with an improving revenue mix of higher margin primary and secondary systems. We foresee a stabilizing supply chain and decreasing inflationary environment combined with our global efficiency initiatives that, at a minimum, drives our year-over-year improvement. To be clear, the management team’s expectation is to return the business to significantly higher earnings performance than our current outlook. We have a path and are working to accelerate our efforts through sales execution on growth and improved revenue mix, driving improved operational efficiencies, creating synergies and scale by leveraging our global footprint, and achieving our targeted cost reductions. We covered a lot today, and before I hand it back to Jamie, I’d like to say after my first quarter here at Quantum, I’m super excited to be here. The team is focused and extremely optimistic about our company, our transformation, and we are excited about our future. I look forward to catching up with you in the weeks and months ahead. With that, I’ll now hand the call back to Jamie for closing remarks. Jamie Lerner: Thanks Ken. We’re truly excited about the future. We finished the year with positive momentum and a major new product introduction in Myriad. We laid the foundation for end-to-end enterprise sales growth in the Americas and internationally. We see the supply chain stabilizing and inflationary pricing subsiding. We are executing on our transition to subscription ARR and we have strengthened our company with increased strategic and capital flexibility to execute on the growth of the business. We expect these developments combined with the global efficiency plan’s cost improvements will allow us to significantly increase earnings growth this year and continuing our journey to elevating this company back to the kind of earnings potential we and our shareholders expect. With that, let’s open it up for questions. Operator? Q&A Session Follow Quantum Corp (NASDAQ:QMCO) Follow Quantum Corp (NASDAQ:QMCO) 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 is from George Iwanyc with Oppenheimer & Company. Please proceed. George Iwanyc: Thank you for taking my question. Jamie, maybe you can expand a little bit about what you’re seeing from a macro environment perspective. If you look at the various regions and verticals, are there any spots of weakness that you’re still managing through? Jamie Lerner : Yes, I mean, let me answer that across a couple of different dimensions. Probably the first and most obvious thing is that the supply chain environment has changed drastically. Parts availability, almost everything is in an all-clear state. We’re not paying up-charges to get things, and in some cases we’re even seeing parts and materials getting discounted to incentivize them to move more quickly as people have loaded up inventory. The other things that I’m seeing, I am seeing our hyperscale customers slow down a bit. I’m seeing them still buying, but I would say the rate’s slowing down a bit as they adjust their inventory levels and think about the outlook for their business, or re-think that. I’m also seeing a newer trend, which is I’m seeing certain organizations bringing large amounts of data back from the cloud for a variety of reasons. Some of them are just pure cost savings. I think if they plan to leave data in or archive data for 20, 30 or 40 years, I don’t think they’re looking at paying a monthly bill for 40 years and they’re looking at ways to use their own IT resources to do that. I’m also seeing people doing that for security reasons and to have greater control over important data, so I’m seeing a number of very large projects that involve just bringing data back from a variety of cloud and other outsourced models and bringing that under a company’s own control. But in terms of the macro, I am not seeing in the segments we share–that we serve, I’m not seeing large pull back. In the movie-making business, I’m not seeing slowing down. Sports and entertainment, I’m not seeing a lot of slowdowns. I’m seeing most enterprises buying at a normal and healthy clip. I think most large enterprises view IT as something that’s very strategic, and I think they’re protecting those budgets. I think people are looking at AI as an area to gain efficiency and be more strategic, so more and more investments in IT, and I think people are looking at other areas if they have to cut costs. Cutting IT, I think people are trying to protect those investments because I think most companies compete with data. They compete with their access to data and their analysis of data. George Iwanyc: Thank you for that. Maybe just to be clear, on the hyperscale side with the demand you’re seeing, have you fully worked through your backlog at this point, and are you kind of at a steady state on the shippable backlog level? Ken Gianella: Yes, we’re not giving the exact backlog level, but I can tell you it’s about normalized for where we would be going, year-over-year. The backlog that was super large that we were working off of, that was mostly due to supply chain constraints that we’ve worked through over the last couple quarters, so it’s more back to normalized levels that we stated before, somewhere between the $10 million to $20 million range. George Iwanyc: Okay, and just finishing up with one last question for you, Ken, with the cost reduction activity that you’re planning, is that mostly going to be taking place over the next several months and you get to an opex level that you see as being sustainable after the first quarter of the year? Ken Gianella: Yes, it’s going to happen really over the next couple weeks, the majority of it, and then we’re going to see another slug coming in towards the back half of the year as we work through some international and regulatory locations. I think that when you think about the profile of it, we’re going to see about $7 million of opex savings coming in, in this fiscal year based off of a Q4 2023 exit rate, and then we should see the other half of it coming in by the end of FY25. George Iwanyc: Thank you. Operator: Our next question is from Craig Ellis with B. Riley. Please proceed. Craig Ellis: Yes, thanks for taking the question. Guys, I just want to say thanks for the very granular transparency in the deck – really helpful. I’ll just start with a revenue question. Clear on the trajectory overall with secondary storage customers at the hyperscale level moderating their pace of purchase intensity, primary starting to pick up. Not looking for explicit guidance, but if we look beyond fiscal first quarter, how does that dynamic play out in the fiscal second quarter? Does that mean we could see revenue step down one more time before we start to re-accelerate, or how we do weigh the different gives and takes that you’re seeing in the business? Jamie Lerner: Yes, I mean, what we’re trying to do, I hope it’s somewhat obvious. We need to bring our margins up, and we bring our margins up based on the segments we sell to. If you think about a hyperscale sale, that could be margins as low as 18%, whereas you look at federal government sales could be as high as 70%, so that’s a pretty big margin range. We’re putting a lot of emphasis on our high margin areas – software sales, North American sales, large enterprise sales, solution sales, and trying to bring down or turn the volume down a bit on our low margin business, which can be hyperscaler sales, certain OEM sales, tape media, things of that kind. I don’t think you’re going to see–we’re trying to avoid any kind of upheaval, where you see massive changes, but we’re trying to bring down some of the lower margin sales while bringing up the higher margin parts of our business, and we’re doing that through our channel incentives, we’re doing that through our sales compensation plan, we’re doing it through our marketing efforts, and what we’re trying to do throughout this year is keep the revenue flat while bringing the revenues up significantly in our high margin products. You see things like primary storage coming up as high as 25%, you see our enterprise sales coming up 25% to 30% as we bring down some of the larger pieces of our sales that are more–I wouldn’t call them completely empty calories, but they’re certainly less nourishing than our higher margin business. We’re trying to manage that so you won’t see any big drops, but really shifting the mix towards higher margin products and services. Ken Gianella: Yes, and I’ll just add onto that, Jamie, is when you think about the services business over the last few years, with the end of life runoff that we’ve seen, the team–you know, we had a change over there and the team has done a great job of stemming the runoff there, finding ways to extend some of these product life–product service life, in some cases, and we do see that subsiding by the back half, or the first half of this year. We should see going into the second half that stabilizing and potentially going back up, so if you think about our services business, just the legacy Quantum service business, that carries anywhere from high 50s to low 60s in margin, and so preserving that and then growing that again is a key part of our total ARR strategy. Craig Ellis: That’s real helpful, nailed the first question and anticipated the second one on services. Moving on, talking a little bit further on opex, it sounds like with the different levers that the company has, we’ll be seeing $7 million of benefit this year. Is that mostly in the back half of the fiscal year to get to that $7 million, Ken, or would we see some of it as early as fiscal 2Q? Ken Gianella: It’s ongoing right now, so we started–we had a lot of things going on this quarter, as you can see from our release, in order to get ourselves healthy and back in productivity mode. We have those elements going on right now, and so we would expect to start seeing benefit of that in Q2 and then heading into the back end of the year, to pick up the rest of the $7 million. I think you’re going to see a little bit of help of that coming through in Q2 and the rest coming in Q3. Craig Ellis: One more model question and then–on products. On the model side, helpful to see what you’ve done with debt and taking it up another $15 million to give you some operational flexibility. What does that mean for quarterly interest expense, Ken? Ken Gianella: We expect it to bump up a little bit. Looking at what’s in the marketplace today, I think that we worked with our existing lenders to get a very favorable deal for where we were at on a blended basis. Our debt only goes up 67 BPs, so I think it’s a really good deal overall. We’re only expecting to see a little bit more interest payment in the year. Craig Ellis: Got it, and then finally back to you, Jamie, when Myriad was announced, we spoke and you were very excited about it, and then it was richly awarded at NAB, as you noted. What is your sales team hearing on potential Myriad uptake as we move through fiscal ’23, and how are you thinking about potential revenue impacts to the business, either in late fiscal ’23 or fiscal ’24, on more of a qualitative than quantitative basis, perhaps, at this point? Jamie Lerner: Yes, as you said, we announced the product, we have put it in front of analysts and gotten a lot of praise around the product. We are now pitching it to customers, and certain customers are starting to install it and run benchmark testing with it, run different use case testing, and we’re extremely encouraged. What we’re learning is the product is very unique. It’s much more modern than the products that we’re competing against, so it has many more capabilities in very modern AI and ML use cases. It has certain features and capabilities that make it very unique for AI and ML especially, including integrated metadata tagging, and we’re pretty encouraged. The other thing that we’re really excited about, and we may have underestimated, is that every time we would sell Myriad as a high speed analytics or high speed platform, it usually has a data lake that is a form of secondary storage where data waiting to be analyzed resides, and we’re seeing that as every time we sell Myriad, we expect to sell active scale or active scale cold storage as the data lake, and then also sell management software that’s moving data from the data lake into the high speed analytics area and then back, and doing metadata tagging, doing data classification, doing different forms of analysis, and so we’re really seeing it evolve into where a Myriad sale would typically drive with it active scale cold storage and likely also drive with it CATdb. It’s almost like an analytic ecosystem that we would sell, so that’s been really encouraging to see that develop. In terms of looking forward, my best view into that is by watching the pipeline, and I would say it’s the fastest growing pipeline we have inside the company right now, so I think it’s as we suspected. It’s the fastest growing market in storage and you can see it by its pipeline growth relative to other products, so we’re pretty encouraged but at the same time, it’s a new product and we’ve got to get it through its initial launch, get it through all of its trials and then get it moving in the market. But yes, it will have revenue impact this year. We’ve modeled it very conservatively until we start to see POs coming in, but there will be revenue impact in this fiscal, for sure. Craig Ellis: That’s really helpful. Thanks Jamie, thanks Ken. Operator: Our next question is from Eric Martinuzzi with Lake Street Capital Markets. Please proceed. Eric Martinuzzi: Hey Jamie, the cadence of business in Q4, given the success on the numbers, I would anticipate that you saw kind of a normal February up from January, and March up from February. Was that how things played out? Jamie Lerner: Yes. Typically January and February are very slow for us, especially in Europe, and then you really hit the buying season in March, that’s really what we saw. Things really accelerated in March for us. That always puts a lot of pressure on the supply chain to build and ship that quickly, but yes, it–slow January and very rapid March. Ken Gianella: And to add to it, this was the best fiscal Q4 we’ve had since 2017, so you look at the numbers that were coming through, a lot of that was aided by the improving supply chain also, that when these things came in, in March, historically we had to just sit back on it and ship– Jamie Lerner: They’d go to backlog. Ken Gianella: Yes, it goes right to backlog, and so with this loosening of the supply chain and our improved operational performance this quarter, we were able to get that out the door, and that’s why you saw the higher end beat. Jamie Lerner: Yes, that was a big difference. I mean, a year ago, we’d order a product and it could be–a simple product like a server, and it would be months to get a network card. Now we order a server and it can ship in, like, two days. We get an order and servers can be at the customer site in a week to two weeks. It’s just a very–and not in all cases, but that wasn’t even thinkable a year ago, and now products are just shipping off the shelf, a lot like–a lot more normalized. That had a big impact. Eric Martinuzzi: Got it. Then for the Q1 outlook, it’s a little bit below where I was modeling. Anything that you saw in April or May regarding the normal seasonality here? Did we have maybe a tough comp on the hyperscaler side from a year ago? Jamie Lerner: Yes, I think that’s probably where you see things happening. The hyperscalers are–you know, it’s a big part of our revenue and it’s slowing down a bit, and whereas a year to two years ago we were the only company that had a hyperscaler tape offer, now two other companies now offer something similar to us, and you can imagine through the supply chain pressures, the hyperscalers want to be sourcing from multiple vendors to manage their risk, so we’re sharing some of that load with other players as well. Ken Gianella: Yes, in the investor deck online, we’ve tried to give a little bit more color when you look at the verticals of how we go at it. Hyperscaler is going to be less of a mix when we look at this fiscal year. Obviously that helps with the total rotation for margin, as we talked about, but on the near quarters, that’s going to be some pressure to the top line, but we would expect the margins to improve to offset that. Eric Martinuzzi: Okay. Then you talked about gross margins rising from the 35.5%, was the non-GAAP gross margin in Q4. What are you targeting by year end? Ken Gianella: Well, for the full year in this mix, I’d love to see us somewhere between 37% to 38% in total gross margins. If you look at that, that’s a number of things that are driving that. One is the improved mix that we have; number two, as Jamie was saying, the overhead and the increased pricing from the inflationary pressures we saw for expediting goods and services, we expect that to come down pretty dramatically, but also our manufacturing organization–you know, Eric is running that and I think he’s done a really great job of finding efficiencies within the total org and finding ways to bring our costs down from low cost manufacturing. I think you combine those three together, we’re feeling really positive about the margin rotation this year. The second piece, and I don’t want to discount it, some of these actions that we’re taking, this isn’t just an opex action. There’s things that we’re doing within our margin profile, specifically within our services business. We really didn’t do a good job of keeping pace with the runoff of revenue in that business and we let the margins drop down to put a 5-handle on it. I think again with the leadership that Jamie put in there, with Ross and the team, really excited about what Ross is doing and the products and services that we’re going to be offering to customers for an uplift. That service mix change will also help with that, but then you look at what he’s doing with the org – the synergies that we can get from globalization and moving org to lower cost regions to help service and maintain these product sets, that’s going to get us to a much better margin position going forward. Eric Martinuzzi: Then last question is on the balance sheet. Obviously you made the borrowing move after the close of the fiscal year. Do you have a pro forma cash and debt balance, maybe as of the end of May or whenever you took the loan out? Ken Gianella: I don’t have that to give right now, but we can probably make that public. The way we carry forward, because I didn’t want to do a walk of what we actually did during this quarter, but if you think about the dollars taken down, it’s probably plus or minus another $10 million. Eric Martinuzzi: Okay, great. Thanks for taking my questions. Operator: Our next question is from Nehal Chokshi with Northland Capital Markets. Please proceed. Nehal Chokshi: Yes, thank you. With respect to the guidance, which I think is characterized as being down seasonally, but then you also talked about how you expect hyperscalers to be down year-over-year for you guys as well, so it is fair to say that you’re expecting secondary storage to be the main component of your down Q-over-Q for the June Q? Ken Gianella: Listen, if we categorize it with hyperscaler in secondary, the way we do today, yes – secondary is going to be down Q-on-Q. But I think that we’re expecting to see some improvement out of the primary business this quarter, which is going to help the cause, but also you’re going to see services coming down slightly, as I said. It’s going to be more towards the end of Q2 that you’re going to see that stabilizing, so that’s going to be down a little bit in the quarter too. But it’s primarily the secondary portion of it and the hyperscaler segment within that, that is the decrease. Nehal Chokshi: Okay, and given that the hyperscaler portion is relatively low calorie, why then–and also given that the March Q had this negative impact from the dilutive lighthouse deal, I’m a little bit surprised to see that the guidance effectively is flattish Q-over-Q. Can you walk us through those dynamics there? Ken Gianella: Well, I think when we come into the quarter, we’re looking to be somewhere around that 36% to 37% gross margin, and again all these things that we see movement on, there is still some mix of hyperscaler in there that is going to have an impact on the lower revenue numbers. It’s purely just a number of going from 105 down to that 97 range that we’re in, but then you have to add on these actions that we’re anticipating. We didn’t start them until this week, so I’m still carrying a little bit higher opex in the first two quarters, a little bit higher selling expenses–in the first two months, I mean, I apologize, in the first two months, including some higher sales and marketing in those first two months that is dragging that down. Nehal Chokshi: I see, okay. Can you guys size what your expectation is for hyperscalers in terms of the year-over-year decline for fiscal year ’24? Ken Gianella: We don’t want to give the specific piece of it, but I can tell you it’s going to be pretty significant drop year-over-year. It’s probably going to be normalizing a little bit more towards what we did in ’22 versus what we did number-wise in ’23. Nehal Chokshi: Got it, that’s very helpful. Then you did mention that you are seeing a pipeline increase from large enterprises – that’s really great to hear that. Can you give a little bit more detail as far as–you gave workload, but you didn’t talk about the products that you’re actually seeing for. Jamie Lerner: Yes, we’re seeing a couple things. One is we’re putting a lot of emphasis on back-up and our DXI product, which is a de-duplication and compression back-up target. We’re seeing a lot of large deals there. I think we said in our prepared remarks, we did north of a $10 million deal with a Fortune 50 bank with DXI, so seeing those kind of large deals come together is good to see in that business. It’s probably our highest margin product. The other business that is accelerating very quickly and a little bit unexpectedly is the active scale cold storage product, which is essentially for storing enormous amounts of data for very long periods of time, and we’re seeing people use this for storing movie and film footage, we’re seeing people store video surveillance footage, autonomous vehicle footage, anyone who has just large sums of data–the national labs, that they want to keep for long periods of time, so that offer has really begun accelerating and we have probably over 10 deals in our pipeline that are over $5 million, so they’re large, large, usually north of 100 petabyte, often north of 500 petabytes data, just enormous data repositories, so. That product is gaining a lot of traction, and then StorNext for non-media and entertainment use cases, analytic use cases, analyzing large amounts of unstructured data, being just a high speed file system for unstructured data, and also strength in its traditional area, media and entertainment. StorNext is also a key part of that, but those are the products we’re really placing in the enterprise – active scale, StorNext, and DXI. Nehal Chokshi: Awesome, thank you for that color. Operator: Our next question is from John Fichthorn with Dialectic Capital. Please proceed. John Fichthorn: Yes, hey guys. Thanks for taking the question. A lot of things sound good as we sit here, and yet it’s hard to kind of parse some of that out in your numbers. I think it’s because you’ve got a lot of different moving parts in your business – you’ve got some things with bad margins that were growing, and some things with good margins that weren’t growing. A lot of that is now reversing in theory going forward. You’ve said some things like primary storage could be 25% this year – I didn’t know whether that was 25% growth or 25% of revenues. Ken Gianella: Twenty-five percent growth. John Fichthorn: Twenty-five percent growth? Great. I assume you’re factoring Myriad into that, and so that is in the guidance for this year, maybe conservatively. I guess my first comment, you can comment on it but it isn’t necessarily intended to be a question, is it’d be great if you could on the next quarter or next year, think about ways to if you’re now focused on EBITDA over top line, which is what it sounds like you are effectively, if you could break that out at a segment level so that we can really kind of analyze what you guys are looking at when you’re driving the business, so we can measure whether you’re succeeding or not, because it’s very difficult to kind of look at the numbers now and know whether you’re accomplishing your goals, to a large degree. On the gross margin side specifically–yes, go ahead? Jamie Lerner: I just want to comment that I heard that feedback from you and others when we were talking about it, and I encourage folks to look at our investor deck that we put out there this quarter on top of our earnings deck. We do give a little bit of a color breakout of the segments and the verticals of what we’re doing in a little bit more detail to help with that rotational view. You just gave me a good in to give a little advertisement there for folks to go check out that investor deck. John Fichthorn: Cool. I have not seen it – I was looking at your earnings deck here. But you mentioned for gross margins at year end, 37% to 38%, and you’re kind of coming into the quarter 36% to 37%. I would have kind of expected a little bit more gross margin improvement. Did I hear that wrong or is that what the target is, and if so, why is it so anemic? Then further, where do you think you can get to on gross margin and over what time period? Ken Gianella: Yes, so part of this, and you said it at the top of your comments, was around the rotation and a lot of moving parts. We still have this declining services business that we have to work through. There’s still a nice slug of hyperscale that is in there, that we’re rotating out the hyperscale and we’re rotating back in the primary and the secondary product sets that Jamie was talking about earlier, so you have those three moving parts all happening at the same time there that as we take action going into the back half of the year with the cost savings that we’re looking it, it’s going to rotating back up in a positive way. I think it’s just a matter of mix and rotation back up to get to the higher levels, so if we can start rotating and we get towards that higher end of the range and we see more of the primary and secondary come on as we anticipate, because the guidance I was giving was more on that midpoint as we start rotating more towards the higher end, I would expect those numbers to rotate up more into the 38% to 39%, maybe starting to peak at 40% as we get that rotation. John Fichthorn: So you said peak at 40, and I just want to make sure what you’re saying is– Ken Gianella: Peaking at 40. John Fichthorn: So you can start to see 40 at the end of this fiscal year, is what you’re hoping for? Ken Gianella: If we get to the higher end with the rotation of primary and Myriad starts picking up, absolutely. John Fichthorn: Then longer term, what do you see yourself building towards with gross margin? Like looking out, I’m not looking for specific guidance for FY25, but just kind of curious, you’re focused on–I mean, is the Myriad gross margin 60 and is the things you’re growing into, as opposed to moving away from, where do you see that gross margin getting to longer term? What could this business look like? Ken Gianella: Well, in that investor deck that we put out there, we restated what we’re going for those goals. We want to see 45%-plus gross margin. In the primary business with Myriad alone, the margins in that business when you think about the rotation traditionally are high 40s, low 50s. With this Myriad product line coming on, we want to see that rotation continuing more into the 50s. The secondary business, once you pull out hyperscale, it’s a pretty healthy business, especially with DXI – it’s one of our largest margin products that we have out there. Those underlying products, that can be carrying mid-40s type of gross margin to it, too. Getting services healthy – services dipping down into the mid-50s, high 50s, not where we want it to be. That business can be up into the 60s also. The other piece, that we really didn’t talk about a lot, but we are really, really stressing the amount of subscription and how we’re rotating there. Going from 25% a year ago of new sales being subscription to over 78% of our sales being subscription based now, and looking at a 60%-plus margin with that, that’s an awesome rotation that the sales team is doing there and the great traction that we’re seeing. I guess, John, what I’m trying to say is the proof points that we’re driving and why we feel confident we can get back to the mid-40s is all in the rotation of the primary coming back, driving the subscription portion of that versus being a one-time sale, and then getting services healthy again and having that be in the 60s. Those elements of those three things combined with the self help of the lower cost of production, that’s why we feel confident that the trends going out of ’24 into ’25, ’26, etc., we can get back up into the 40s-plus. John Fichthorn: So help me, just last question, drill down on this software subscription concept. It would seem like if you’ve seen the attach rate, I don’t know what else to call it, go from call it 20s to 70s, that I would see a higher revenue jump than I have year-over-year. Look, the revenue growth is great, it’s still a small number though, so if I’m all of a sudden getting 70% of my sales attaching to a software sale, why am I not seeing that, a double digit quarterly revenue number, for example? Where can that get to? Maybe flesh that out a little bit for us, if you would. Ken Gianella: Right, well I want to break the two out. I was very specific on the new sales that were coming in. We still have a lot of legacy sales, so think of it as a 40/60 split – 40% being new sales to new customers, those are coming through a subscription, where the add-on to legacy customers that were already in perpetual, they tend to want to add on a perpetual, so we’ve got to get that rotation for both new and legacy into the subscription side, John. I don’t know if that answers your question, but that’s the data point. John Fichthorn: Got you, so it’s the new sales as opposed to the legacy that is that, so you’re succeeding in new customers and new sales, they have now a very high attach rate, and as that blend increases versus legacy, that will drive the growth? Ken Gianella: Spot on, John. John Fichthorn: All right, thanks guys. Operator: This concludes our question and answer session. I would like to turn the conference back over to management for closing comments. A – Jamie Lerner: All right, I’d like to thank everyone for attending today, and if you have further questions or want to speak to us directly, Ken and I are always available. Thank you everyone. Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation. 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Sprinklr, Inc. (NYSE:CXM) Q1 2024 Earnings Call Transcript June 5, 2023 Sprinklr, Inc. beats earnings expectations. Reported EPS is $0.06, expectations were $0.01. Operator: Ladies and gentlemen, thank you for standing by, and welcome to Sprinklr’s First Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the […] Sprinklr, Inc. (NYSE:CXM) Q1 2024 Earnings Call Transcript June 5, 2023 Sprinklr, Inc. beats earnings expectations. Reported EPS is $0.06, expectations were $0.01. Operator: Ladies and gentlemen, thank you for standing by, and welcome to Sprinklr’s First Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session. Please limit your questions to one with one follow up, so we will have time to go through all the questions. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Eric Scro, Vice President of Finance, for introductory remarks. Please go ahead, Eric. Eric Scro: Thank you, Doug, and welcome, everyone, to Sprinklr’s first quarter fiscal year 2024 financial results call. Joining us today are Ragy Thomas, Sprinklr’s Founder and CEO; and Manish Sarin, Chief Financial Officer. We issued our earnings release a short time ago, filed the related Form 8-K with the SEC, and we’ve made them available on the Investor Relations section of our website, along with the supplementary investor presentation. Please note that on today’s call, management will refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. You are directed to our press release and supplementary investor presentation for a reconciliation of such measures to GAAP. With that, let me please turn it over to Ragy Thomas. Ragy Thomas: Thank you, Eric, and hello, everyone. Thank you for joining us today. Before we jump to our quarterly results, there are a few things I like to share. First is that on July 12, we will be hosting our first ever Investor Day at the New York Stock Exchange. We look forward to seeing many of you in person and sharing more details about Sprinklr’s vision and business strategy. The second, you saw the 8-K we filed on May 15th about John Chambers resigning from our Board as of June 14, but remaining as an advisor. We want to take a moment to publicly thank John for his contributions as a Board member since joining our Board in 2017. John is one of the most caring and hardest working executives I know, and if anyone deserves a little time back in his life, it would be him. While John will no longer have board commitments, we are grateful that he’ll stay on as an advisor and continue to be a coach, mentor, and a friend to all of us. Next, we are excited to welcome Trac Pham to our Board of Directors. His appointment will become effective on June 15, and Trac will also be a member of our Audit Committee. Trac most recently served as the CFO at Synopsys with a broad remit across finance, business development strategy, and IT. Trac is a great culture fit for Sprinklr and given its vast experience scaling a multibillion dollar business a great addition to our Board. The management team and I are looking forward to working with him and tapping into his broad expertise. So, let’s jump into the results of our first quarter. We are very, very pleased that Q1 was another strong quarter that exceeded guidance across all key metrics. Q1 total revenue grew 20% year-over-year to 173.4 million and subscription revenue grew 24% year-over-year to 157.7 million. With our continued focus on operational efficiency, I’m also delighted to report that we generated 11 million in non-GAAP operating income for the quarter. These results are driven by a few key things that are top of mind for all of us. First, we believe we are creating a new category of enterprise software for the front office. We call it unified customer experience management. As we hear constantly from some of the best brands in the world, there’s a clear need for a front office platform to eliminate siloed technology team’s data, and to create seamless customer experiences as simple as it might appear. These seamless experiences are impossible to create across the multitude of channels, functions, business units, and markets that most large companies have and operate in today. Unified CXM is differentiated at its core by a unified AI powered architecture that spans all of these different silos and it’s fueled by publicly available and mostly unstructured data and conversation. And that just cannot be supported by the current CRM and CDP relational database package. This approach of unifying the front office benefits both customers and brands. Customer experiences improve and brands can reduce costs, mitigate risk, and increase productivity for growth. We recently hosted our first Analyst Summit in Dubai where approximately 20 well-respected industrial analysts joined us and our customers. It was very encouraging to see them speak to our customers and validate our vision. We have made some of their quotes and references available for you in the presentation on our IR website. But one quote worth mentioning came from an IDC analyst who said, ‘built on an already robust architectural framework, Sprinklr appears to be set up well to address its ambitious growth plan.’ The second point for us is, is that we are very, very excited to see AI finally become mainstream. As all of you who’ve been tracking us from beginning and are at our IPO, you know that AI has been foundational to a platform from the very, very beginning. It’s woven into every fabric of our unified platform. And if you read our IPO prospectus, it should be very clear that it was and always has been a key differentiator for us. Sprinklr is the system of record for unstructured external and conversational data for some of the best brands in the world. And we’ve been training over 2,000 AI models with over 100 million training data points in over 100 languages across over 70 industries and sub industries for five years. And that accuracy that we’re able to achieve with the training, I don’t believe can be matched by any other company in our space in the short-term. A recent announcement regarding Sprinklr AI+ is the next evolution of our AI. Sprinklr AI+ includes generative AI capabilities through an open AI integration across all our product suite. With generative AI, our AI becomes even more powerful. We delivered over 30 features AI features in our last release. We have another 25 planned for our next. Some of these features include smarter responses, generated recommendations, content summarizations, which help customers with more relevant and specific auto responses and increase agent productivity. For example, one of our streaming customers improved the agent’s acceptance of Sprinklr smart responses, which are the suggested responses that we provide for agents by 300% after we enabled AI plus. Every company will embrace AI sooner or later. What I believe will separate winners from losers is whether AI is a feature for you or is it at the core of everything you do. So, despite the macro environment, we are very pleased with how we’re managing what’s in our control with our go to market strategy, productivity, and execution. Specifically, we’re excited about the progress we’re making it – to make it easier to sell, which has been a top priority for the company. This past quarter, we made several key hires in the service overlay team to add expertise in-depth to our CCaaS offering go to market and we continue to verticalize to enable quicker time to value in faster deployments. We are now up and running to CCaaS with a couple of more key industries, including financial services and airlines. We’re also doubling down on our partner ecosystem and we’ve recently partnered with some amazing companies like Intelisys and Foundever, which are beginning to result in deals that we want together in the field. As you all know, partners are critical, especially in the context and the space and we remain committed to training and onboarding them as rapidly as we can. And finally, last quarter, we discussed our self-serve offerings, Sprinklr Social event. Feedback has been in incredibly positive in terms of how easy it is to use and the product is opening the door as we anticipate for larger deals. This past quarter, a very large media company, actually started with social advance and now in conversation with our sales team to expand to multiple geographies and product suites. I’d love to provide a brief update on Sprinklr Service and our continued momentum as a disruptor in the CCaaS space. Our vision is to help customers transform the contact center from a voice focused cost center to a more efficient and effective AI powered omnichannel revenue center by unifying it with marketing and sales. IT buyers find Sprinklr to be a great fit for their needs as they consolidate point solutions in the contact center stack to a platform that’s built on a single code base with a very extendable architecture. During the first quarter, we saw meaningful CCaaS deals close across all three of our primary theaters. During the first quarter, we continue to add new customers and expand with existing customers, including world-class brands like Avis, Garmin, Lululemon, [Tuma] [ph], Spirit Airlines and Wilton. Let me give you a few examples of how customers are currently using Sprinklr. Starting with service and showcasing the power of the unified CXM platform is an expansion win in Q1 with the top 5 Global Technology company, which renewed and expanded their business to over $15 million in ARR with Sprinklr. They are now using 40 Sprinklr products across all of our product suite in over 13 languages. Sprinklr service is now a critical part of the deployment at this client, enabling guided workflows, knowledge bases for agents, customers, video chat, co-browsing, and AI powered agent assist capabilities like smart comprehension, pairing, and responses. Through Sprinklr, this client can now detect issues within 5 minutes as opposed to the 30 minutes to 45 minutes it used to take previous enabling them to expand their support coverage and improve their SLAs through increased actionability, AI, and automation. Another service story is with Americana, one of the largest restaurant companies in the Middle East and Africa. Americana originally began partnering with Sprinklr to build-out an actionable voice of the customer and customer service program. This program gathers life, actionable voice of customer insights across all digital and voice sources to provide enhanced resolution. Our platform and the implementation of it has helped Americana reduce response time now to minutes. With the expansion last quarter, Americana now has implemented Sprinklr across 10 brands in multiple countries across several 1,000 restaurants. Another example is a new logo, Hilti, a leading multinational manufacturing company with over 30,000 employees, who signed interestingly a 7-year deal with Sprinklr as a new customer using – to use our inside, social, and marketing solutions. This is an amazing example and a testament to how strategic Unified-CXM is for large enterprises. Another example is the expansion of a strategic partnership with Roche, one of the largest pharma companies in the world. Using Sprinklr, they have now laid the foundation for global intelligence teams to provide holistic insights across social, digital, and traditional media including print and broadcasting stations. The consolidation and analytics based on real time data display is, it plays a key role in Roche’s vision to become One Roche as it enables diverse siloed stakeholders across the pharma and diagnostic divisions in over 100 countries to make informed decisions and proactively respond in crisis situations and obviously is driving growth and optimizing strategies. Before wrapping up, I’d like to take a moment to celebrate our incredible engineering team who as always make all of this possible. Their speed of innovation and dedication continue to differentiate Sprinklr in the marketplace. In closing, we are very pleased with our start to FY 2024. We’re encouraged by the engagement and momentum we’re seeing from customers industry analysts, influencers, around three things. First, a new category of front office software. We call it Unified-CXM, but the simple idea that teams and data and technology and customer journeys have to be unified at the architecture level and that a disconnected set of point solutions won’t work. Two, AI is well on its way to being mainstream and customers are super excited with our AI first approach and generative AI plus integrations that give them I think is customer facing superpowers. And our focus, lastly, third, our focus on efficient execution, which is helping us drive strong momentum across our product suite. We remain committed to our vision of becoming the world’s most loved enterprise software company innovating for our customers, succeeding with our partners, and delivering shareholder value and in the long-term executing for growth and continued profitability. Thanks to our customers, partners, and our employees for hard work and results and thanks to our investors for believing in our vision. Let me hand the call over to Manish. Manish Sarin: Thank you, Ragy, and good afternoon everyone. As you heard from Ragy, we’re pleased with our start to FY 2024. For the first quarter, total revenue was 173.4 million, up 20% year-over-year and above the high-end of our guidance range. This was driven by subscription revenue of 157.7 million, which grew 24% year-over-year also above the high-end of our guidance range. One of the key drivers of subscription revenue outperformance was the timing of new bookings, which was front loaded in Q1 and the commensurate benefit to Q1 subscription revenue was approximately 2 million. Services revenue for the quarter came in at 15.7 million. Our subscription revenue based net dollar expansion rate in the first quarter was 122%. As we have discussed in the past, the NDE statistic is not something we monitor as part of growing our business, but is a byproduct. As macroeconomic conditions moderate renewal rates and customer upsells and new logo acquisition continues to increase, we expect NDE to moderate in the coming quarters. Our current expectation is for NDE to settle in the mid-to-high teens percentage range over the next few quarters. As of the end of the first quarter, we had 115 customers contributing $1 million or more in subscription revenue over the preceding 12 months, an increase of seven sequentially, which is a 28% increase year-over-year. Turning to gross margins for the first quarter. On a non-GAAP basis, our subscription gross margin was 82.8% as we continue to drive efficiencies in our cloud operations, leading to a total non-GAAP gross margin of 76.2%. We continue to generate efficiencies in sales and marketing and have shown consistent improvement in S&M spend over the last several quarters. Sales and marketing expense in the first quarter is now 48% of revenues, compared to 56% in Q1 of last year. This is an 800 basis point decrease year-over-year. The sequential increase in S&M spend in Q1, compared to Q4 of FY 2023 is largely attributed to sales activities slated for the start of the year such as sales kick-off, as well as costs related to the Q1 restructuring we had discussed on the Q4 earnings call. We also realized operating leverage from G&A, which decreased by 100 basis points year-over-year. Turning to profitability for the quarter, non-GAAP operating income was 11 million, equating to a non-GAAP net income of $0.06 per share. This 6% operating margin for the quarter was a result of revenue over performance, improved gross margins, coupled with operating expense discipline across every department and is the third consecutive quarter of non-GAAP profitability. It is also worth noting that in Q1, we had approximately 3 million in tax credits related to the release of valuation allowances in our Brazil and Japan entities. Had we not realized these credits, the tax provision on Q1 would have been approximately 2.2 million, in-line with our prior guidance. Lastly, on the topic of profitability. For the first time ever as a publicly traded company, we posted positive GAAP net income for the quarter totaling 2.8 million or $0.01 per share. While we were the beneficiary of one-time tax credits allowing us to achieve GAAP net income profitability faster than expected, we remain committed to achieving GAAP net income profitability on a full-year basis for FY 2024. In terms of free cash, we generated 14.3 million during the first quarter, [an] [ph] 8% margin compared to an adjusted free cash flow of 6.2 million in the same period last year. This cash flow generation contributed to our very healthy balance sheet, which now stands at 604.4 million in cash and equivalents with no debt outstanding. Calculated billings for the first quarter were $170.5 million, an increase of 23% year-over-year. As of the end of Q1, total remaining performance obligations or RPO, which represents revenue from committed customer contracts that has not yet been recognized was 708.1 million, up 23% compared to the same period last year and CRPO was 478.8 million, up 19% year-over-year. The sequential decrease in RPO and CRPO can be attributed to a handful of large multi-year deals that are up for renewal in Q2 and therefore not included in both RPO and CRPO. Moving now to Q2 and full-year FY 2024 non-GAAP guidance and business outlook. As you heard today, long-term demand trends and engagement for Sprinklr remains strong. However, we recognize that the macroeconomic environment continues to be uncertain and our current assumption is that the broader macro trends from the last few quarters are likely to continue throughout FY 2024. For Q2 FY 2024, we expect total revenue to be in the range of 172 million to 174 million, representing 15% growth year-over-year at the mid-point. Within this, we expect subscription revenue to be in the range of 158 million to 160 million, representing 20% growth year-over-year at the midpoint. As we had mentioned on the Q4 earnings call, we expect approximately $30 million in services revenue in the first half equating to approximately 14 million of services revenue here in Q2. Concurrently, we expect services margins to dip here in Q2, driven by our ongoing investments in CCaaS service delivery and managed services such that our overall services margins for the first half of FY 2024 are effectively breakeven consistent with our commentary on the Q4 earnings call. We expect non-GAAP operating income to be in the range of 11 million to 13 million, and non-GAAP net income per share of $0.04 to $0.05 per share assuming 270 million weighted average shares outstanding. For the full-year FY 2024, we are raising both our subscription and total revenue outlook for the year. We now expect subscription revenue to be in the range of 649 million to 653 million, representing 19% growth year-over-year at the midpoint. This is an increase of 5 million, which represents the full magnitude of the Q1 beat and the subscription revenue guidance raise for Q2. As we alluded to on prior earnings calls, we have been investing in making our products easier to implement and therefore, accelerating the time to value for customers. In addition, we have also been cultivating a partner ecosystem around delivering our product suites such that we expect our service delivery partners to take on a larger proportion of the services revenue attached in delivering our product. In-light of these dynamics, we are reducing the FY 2024 services revenue guide from 66 million to 62 million. With this change, services revenue for FY 2024 will be approximately 9% of total revenues. We expect total revenue to be in the range of 711 million to 715 million, representing 15% growth year-over-year at the mid-point. For the full-year FY 2024, we are raising our non-GAAP operating income estimate to now be in the range of 51 million to 55 million equating to a non-GAAP net income per share of $0.19 to $0.21, assuming 273 million weighted average shares outstanding. This implies an approximately 7% non-GAAP operating margin at the midpoint. Note, the increase of 10 million at the midpoint represents the full beat for Q1 and the accompanying raise for Q2. In deriving the net income per share for modeling purposes, we estimate 13 million in interest income for the full-year with 4 million of that to be earned here in Q2. Furthermore, a $6 million total cash provision for the full-year FY 2024 needs to be added to the non-GAAP operating income range just provided. We estimate a tax provision of 2.5 million here in Q2. We are tracking to be GAAP net income positive for the full-year FY 2024 consistent with our comments on the Q4 earnings call. Billings in Q2 are expected to grow in the high teens, growing slightly slower than subscription revenue, but faster than total revenue. We expect the Q1 beat and any Q2 upside in billings to flow through for the full-year FY 2024. For modeling purposes, I would assume the same billing seasonality in FY 2024 as in FY 2023. With respect to free cash flow, in Q2, we have a large annual payment due to one of our public cloud partners. As such, Q2 free cash flow is expected to be negative and coming around negative $15 million. Consistent with our prior commentary, we expect to be solidly free cash flow positive on a full-year basis. As a quick reminder, Ragy, the broader Sprinklr management team, and I are eager to share more details about our business and financial profile with you at our upcoming Investor Day on Wednesday, July 12, and look forward to seeing many of you there. Lastly, I would like to thank all our employees for their dedication and passion for what we are building at Sprinklr. During an uncertain macro environment, I’m also grateful for the confidence that our customers have placed in us. We remain focused on building a track record of successful execution and operating discipline across the business. And with that, let’s open it up for questions. Operator? Q&A Session Follow Sprinklr Inc. Follow Sprinklr Inc. 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 the line of Raimo Lenschow with Barclays. Please proceed with your question. Raimo Lenschow: Perfect. Thank you. I had two, if I may. First one – and congrats on a great quarter. First one is on the Services push that you’re kind of doing now, and thanks for the updated guidance there, that kind of explains a lot. If you think about what’s the nature of the relationship with the Service partners, like, are they kind of building it as a bigger digital transformation in the front office – a bigger practice there or is it kind of more Sprinklr specific what you’re seeing there in terms of how they are thinking about building and working with you? And then I had one follow-up. Ragy Thomas: Yes. So, Raimo, this is Ragy. Good to connect always. So, there are two things I would point out. First is, our broader partnership ecosystem that we’ve been developing with the systems integrators like Deloitte and Accenture, are more on the digital transformation and the broader ecosystem, as you’ve outlined. What is interesting now is, we’re developing a second category of partnership and more specifically in the customer service space, and there’s a pretty interesting ecosystem there of peripheral partners, implementation partners, consulting partners. They’re very focused on the contact center industry. So, we’re rapidly expanding that aspect of our partnership ecosystem, which was something that in the past we hadn’t done. Raimo Lenschow: Yes. Okay. Perfect. And then the other big debate that happens in the market at the moment is like was that front office first maybe, kind of overinvested a little bit in 2021, and now we have like a digestion period, and now we can slowly start looking forward again. In your customer conversations, what do you see in terms of like thinking about ongoing investments, do you see a change in the nature of the conversation that you have here? And I’ll leave it with that and congrats again from me again. Ragy Thomas: We’re seeing a palpable change from our biggest and best customers for the, let’s say, 20 or 30 customers I spoke to that are large. I’d say a large customer for us is over 1 million. And as you probably know, we actually have several that are over 10 million now and increasingly more over 15 million. What we’re finding is the platform is sticking. What we’re finding is companies are expanding across business units. What we’re finding is that companies are expanding across channels, and they are expanding across markets. So, you know we have two vectors of growth. One is more products and more cross-sell capabilities across products and product suite. The other one is expanding across business units and market. That’s a less understood part of our expansion strategy because you have a single instance architecture where the new business unit that comes along or the new market that gets added, it suddenly has global collaboration and visibility. Raimo Lenschow: Okay, perfect. Thank you. Congrats again. Ragy Thomas: Thank you. Operator: Our next question comes from the line of Pinjalim Bora with J.P. Morgan. Please proceed with your question. Unidentified Analyst: Hey, guys. This is [indiscernible] on for Pinjalim. Thanks for taking our questions. Just for the first one, you launched the self-service product at the end of March, which should really help with the top of the funnel dynamics. Can you just maybe provide some more additional color around the new self-service products and just the uptake there? Thanks. Ragy Thomas: So, we are – it’s been – like we said last time, it’s been a fairly controlled roll-out because what we wanted to do is get the product and the dynamics of someone using the product, right, which I’m very happy to report that the feedback is very, very strong. We are now in the process of increasing the reach using traditional and digital marketing capabilities to get more people to that top of the funnel to try. It’s working really well as companies in our target market, who are smaller teams going on there, try and testing out and giving us great feedback. And I’d say, over the next two to three quarters, we’ll be putting more resources and more focus on that to build that out as a very hopefully, potentially big lead generation and try before you buy channel. Unidentified Analyst: Great. And then just a quick follow-up. Related to the macro, it sounds like that the environment has been relatively consistent. You did call out some moderation in the retention going forward. Could you maybe just unpack that a little bit for us? Thank you. Ragy Thomas: Yes. So, we’ve always said that. I think, for the last now three quarters, we’ve consistently said that the environment is steady. So, what we’re seeing is more scrutiny, careful spend, measured spend, more people approving deals, and that continues. We’re not seeing it change. What I’d point out is, as we get into CCaaS, get into the partner, unlocking the partners, as you probably know already, CCaaS deals take longer. There are very formal RFP processes and multiple stakeholders outside consultants and lots of people involved. And change management is a huge deal in that space. So, as we lean more, you’re going to see sales cycles increase a little bit, but we don’t think it’s a macro thing, but we’re seeing very strong reception. We’re running several proof of concepts, and we’re able to show agent productivity and average case handling time reduced by 20%, agent productivity go up by 30% in many cases. So, it’s very promising. Now, we got to get scale and get a few deals through the sales cycle. Unidentified Analyst: Thank you and congrats on the quarter. Ragy Thomas: Thank you. Operator: Our next question comes from the line of Elizabeth Porter with Morgan Stanley. Please proceed with your question. Elizabeth Porter: Great. Thank you so much. I wanted to ask on generative AI, just given how topical it is. We see a lot of interesting press releases across the broader landscape, specifically for generative AI, including Sprinklr AI+. So, how do you view what generative AI capabilities really become table stakes versus real incremental monetizable solutions? And how should we think about the road map for new Gen AI features? And what forms of monetization make the most sense for Sprinklr? Ragy Thomas: Well, I’m glad you asked the question. Look, you know that if you read a prospectus, we’ve been seeing this for 5 years, and we are thrilled that generative AI is adding wings to our own AI and raising broader awareness. I think, as we said in the prepared remarks, there’ll be two kinds of companies, one that is adding a feature on the AI and got five things going. And others that deeply go back to their core architecture and embed AI. And I think over time, the latter will clearly be the winner. They will be the AI companies, not people who use AI. Having said that, for us, AI is a fundamental differentiator across the front office. As you know, we have several hundred features in every product suite. And most, I can just wrap it up, maybe in the call back, I’ll show you a slide. You take any product that we have, any feature, that center more than 60%, 70% of that is enhanced using AI. Now how do we monetize AI is very, very interesting. Awareness helps us, and I think there are additional monetization opportunities that are not obvious right now for companies that are completely and just see base, this is going to be a deflationary situation for them. For us, and companies like us, who’ve fluidly transition between agent base cases, community-based cases, knowledge-based, self-resolution and who can charge for licensing and enterprise licensing that includes AI regardless of the agent hours, I think it’s a good thing. And we are exploring different pricing models like case-based pricing, insight based pricing. And you know our insights product is completely based on AI and price on a licensing basis based on the value we create. So, we see this as a net positive for us. In the short-term, we’re going to use this to differentiate massively and the awareness is doing wonders for us. We are having C-level conversations as the AI platform, as the traditional older companies have struggled. And everyone’s talking a big game, but we can prove it. We’re showing 90% accuracy in actionability, when you look at the random method and ask you, should I act on it? Is it engaged? We’re showing 30% better sentiment accuracy, we’re showing 25% to 30% better routing with our smart routing, agent productivity is [indiscernible]. So, we’re doing proof of concepts where we’re showing in some cases, twice as better accuracy and AI capabilities. I’ll give you a specific example because everyone’s talking generically. We’ve always had the concept of smart responses. So, if you’re using Sprinklr in a context, enter the agent is guided to [indiscernible], why don’t you use say this, offer that. That’s a smart response that the system is nudging the agent to do. I mean that had good usage, but when we added the generative AI integration and expanded it, now the agent is getting a full script and so he can just read off where they’re having the process and rephrase. And the adoption, as we called out, has gone up 300%. So, that’s the kind of quantum leap that suddenly makes AI a lot more accessible and visible from an external user synthesizable way as opposed to in the back end. So, I think it’s going to just really help us differentiate in a big way. Elizabeth Porter: Great. Thank you. And as a follow-up, I was wondering if you could talk about the success you’ve seen on new customers and launching new initiatives like that new logo team or focusing partners to source deals. I understand you don’t report the customer count number, but any color on how those initiatives are taking hold would be helpful. And historically, about two-thirds of the business has been driven by existing accounts. Can we expect that to change over time? Ragy Thomas: Look, I think there is precedent for very sustained long-term growth without having to just keep adding logos. And as a very high-end enterprise company, I think we are very well placed with the likes of companies like ServiceNow, where we’re seeing our top customers buy more and more and more growth. And I think that’s a very sustainable long-term growth driver for us. Now, we want to continue adding more customers, and we have identified as we said last time with this focus on go-to-market, we’ve identified a target customer base of 43,000 companies. So, through everything we do, we’re only trying to reach those companies, and we’re not chasing anybody else. So, the focus continues to be on growth and not logo count. We’ve put dedicated teams. And I think that’s 1 of 10 things we’re doing. And I think almost all those things are first principle space, and we – it’s a multi-quarter thing. So, we don’t have any early results to report, but it looks very promising. Elizabeth Porter: Great. Thank you. Ragy Thomas: Thank you. Operator: Our next question comes from the line of Matt VanVliet with BTIG. Please proceed with your question. Matt VanVliet: Hi, good evening. Thanks for taking the question. I was maybe curious on all the success around the contact center and Sprinklr Service space overall. What are you finding that you’re replacing most often or are any of these, sort of net new contact center type of engagements that you’re seeing? Ragy Thomas: Matt, we’re seeing two distinct patterns. Well, one is, we’re finding that companies with 50 agents to, let’s say, 500, maybe even 1,000 agents have all the problems that large 5,000 agent contact centers have in terms of workforce optimization, routing needs and ticket volume and a whole bunch of things. And we’re finding that, that market specifically is craving for a unified solution because they can’t afford to buy 6 or 7 and then integrate it together. So that’s – what we think of as a right-to-win segment for us, and we’re seeing success in that market. Second is the large enterprise deployments. Now, we’re seeing success there, but these are larger drawn out, protracted proof of concept to RFPs to replacements where we are encountering traditional vendors like Avaya and Genesys a lot. And essentially, what’s going on there is, we have opportunities where it’s long-term, and we’re going after the whole thing. And we have a lot of like lower-hanging fruit in terms of just augmenting the core voice infrastructure that is working with about seven of our AI-based products. So that suite is our contact center CCAI product suite for the service industry. So, you can just deploy that as a pack on top of your current traditional voice infrastructure. And in many cases, because they’ve already been using those capabilities for digital or social with Sprinklr, it is a much easier lift. Does it make sense? Matt VanVliet: Yes. No, that’s very helpful. Thank you. And then maybe just a quick follow-up on the services gross margins and just, kind of thinking about that more long-term. If you can push more of that work to some of the partners maybe ignoring the potential business development side or kind of top of the funnel, but as you just look at kind of how that could impact gross margins over the longer-term, maybe just help us think about how framing that out is also a cost benefit analysis here for the model? Manish Sarin: Hi, it’s Manish. I think that’s a great question because we’ve been spending a lot of time evaluating the kind of services opportunities we take on board. And I think this is consistent with the comments we’ve given on the last earnings call, whereby we were looking to partner with firms that could develop an ecosystem of delivery capabilities around us, whereby we could transition some of the, let’s just say, less attractive margin business to them. So our view, once we are through with this transition and the investments that we are making in CCaaS delivery, managed services, which is a lot more higher margin that we should be in the circa 20%, give or take, over the long-term. Now these can obviously go up depending on any quarter that we might be in. But given where we are right now, that’s what we feel comfortable looking out over the next year or so that, that sort of margin profile probably is achievable. Does that make sense? Matt VanVliet: Yes, that’s great. Thanks for taking the question. Operator: Our next question comes from the line of Michael Berg with Wells Fargo. Please proceed with your question. Michael Berg: Hi, thanks for taking the question and congrats on the quarter. I wanted to touch on the shape of the quarter. You noted that it was front-end loaded. I was curious if there was – just looking at some of the Q4 statistics, if there were some larger deals that fell out of Q4 into Q1, and that’s what drove part of the upside shape with the quarter. And then secondarily to that, is there anything meaningfully different that you’re seeing in the demand environment more broadly? Thank you. Manish Sarin: Yes, that’s a great question. So, there weren’t any deals that flopped over from Q4 into Q1. Now, we, like any other enterprise software company do believe that a lot of our new business is back-end loaded. And we’ve been fairly consistent in how we then model it out and guide the Street to, but of course, we can’t predict customer buying behavior. And every once in a while, we do run into a situation where, for a variety of reasons, the customers have a desire to purchase one of our product suites and that was the case here in Q1. And consistent with our prior commentary, we were fairly transparent in pointing out when that happens and the additional benefit that accrued to us here in Q1, which, as I pointed out in the prepared remarks, was approximately $2 million. So, if you sort of factor that into both the guide as well as what Q1 results look like, you would see a more normalized, sort of revenue pattern. Michael Berg: Helpful. And then going back to the Services piece, do you have a long-term target goal in terms of the mix there? Like how can we see that shaping up over time? Manish Sarin: And with that, in particular, you’re referring to as a percentage of overall revenue? Michael Berg: Correct. Manish Sarin: Or the mix within Services? Michael Berg: Services as a mix of overall. Manish Sarin: Yes. So, if you go back a couple of years, Services for us was almost 12% of overall revenues. And we did feel, as a management team, we wanted to sort of bring that down partly because we were all driven by trying to make the suites much more easier to implement, providing value to the customers in a much more expedited fashion. And so, I think where we are right now is just under, call it, [9-odd percent] [ph], it is probably a respectable level. So, as I look out over the longer term, somewhere between 8% and 10% seems to be the right spot for us. The mix within Services obviously will migrate more towards managed services or CCaaS service delivery, sort of more higher up the value chain, if you will, versus just your [plain vanilla] [ph] implementation. And that might obviously lead to a better margin profile in the longer-term, as I said earlier. So, I think where we are probably is what you should expect more at a steady state level. I will, however, admit that we’re in a fast-evolving industry. And we’re trying our level best to adjust our economic model toward the customers’ demand. And should things change, we would be transparent with the Street on future earnings calls. Michael Berg: Helpful. Thank you. Operator: Our next question comes from the line of Patrick Walravens with JMP. Please proceed with your question. Patrick Walravens: Great. Thank you. Ragy, how do you expect your competitive environment to evolve over the next three years? And maybe in particular, it seems like Amazon is making a lot of progress in the contact center space, and I know you have a partnership with them. So, if you could touch on that element of it too, that would be great? Ragy Thomas: Absolutely. So Patrick, as you know, we started out in the social space right. Our legacy with a lot of little companies that we’re competing with. We evolved from that to the digital space where we were competing with bigger companies, but still endpoint solution world or companies who have bought some of these and been selling this together using invoice engineering, if you will. Where we have evolved to is, we have mainstreamed and we are mainstreaming every one of our product suite. So, that’s very important for the market to understand. So, we’ve got four product suites. The Service product suite, the Insights product suite, the Marketing product suite, and our Social product space. And each one of those are evolving to a mainstream category. And the easiest way to understand is, what we’re doing and have done with, frankly with the service space, right? We started with Social service. Now, we have digital. Now, we’re in the CCaaS space. So, now we’re obviously competing with the likes of the Avayas and the Genesis and a lot of Zendesk and other companies who are in that enterprise space. That’s a very large TAM. The contact center market, as you know, is about $800 billion, and that’s including tech and labor. And as you know, the tech is only a small single-digit percentage. What’s super exciting is now the – a good chunk of the $800 billion is at play because AI will actually expand the tech market into and [beat] [ph] into the labor cost mitigation opportunity. So, we know that’s a major market. We know we’re doing a replacement sale. We know we have a better product. We know we are AI-based. So, it’s become easier. So, a competitive set is involved to a very different group of companies. That’s the same thing we’re going to do in marketing. That’s the same thing we’re doing in Insights, where we’re going to be adding more voice of the customer capabilities, as I outlined in the prepared remarks. We have – increasingly we’re doing deals where the customer is using us as a voice of the customer platform in addition to their survey-based platform. So, at some point, it should be obvious that we add surveys, and we are incredibly competitive there. So, that’s a strategy and our competitive set will evolve. You know very clear, I’ve mentioned many, many times that our goal is to become the third or the fourth platform in the enterprise. You go buy Salesforce, such as CRM suite. You go buy Adobe, it takes care of your website and analytics, Microsoft can and should be your stack and then you have Sprinklr and that’s a platform that unifies it and connects a lot of those other – replaces a ton of point solution somewhere between 5 and 25 and connects to the other three. And that is the [stated stack] [ph]. Let me now switch gears and talk about how we see the cloud providers. Now, it’s very interesting the way the market is moving. The infrastructure providers are going to keep coming up the stack. And so, you’ll see the market with the past players, the communication service providers and all of that. I think that’s – they are going to bleed into each other. We’re coming from the very top of the app stack. We’re a pure play application player, operating system play. That’s – it’s all code. It’s all software. We have no data aspirations with. It’s all license based, and it’s all part of the architecture. And we’re agnostic across channels, and we provide a unified way to communicate across channels and business units. So, I think they will eventually connect, but right now, it’s a great complement to each other. So, we see ourselves as great partners to Amazon, great partners to Microsoft, great partners to Google, and we actually do several deals together every quarter. Now obviously, do they bleed into each other a little bit, possibly. But in the front office, you’re going to see everybody bleed into each other. And I think what I would bet on, if I were you, is a truly platform architecture. Because invoice engineering is pretty tough to pull off over the long run. Patrick Walravens: That’s super helpful. Thank you. Ragy Thomas: Thank you. Great questions. Operator: [Operator Instructions] Our next question comes from the line of Tyler Radke with Citi. Please proceed with your question. Tyler Radke: Yeah, thank you. Good evening. I wanted to just ask you about how you’re seeing some of the large renewals shape up. I think you talked about some large renewals expected here in Q2. Some of the other larger front-office players have talked about some renewal pressure. We’ve heard anecdotes of shelf ware and seats that have gone undeployed. How are you expecting your renewal rates to trend? And if you could just remind us on the composition of your revenue base that’s seat space versus usage or interactions based? Thank you. Ragy Thomas: Okay. So, there are two questions there. The first one is, what are we seeing in our larger deals in terms of renewal? Well, now I’ll tell you, once you buy into the Sprinklr approach, we keep growing. And true story now we have customers who call us first before they go put out an RFP or open it up to a point solution and say, hey, do you guys do it, because they’ve bought into the – attuned the AI models, they’ve set up the governance. They’ve got the analytics. I’ll give you an example of a very, very large as a top 5, probably top 3 tech company that expanded their marketing services with us. And the idea was there was an agency breach that happened and issue that resulted in ad spend that was not governed and approved. So, they just paused spending till everybody got on Sprinklr, so that they can be compliant, right? And so they can have governance and visibility and they can have a global editorial calendar. So, I can confirm to you, and you know we had one customer that paid us over [15 million] [ph]. And if you count the number of customers that are paying over [10 million] [ph], that’s going up as well. And so, we’ll both share more details on our Investor Day, but we love what we are seeing at the very top of the market that we love it. We love that. It’s just cementing our position as the third or fourth platform. Now, you also know we’ve been obsessed unlike many other companies about value delivery in our aspiration to try and build a company that people are going to love. So, value delivery is super, super important for us. Everything is backed up by a business case. And so, we’re not seeing the shelfware compression that you’re seeing. We’re seeing it as well from, for – our customers are telling us they are seeing shelfware compression from other vendors, thankfully. And fortunately, that’s not us. Tyler Radke: Thanks. That’s helpful. And then are you able to talk about the mix of revenue versus interactions or usage? Ragy Thomas: Yes. So, we don’t really have any usage-based pricing at the moment. So, we’ll have flat enterprise products that you buy like some AI SKUs or you have seat based high sensory buy or you have tier based, like, for example, our Insights product is based on how much – what tier of data are you consuming, right? So, I don’t know whether that qualifies as usage. We think of it as you’re buying a license. So, it’s not like you, if you don’t use all of that, you get money back, but you just get push into a different tier, if you go. So, they’re committing to a license always. And I think it’s a pretty good mix. Our Insights product is all based on AI and quantity of data that they ingest and process. Our CCaaS is again, we have community products and knowledge-based products and other things at the license based, and then you have the contact center that’s seat-based and we’re very open to other pricing models there as well like flat fee and enterprise license models. So, it’s a healthy mix. I couldn’t tell you exactly how that is split. Tyler Radke: Okay. That’s helpful color. So, then I wanted to just follow-up again on the contact center wins. It sounded like you saw some large ones in the quarter. You talked about some airlines and financial services. Did I hear you correctly that are you – in those larger deals, are you kind of complementing them initially? In other words, you’re not displacing one of these large incumbents in terms of the seats, you’re kind of complementing with the potential road map or optionality to displace them longer-term or – was just curious on those two examples, kind of your role? Thank you. Ragy Thomas: Both, both, Tyler. So, we have – our typical route is, we’re the digital care solution to start with social plus digital, right? It used to be social, now social plus digital. And that’s where they first, kind of see the power of AI agent productivity, time to respond, all of that gets better very quickly. And I can also confirm that we have several early pilots, conversations, proof of concepts with large wall-to-wall plays. And we’re very invested in it, which will be a drag on short-term bookings, right, because these are larger longer-term plays and there’s significant people and resources being committed to moving that along. Our hope and aspiration is we publicly stated is to become a pretty serious CCaaS player. And so that requires us to, kind of overinvest early on. So, the fruits of that labor will probably take a few quarters. But we’re able to show remarkable business results, Tyler. So, that’s that – we know that’s the right strategy, and it allows us to put our head down and not think about this quarter or next quarter, but think about the next 3 years to 5 years. Operator: Our next question comes from the line of Michael Turits with KeyBanc. Please proceed with your question. Michael Vidovic: Hi. This is Michael Vidovic on for Michael Turits and thanks for taking my question. You talked about the early traction you’re seeing with the self-service offerings, but is there any indication at this point that will help you move down market, call it, longer-term? Or are you really just seeing these products help you land the [43 customer count] [ph] you talked about earlier? Thanks. Ragy Thomas: Michael, more of the latter. We are not looking to go down market. Let me be very, very clear. So, if you are coming to a website, we’re actually not contacting anybody who’s not in our target list of 43,000 companies. So, it’s not that people wake up and go find us, right? And some day, we’ll be ranked very high in [that year] [ph], but that day is not today. So, we’re very intentional in terms of driving the audience to our self-serve products, and that is only in our target segment. So, it’s not a volume game for us. And our intention, at least I can say in the medium term is to stay very focused. There is a lot of upside to them in the market we play. So, it’s not going down market at all. Michael Vidovic: Got it. Thanks. And then just now that we’re past May here, any trends or changes between now and Q1 that you’d call out? Thanks. Ragy Thomas: Now, and – you mean just in the last month or so? Michael Vidovic: Right. Ragy Thomas: Look, I think everyone’s talking about generative AI, that is super exciting and I think the awareness of AI broadly is helping us differentiate and people are paying more attention to performance metrics. Look, I think the noise is going to subside and the winners will be declared over the next few years. I love what I’m seeing in terms clients thinking of us as a strategic partner, companies thinking of us as the system [Technical Difficulty] companies thinking of us as you are the – well, I had a customer that I was speaking to who said to us that they’re paying Sprinklr more than they’re paying Adobe and it was very surprising. And sure, it’s just value based. I’m not saying all companies in all industries. So, that’s something that I’m personally very excited about being a strategic partner in the C-suite. And I can also tell you that increasingly, we’re talking to the C-suite and we’re having a lot less difficulty getting to and holding a conversation and demonstrating a value to a CIO and CMO than we ever did before. Because I think the point solution versus platform, that game is up and people want to consolidate point solutions and CIOs want to talk to companies who can rip out 5, 10, 20 of those at a time. Operator: Our next question comes from the line of Arjun Bhatia with William Blair. Please proceed with your question. Arjun Bhatia: Hi, guys. Thanks for taking the question. Ragy, for you, just on the contact center opportunity. Can you just help me understand how you’re delineating, what’s a contact center deal versus service deal? Is it where it’s sitting, whether it’s the marketing team or the service team because you’ve had this product in market for some time. And then just to follow up on that, the growth strategy there, does that focus – do you see that focusing more on existing Sprinklr customers or is this a way to, kind of get maybe some of the holdouts on to your platform? Ragy Thomas: So Arjun, the good news is, everything that we’re referring to in our service bucket is a seat that’s assigned to somebody in the customer service department, okay? So, it’s almost always in the contact center, but it’s real customer service. If you are a marketing user engaging with a customer, you’re probably that – revenue goes under the social bucket or the marketing bucket. So, everything we’re talking about is service, which is very interesting for us. It’s a customer service seat. The second thing I want to point out is, for us, a customer service seat is a customer service seat. So, you may choose to activate five channels and call it social. You may choose to activate 30 and just do only digital or you may activate voice and go entire contact center. It’s all the same for us. And I’ll give you a real story with one of the largest of the 15,000 seat contact center we implemented at the bank that we talked about before. In the contact center, before Sprinklr, there were a bunch of people with the e-mail customer service capability. So, if you e-mail them, hey, I want to increase my credit card limit, they literally would e-mail you back because that’s all they could do. They were e-mail agents. And so you would send an e-mail Sunday night, you go to work Monday. That case wouldn’t get close till Friday when you come back and send an e-mail to respond. With Sprinklr, this is just – they came into this analyst summit and said the story, it was amazing, because now the e-mail agent gets that request, hits the call button, talks to the guy and say, hey, can you submit your proof of income blah, blah, blah. And that case resolution went from weeks and days to hours and minutes. So, you just turn things on and off and just – you are buying the exact same capability, which is what we mean by true omnichannel. Arjun Bhatia: Understood. All right. That makes sense. And then one for Manish. You talked about just some – maybe some downward pressure on net retention rate coming up in the next few quarters here. Is that – are you anticipating some renewal headwinds from customers? Maybe just walk us through some of the assumptions that you’re baking in there because you did raise the subscription revenue guidance? I’m just trying to square the two. Manish Sarin: Yes. So, we raised the subscription revenue guide for the full-year by the full beat of Q1 and the raise for Q2. So, I don’t think the issue is, are we expected – expecting any churn? But look, we live in a fairly uncertain macro environment. And I just didn’t want investors to start feeling that the 120% was sort of set in stone for the rest of the year. So, just trying to be cautious there. And the commentary that I’ve provided in the prepared remarks will square with the 19% subscription growth rate for the full-year. So, I think this is us in this period of as we look out over the next three quarters, what we are expecting in terms of new business, renewals, all of that captured together is what I was trying to give commentary on. Arjun Bhatia: Okay, perfect. That’s helpful. Thanks guys and great quarter. Operator: There are no further questions in the queue. I’d like to hand the call back to management for closing remarks. Ragy Thomas: Well, thank you, operator, and thank you all for joining us today. I’d like to first thank our employees and our partners and most importantly, our customers for their trust and continued business. We look forward to updating you all again soon as we continue on this exciting journey of creating a new category and aspiring to create the world’s most loved enterprise software company. Thank you very much, and have a great evening. Manish Sarin: Thank you. Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day. Follow Sprinklr Inc. Follow Sprinklr Inc. We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Can you invest in ChatGPT? There are two answers to that question. First, no you cannot. OpenAI, the company behind the ... Read more Can you invest in ChatGPT? There are two answers to that question. First, no you cannot. OpenAI, the company behind the software called ChatGPT, is not publicly traded. Second, that doesn’t mean you cannot invest in AI at all. You can get into this industry by investing in companies like Microsoft, Google and other firms that are tied to developing the new generation of AI technology. Here’s what you need to know. Consider working with a financial advisor as you explore which asset classes to invest in. Why Invest In AI? Depending on who you are, AI is about to change everything all at once or nothing at all. Since the release of art-bot AIs like DALL-E and chatbot AIs like ChatGPT, some observers have rushed to dub this the dawn of a new age. Occasional enthusiasts have literally compared the invention of AI to the industrial revolution or even the invention of agriculture itself. On the other end of the spectrum, skeptics have dismissed the current generation of artificial intelligence as little more than a digital party trick. These writers have rushed to point out every mistake made by the nascent, still-in-beta products as proof that the underlying technology is irredeemably flawed. Where this will all land is hard to say. Normalcy bias is a powerful thing, so the “nothing to see here camp” might be based on little more than the assumption that since a digital mind didn’t exist yesterday, it cannot exist tomorrow. On the other hand, right now ChatGPT could be a difference of degree masquerading as a difference of kind. It does the same thing that computers have always done best, finding patterns in existing data, just on a massively expanded scale. What seems most likely, as the consulting firm McKinsey writes, is a “fourth industrial revolution,” in which advanced software gains the ability to automate non-routine tasks. This would be a massive leap forward in technology, akin to when computers gained the ability to automate repetitive and routine functions, and is certainly worth paying attention to on both a social and a financial level. How Can You Invest In ChatGPT? As a threshold level, you cannot invest in ChatGPT. ChatGPT is the big name in AI at time of writing, although the field is moving so quickly that may no longer be the case by the time you read this. It is a software package produced and owned by OpenAI, which is a private company based in San Francisco. If you are an accredited investor, it’s theoretically possible that you could buy an ownership stake in OpenAI by purchasing privately held shares. But their investor list includes some of Silicon Valley’s most influential billionaires, so it might take an eight-figure check to even get someone returning your calls. If that is your profile, though, you are most likely better off investing through one of the venture capital firms that own a stake in OpenAI, including Sequoia Capital or Andreessen Horowitz. For retail investors, generally the closest you can get to investing in ChatGPT is by purchasing shares of Microsoft (NASDAQ:MSFT) stock. The company has invested more than $10 billion into the company, giving it a significant ownership and profit stake and access to OpenAI’s software as the basis of a next-generation version of the search engine Bing. Beyond that, you can invest in companies that have a relationship with OpenAI’s product and success. On the back end, this can mean investing in vendors who provide the hardware and software solutions that ChatGPT relies on. The most noteworthy company there would be NVIDIA (NASDAQ:NVDA), which produces the advanced chipsets used for artificial intelligence machines. The share price has been rocketing skyward since Oct. 10, 2022, when the stock traded at $112.27 to June 1, 2023, when it was trading at approximately $400. On the front end, you can invest in companies that intend to use ChatGPT in their own products. Several firms have announced strategic partnerships with OpenAI to begin integrating the artificial intelligence into their own lines, such as Salesforce (CRM) and Snap (SNAP). One report by Forbes even suggests that Coca-Cola (KO) may integrate OpenAI into its business model. It’s not the same as investing directly in OpenAI itself, but it still will give your portfolio exposure to ChatGPT as a product. How Can You Invest In AI? Beyond investing in OpenAI, you can also look to invest in AI as a field overall. Over the past year, artificial intelligence has become a sort of four-minute mile. Nobody could build a system remotely like DALL-E or ChatGPT just a few years ago. Now, new breakthroughs emerge every few weeks from any number of places. So a good way to invest might be by looking for those other companies. The most prominent AI companies right now are probably firms like Alphabet (NASDAQ:GOOG), Tesla (NASDAQ:TSLA) and Amazon (NASDAQ:AMZN). All three are either heavily invested in their own artificial intelligence software or are helping to develop third-party programs. This is generally the closest thing you can get to investing in OpenAI, since in all three cases you will be investing in a firm developing AI software. Beyond that, as with ChatGPT partnerships, you can begin looking for companies that will thrive on artificial intelligence. With this approach, your goal is to try to identify firms that can take advantage of the opportunities that AI offers. What sectors and companies will use this tool? Who will become more profitable in the long run because of it? One way to answer this is by investing in the technology sector in general. You can buy stock in exchange-traded funds (ETF) or mutual funds that are indexed to the tech sector, or funds which are indexed to the NASDAQ market. You can also try to identify firms and sectors that will do well with artificial intelligence technology, such as companies that do automated customer service, large data-management firms and logistics companies. All of these are sectors that need to handle large volumes of data with complex, non-routine outputs, which is exactly what AI is likely to specialize in. Bottom Line You cannot invest directly in OpenAI, the company behind ChatGPT, but that doesn’t mean you can’t invest in artificial intelligence. By seeking out companies and sectors most likely to profit off of data-driven, non-routine transactions, you can find companies that will likely thrive on this technology. Technology Investment Tips We’ve just scratched the surface of investing in artificial intelligence. In fact, if this technology has the potential that its enthusiasts claim, pretty soon it will be as ubiquitous as investing in electricity or Wi-Fi. A financial advisor can help you sort through your options when it comes to investing in artificial intelligence and other technologies. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. The post Can You Invest in OpenAI’s ChatGPT?  appeared first on SmartAsset Blog......»»

Futures Drift Higher Despite Sharp Drop In Chinese Exports Futs are starting flat for a second consecutive day, having reversed earlier losses, after China reported a bigger-than-expected drop in exports and OECD warned of a weak global economic recovery. Shares are trying to build on Tuesday’s gains as a rally in megacap stocks that had propelled the S&P 500 to the edge of a bull market continued to fizzle. As of 8:00 am ET, S&P futures were modestly in the green at 4295 while Nasdaq 100 futs were up 0.2%The Bloomberg Dollar Spot Index traded near the day’s lows, boosting most Group-of-10 currencies. Treasury yields were little changed amid listless trading global bond markets. Oil and gold were flat, while Bitcoin retreats a day after climbing more than 5%. Today’s macro data includes mtge applications, trade balance, and consumer credit. Ultimately, the macro data prints are light for the balance of the week. In premarket trading, Apple was set to extend Tuesday’s decline, falling in premarket trade along with Nvidia and Microsoft in a signal that more air is coming out of the rally in tech shares. Tech stocks continued to decline amid growing expectations that central banks will keep rates higher for longer (at least until the next big macro print), disappointing hopes they will pivot to rate cuts later this year. Here are some other notable premarket movers: Amazon.com was upgraded to outperform from neutral at Edgewater Research, which sees a more positive outlook for the e-commerce and cloud-computing company. Shares are up as much as 0.7%. Coinbase rises 2.2% after the crypto firm slumped 12% on Tuesday following the Securities and Exchange Commission’s lawsuit against the firm. Dave & Buster’s rises 5.1% after the food and entertainment venue operator reported first-quarter earnings per share that beat estimates. Herbalife slips 0.6% as Mizuho Securities initiates coverage with a neutral recommendation, saying the long-term targets of the nutrition company are achievable, but near-term visibility is limited. Novocure Ltd. climbs as much as 5.1% as Wedbush analyst David Nierengarten raised his recommendation on the stock to neutral from underperform. Petroleo Brasileiro SA’s US-traded shares are up 2.1% after Morgan Stanley upgraded the company to overweight from equal weight and raised the price target to $16.50 from $12.50, citing “further room for capital appreciation.” Stitch Fix rises 7.3% as analysts note that the online clothing company’s better-than-expected revenue and cost-cutting measures could pave the way for better profitability. Yext Inc. rallies 18% after the infrastructure-software company boosted its adjusted earnings per share guidance for the full year. “One of the things I’m a little nervous about is that the rates market got a little too carried away about the central banks being able to quickly pre-emptively cut rates,” said Karen Ward, chief market strategist for EMEA at JPMorgan Asset Management, in an interview with Bloomberg TV. With rates markets pricing out some expected cuts, “that to me puts some of those growth, those megacap tech valuations, a little at risk,” she said. European shares wavered, with sentiment damped by a bigger-than-expected drop in Chinese exports and an OECD warning that the global economy is set for a weak recovery, dogged by persistent inflation and restrictive central bank policies. Specifically, the OECD said a global recovery that will be weaker than expected, +2.7% for FY23 and +2.9% for FY24 vs. +3.4% average over the 7 years preceding COVID; this comes amid elevated global inflation Euro Stoxx 50 falls 0.5%. FTSE MIB lags regionals, dropping 0.9%. Autos, insurance and chemicals are the worst-performing sectors. The FTSE 100 fluctuated after UK lender Halifax said the nation’s house prices posted their first annual decline since 2012. Hermes International was among the biggest drags on the benchmark, and was set to decline for the third straight session on Wednesday. Despite some hopes over potential stimulus, conviction on the China reopening trade has faltered, with sectors such as luxury goods among the hardest-hit. Here are some notable European movers: Inditex shares rise as much as 6.2% to the highest since 2017 after the Zara owner reported a 1Q earnings beat and a strong start to 2Q. Analysts see potential consensus increases after the results. Danske Bank gains as much as 5.9%, the most since October, after the Danish lender raised its key profitability target and said it will offer more than DKK50 billion in dividends by 2026. Hugo Boss rises as much as 4.1% after UBS initiated coverage with buy and a Street-high price target, noting the firm’s turnaround story. SBB climbs as much as 14%, extending the gains triggered after Friday’s surprise announcement that the beleaguered Swedish landlord would change its CEO. DiscoverIE rises as much as 4.9% after the electronic components distributor reported results which analysts say demonstrate the strength of its business model, noting the firm’s positive outlook. Assa Abloy gains as much as 4.9% after the Swedish lock and entrance systems manufacturer announced Mexican authorities gave a green light to its acquisition of hardware unit HHI. 888 Holdings rises as much as 22%, extending Tuesday’s gains, after a group of gambling-industry veterans built a stake in the owner of British betting chain William Hill. Sectra drops as much as 10% after the Swedish medical imaging company was downgraded to sell at Carnegie, with the broker saying that the stock’s valuation has again become too high. BE Semiconductor falls as much as 6.4%, extending a decline that started during Tuesday’s capital markets day, with analysts flagging a delay to a key product to 2027 from earlier 2025. PGE drops as much as 3.4% after a court in Warsaw suspended the execution of the environmental decision for the company’s Turow open-pit lignite mine, allowing it to operate until 2044. KBC dips as much as 0.7% after AlphaValue/Baader downgraded the Belgian bank to reduce as it expects margins to decline in 2024 due to rate cuts and lower loan volumes than anticipated. “Weaker global trade is not a new story but it is surprising how quickly China’s reopening boost has faded,” said Craig Erlam, a senior market analyst at Oanda. “Pressure is set to intensify on the leadership to announce new stimulus measures in a bid to revitalize the economy again.” Earlier in the session, Asian shares were mostly stronger following the positive handover from Wall St where the S&P 500 posted its highest close YTD and the Russell 2000 rallied amid strength in regional banks, although advances were capped as the attention in Asia turned to softer-than-expected Chinese trade data. Hang Seng and Shanghai Comp. were positive after reports that China asked the largest banks to cut deposit rates to boost the economy and with Hong Kong led by tech strength, while price action was less decisive in the mainland after the latest Chinese trade data mostly disappointed including the wider-than-expected contraction in dollar-denominated exports. Nikkei 225 wiped out its initial gains in an early 700-point swing and briefly dipped beneath the 32,000 level where it found some support. ASX 200 was just about kept afloat but with the upside limited by the weaker-than-expected Australian GDP and hawkish adjustments to peak rate forecasts. Indian stocks rallied for fourth consecutive day to hover around all-time high levels ahead of interest rate-setting panel’s decision on Thursday. The S&P BSE Sensex rose 0.6% to 63,142.96 in Mumbai, while the NSE Nifty 50 Index advanced 0.7% and both gauges closed a little short of their peak levels seen in December. Reliance Industries contributed the most to the Sensex’s gain, increasing 0.7%. Out of 30 shares in the Sensex index, 20 rose and 6 fell, while 4 were unchanged In FX, the Bloomberg dollar spot index gives up earlier gains. NZD and DKK are the weakest performers in G-10 FX, NOK and AUD outperform.  the Turkey lira plunged to a record low, and is the worst-performing currency against the dollar versus expanded majors, as traders said state lenders had halted dollar sales to defend it. In rates, treasuries are slightly cheaper across the curve with losses led by front-end and belly, flattening 2s10s, 5s30s spreads on the day. Stock futures remain inside Tuesday session range, while WTI crude oil futures advance over 1%. US session quiet for scheduled events, with minimal data, supply (except 17-week bills) and no Fed speakers expected.  Yields cheaper by up to 3bp across front-end of the curve with 2s10s, 5s30s spreads flatter by 0.8bp and 2bp on the day; 10- year yields around 3.685%, cheaper by 2.5bp vs. Tuesday close with bunds and gilts outperforming by 1.5bp and 3bp in the sector In commodities, WTI traded about 1% higher around $72.50 while ags appear to have caught a bid from the escalation of hostilities in Ukraine. Spot gold is little changed at $1,962/oz. Looking at today's calendar, at 7 a.m., we got the latest mortgage applications data (another drop, this time -1.4%), followed by April trade figures at 8:30 a.m and a consumer credit report at 3 p.m. The Bank of Canada will deliver a rate decision at 10 a.m. New York time. President Joe Biden will meet with his UK Prime Minister Rishi Sunak in Washington. Market Snapshot S&P 500 futures down 0.1% to 4,284.00 MXAP little changed at 163.82 MXAPJ up 0.5% to 517.07 Nikkei down 1.8% to 31,913.74 Topix down 1.3% to 2,206.30 Hang Seng Index up 0.8% to 19,252.00 Shanghai Composite little changed at 3,197.76 Sensex up 0.3% to 63,005.26 Australia S&P/ASX 200 down 0.2% to 7,117.99 Kospi little changed at 2,615.60 STOXX Europe 600 down 0.2% to 460.81 German 10Y yield little changed at 2.38% Euro little changed at $1.0686 Brent Futures little changed at $76.30/bbl Gold spot down 0.2% to $1,959.65 U.S. Dollar Index little changed at 104.16 Top Overnight News China’s May exports come in below plan, dropping 7.5% Y/Y in May (vs. the Street’s -1.8% forecast and much weaker than the +8.5% in April), although imports were a bit better (-4.5% vs. the Street’s -8%). China posts health commodity imports in May despite softer exports, with crude imports the third-highest monthly level on record. RTRS US secretary of state Antony Blinken will travel to China this month, in the latest sign that Beijing and Washington are beginning to stabilize a turbulent bilateral relationship that had sunk to the lowest point in decades. FT India expected to begin manufacturing GE jet-fighter engines in the country under a deal expected to be struck with Washington, part of New Delhi’s pivot away from Russian military equipment. WSJ The Turkish lira plunged the most in more than a year as state lenders halted dollar sales to defend it, a sign the new economic administration is giving up on costly interventions. The currency fell as much as 7.2% per dollar, weakening for a 12th day. BBG New York pushed past Hong Kong as the world's most expensive city to live in as an expat, thanks to inflation and rising accommodation costs, while skyrocketing rents saw Singapore crash into the top five for the first time. Geneva and London remained in third and fourth places, according to the ECA International's Cost of Living Rankings for 2023. BBG Michael Dell's family office plans to diversify its portfolio to absorb a payday of cash and stock worth more than $20 billion after Broadcom acquires VMware. BBG Mike Pence kicks off his presidential campaign in Iowa, with the former VP saying "different times call for different leadership." Pence is offering himself as the only traditional conservative who can win the nomination, defeat Biden and govern with more civility than Donald Trump. "Our party and our country need a leader that’ll appeal, as Lincoln said, to the better angels of our nature," he said. BBG    Wells Fargo will sell an office building in San Francisco for $42.6-46MM, a steep discount to the $108MM paid for the property back in 2005. Real Deal Reddit is cutting about 90 people, or 5% of its staff, and plans to slow hiring going forward, becoming the latest tech firm to reduce headcount. WSJ AI: Equity investors are vigorously debating the influence generative artificial intelligence (AI) may have on the future revenue growth and profitability of companies, and the valuation of stocks. We believe further upside exists to the S&P 500 index level if investors price some potential productivity and profit boost from AI adoption. Based on a range of productivity scenarios, we estimate the benefit to S&P 500 fair value could be as small as +5% vs. current levels and as large as +14%. Read Ryan Hammond and team’s full report here. A more detailed look at global markets courtesy of Newsquawk APAC stocks mostly gained following the positive handover from Wall St where the S&P 500 posted its highest close YTD and the Russell 2000 rallied amid strength in regional banks, although advances were capped as the attention in Asia turned to softer-than-expected Chinese trade data. ASX 200 was just about kept afloat but with the upside limited by the weaker-than-expected Australian GDP and hawkish adjustments to peak rate forecasts. Nikkei 225 wiped out its initial gains in an early 700-point swing and briefly dipped beneath the 32,000 level where it found some support. Hang Seng and Shanghai Comp. were positive after reports that China asked the largest banks to cut deposit rates to boost the economy and with Hong Kong led by tech strength, while price action was less decisive in the mainland after the latest Chinese trade data mostly disappointed including the wider-than-expected contraction in dollar-denominated exports. Top Asian News China Stocks Woes Hamper Hong Kong IPO Recovery: ECM Watch Blinken Plans Trip to Beijing in Bid to Stabilize US-China Ties China Traders Are Leveraging Up The Most on Record on Flush Cash Pakistan Bonds, Stocks Rise on Growing Optimism for IMF Loan China’s Steel Slowdown Pushes Exports to Highest Since 2016 Air India Sends Relief Jet to Russia for Stranded Passengers European bourses are softer, Euro Stoxx 50 -0.3%, with the complex drifting after the cash open amid a relative lack of fresh catalysts/drivers. Though, attention remains on the soft Chinese trade figures and German industrial output, on the latter ING writes that unless there is a significant pickup Germany could continue into a Q2 recession. Sectors are similarly softer though Retail names outperform amid strength in Inditex post earnings while Danske Bank is the Stoxx 600 outperformer after providing FY26 targets and a dividend update. Stateside, futures are slightly softer in-fitting with the above in similarly limited trade with the region entirely focused on next week's CPI/FOMC; though, today's BoC might provide an interim focal point, ES -0.1%. US lawmakers are reportedly attempting to curb Mastercard (MA) and Visa (V) fees, via WSJ. Top European news ECB's Schnabel says, on rates, "We have more ground to cover. It will depend on the incoming data by how much more rates will have to increase.". When questioned on market expectations for two 25bp hikes: "A peak in underlying inflation would not be sufficient to declare victory: we need to see convincing evidence that inflation returns to our 2% target in a sustained and timely manner. We are not at that point yet." ECB's de Guindos says "To complete the crisis management toolkit for large banks in the EU, we also need to make progress in other areas, such as liquidity in resolution and a backstop to the Single Resolution Fund.". ECB's Knot says prolonged monetary tightening could still result in stress for financial markets, inflation expectations in financial markets seem optimistic, not convinced that current tightening is sufficient. UK PM Sunak seeks to forge an economic alliance with US President Biden and aims to extract concessions from the US on green technologies, according to FT. FX DXY drifts on the 104.000 handle in the absence of primary US data and Fed commentary during pre-FOMC purdah. Yen relishes softer Treasury yields as USD/JPY retreats further from recent peaks towards 139.00 and decent option expiries. Yuan continues to wilt as weak Chinese trade/export metrics compound growth concerns, USD/CNY and USD/CNH top 7.1300 and 7.1400 respectively. Aussie underpinned near 0.6700 vs Greenback as RBA officials underline hawkish guidance, but AUD/USD is capped by tech resistance and hefty expiry interest. Loonie perky pre-BoC around 1.3400 handle against Buck as market pricing sits tight between pause and 25 bp hike. TRY depreciation is a strong signal of a move away from state controls in favour of a free market and declines in the CBRT's reserves have stopped after signs of FX policy change, according to traders cited by Reuters. PBoC set USD/CNY mid-point at 7.1196 vs exp. 7.1194 (prev. 7.1075) Fixed Income Bonds regroup after reversal from highs through or towards prior closing levels. Bunds, Gilts and T-notes back above parity within 134.67-07, 96.87-51 and 114-02+/113-26 respective ranges awaiting US and Canadian trade data pre-BoC. Demand for German Green Bobl exceptionally strong (record high), while 2025 UK Gilt sale reasonably well covered. Orders for the new 4yr BTP Valore retail bond reach EUR 11bln since the beginning of the offer period. Commodities Crude benchmarks are firmer and back towards post-inventory levels as the USD dips and despite overnight trade data. Currently, WTI Jul'23 and Brent Aug'23 post upside of around USD 0.50/bbl; newsflow has been limited and focused on geopols and while IEA's Birol spoke he added little aside from looking for a tight H2. US Energy Inventory Data (bbls): Crude -1.7mln (exp. +1.0mln), Gasoline +2.4mln (exp. +0.9mln), Distillate +4.5mln (exp. +1.3mln), Cushing +1.5mln. Base metals are modestly firmer and largely shrugged off Chinese trade as the import metrics seemingly indicate the overall reopening-recovery narrative remains in play. Spot gold is little changed as the USD pulls back to near-U/C with the yellow metal holding above the USD 1956/oz 10-DMA but unable to make much headway from session high circa. USD 10/oz above. Discussions on the Black Sea grain deal to occur in Geneva on Friday, via Ria citing sources. Indian Steel Minster says they are looking aggressively to diversify coking coal imports, requirement for this product is going to increase. Crypto Binance commented on the US SEC filing a motion to freeze assets in which it stated that user assets remain safe and its platform continues normal deposit and withdrawal operations, while it added that the filing of the preliminary injunction is unwarranted and it looks forward to defending against it in court, according to Reuters. Coinbase (COIN) says the incident with delayed ETH transactions has been resolved. Geopolitics US Secretary of State Blinken and Saudi Crown Prince MBS had an open and candid discussion covering a full range of bilateral issues, while there was a good degree of convergence in the meeting but also differences. Furthermore, they discussed the potential for normalisation of relations between Saudi Arabia and Israel, as well as agreed to continue dialogue on normalisation, while Blinken raised human rights issues with MBS both generally and related to specific cases, according to a US official. US Secretary of State Blinken is set to travel to China for talks in the coming weeks in a visit intended to be a major step in thawing relations between the two countries, according to Reuters citing a US official. EU nations are approaching a deal on the 11th sanctions package against Russia. Representatives in Brussels are aiming to get the package over the line at their meeting today. EU diplomats suggest that several questions are still open, according to Politico. Number of IAEA inspectors at the Zaporizhzhia nuclear plant to increase several times, via Tass citing Russia's Rosenergoatom. US Event calendar 07:00: June MBA Mortgage Applications, prior -3.7% 08:30: Revisions: US Trade in Goods and Services 08:30: April Trade Balance, est. -$75.8b, prior -$64.2b 15:00: April Consumer Credit, est. $22b, prior $26.5b DB's Jim Reid concludes the overnight wrap Today is the day where I see whether I need to start the training clock for the 2036 Olympics as my daughter Maisie has her first ever swimming gala. It's only against a couple of schools so if she wins her race the dream is still on and if she doesn't I'll conclude that unless we have all the global medalists for 2036 in the same 5 mile catchment area in Surrey then it's probably not going to happen. Last week she swam 6 times!! If anyone can explain how you can have any kind of life with a full time job and 3 kids with various sporting commitments and parties then I'd love to know. I didn't see my wife in the evenings last week or last weekend with all the ferrying. All answers gratefully received. Markets are generally swimming slightly against the tide this week, with the S&P 500 (+0.22%) still not quite able to break out into bull market territory that it crossed intra-day on Monday. Having said that the index did just about close at a high for 2023 so the momentum is still there to some degree. In a week of limited data and a Fed blackout there have been a few stories swirling around in the background that have dampened sentiment without reversing it. That has included geopolitical risks, weak data releases, as well as growing scepticism that the Fed would end up cutting rates this year. In fact, by the close yesterday, the 2s10s curve had inverted to a post-SVB low of -82.3bps, which just demonstrates how various recessionary indicators are still flashing with growing alarm. The newsflow was pretty subdued from the outset yesterday, and shortly after we went to press German factory orders unexpectedly contracted by -0.4% in April (vs. +2.8% expected). This echoed the signals in the latest manufacturing PMI for May, which hit a 3-year low of 43.2, as well as the data revisions a couple of weeks ago that Germany did experience a winter recession after all. That weak data interacted with further geopolitical concerns, particularly after the Kakhovka dam in Ukraine was destroyed, which has led to serious flooding in southern Ukraine. A key concern is with regard to the Zaporizhzhia nuclear plant, which relies on water supplies to cool its reactors, but experts didn’t consider a nuclear incident likely. From a market perspective, the bigger concern could well be the impact on agricultural prices and hence inflation, with wheat prices (+0.52%) recording a 5th consecutive daily increase, although having pared back earlier gains when it had been up as much as +3.85%. As it happens, we flagged in our World Outlook on Monday (link here) that a widely-predicted El Nino event this year was a risk to the trend of declining food prices over recent months, so events like that and the Ukraine flooding could provide an additional inflationary impulse as growth slows. You could add in bubbling concerns about low water levels at the lake that feeds the Panama Canal to that list of supply side concerns. The Panama Canal Authority is predicting a record low water level for the end of July with weight limits and rising surcharges already in force. So one to watch in the weeks ahead. On the theme of geopolitics/supply chains, this morning Marion Laboure and Cassidy Ainsworth-Grace on my team have published an update on the landscape for semiconductors and rare earth metals (link here). It’s a topical story, since yesterday saw Japan announce a revised chips strategy that has the goal of tripling sales of Japanese-produced semiconductors by 2030. And that follows China’s announcement in late-May that Micron’s products had failed its cybersecurity review, saying that it posed “relatively serious” cybersecurity risks. It also comes amidst a growing push towards more resilient supply chains, which was one of the themes at last month’s summit of G7 leaders. Back to markets and risk assets were fairly steady on the whole, and the S&P 500 (+0.22%) posted only a very modest gain. Banks (+1.84%) were the main outperformer in the index, whilst the megacap tech stocks continued to strengthen, with the FANG+ Index (+0.56%) taking its YTD gains up to +67.53% by the close. With equities grinding higher, equity volatility hit a new local low as the VIX index closed under 14.0pts (13.96) for the first time since February 2020. Small cap stocks strongly outperformed with the Russell 2000 index +2.73% higher, which was its second best day since November with the only better day being last Friday. European equities also recovered from their Monday losses, with the STOXX 600 up +0.38%. When it came to sovereign bonds, there was a mixed performance on either side of the Atlantic. US Treasuries were flat, with the 10yr yield unchanged at 3.683%. That comes with just a week to go until the Fed’s next decision, where markets are still pricing in a temporary pause as the most likely outcome, which would be a big milestone after a run of 10 consecutive rate hikes. But it was a different story in Europe, where yields on 10yr bunds (-3.0bps) and OATs (-0.6bps) both moved lower. In part, they were supported by the ECB’s latest Consumer Expectations Survey for April, which showed that median 1yr inflation expectations were down to 4.1%, which is their lowest since February 2022 when Russia’s invasion of Ukraine began. Asian equity markets are mixed this morning after erasing their opening gains after China’s May trade data disappointed (more on this below). As I check my screens, the rally in Japanese stocks has paused for breath after recently hitting 30yr plus highs with the Nikkei sliding -1.44% and leading losses across the region. Mainland Chinese markets are also struggling with the CSI (-0.34%) trading in the red and the Shanghai Composite (+0.02%) surrendering its opening gains. Elsewhere, the Hang Seng (+0.94%) is moving higher with the KOSPI (+0.32%) also seeing a positive start after coming back from a public holiday. In overnight trading, US stock futures tied to the S&P 500 (+0.01%) are flat. Coming back China, the data showed that exports (-7.5% y/y) fell in May for the first time since February, much faster than the market expected drop of -1.8%, after a gain of +8.5% in the preceding month. Meanwhile, imports declined at a slower pace, dropping -4.5% y/y in May (v/s -8.0% expected; -7.9% in April). The call for fresh stimulus is mounting. Elsewhere in Australia, Q1 GDP expanded +2.3% y/y, slightly below market expected growth of +2.4% and against a downwardly revised expansion of +2.6% in the final quarter of 2022. On a q-o-q basis, GDP grew by just +0.2% in the March quarter, the smallest increase since the nation emerged from the Covid lockdown in September 2021 and compared with a rise of +0.3% expected before today's announcement. Staying with growth, the World Bank released their latest global outlook yesterday, which pointed to growth of +2.1% in 2023, up by four-tenths relative to their January forecast. However, they revised down their 2024 forecast by three-tenths to 2.4%. Looking out to 2025, they then see growth accelerating back up to +3.0%. Otherwise, Euro Area retail sales were unchanged in April (vs. +0.2% expected), although the previous month’s contraction was revised up to show a smaller -0.4% decline. To the day ahead now, and data releases include German industrial production and Italian retail sales for April, along with the US trade balance for April. Otherwise, the Bank of Canada will be making its latest policy decision, and we’ll hear from ECB Vice President de Guindos, and the ECB’s Knot, Panetta and Vujcic. Lastly, the OECD will be releasing its latest Economic Outlook, and UK PM Sunak will be visiting US President Biden in Washington. Tyler Durden Wed, 06/07/2023 - 08:11.....»»

Lululemon Athletica Inc. (NASDAQ:LULU) Q1 2023 Earnings Call Transcript June 1, 2023 Lululemon Athletica Inc. beats earnings expectations. Reported EPS is $2.28, expectations were $1.97. Operator: Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica Inc. First Quarter 2023 Conference Call. As a reminder, all participants are in listen-only […] Lululemon Athletica Inc. (NASDAQ:LULU) Q1 2023 Earnings Call Transcript June 1, 2023 Lululemon Athletica Inc. beats earnings expectations. Reported EPS is $2.28, expectations were $1.97. Operator: Thank you for standing by. This is the conference operator. Welcome to the Lululemon Athletica Inc. First Quarter 2023 Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there’ll be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Howard Tubin, Vice President, Investor Relations for Lululemon Athletica. Please go ahead. Howard Tubin: Thank you and good afternoon. Welcome to Lululemon’s first quarter earnings conference call. Joining me today to talk about our results are Calvin McDonald, CEO; and Meghan Frank, CFO. Before we get started, I’d like to take this opportunity to remind you that our remarks today will include forward-looking statements reflecting management’s current forecast of certain aspects of Lululemon’s future. These statements are based on current information which we have assessed, but by which it’s nature is dynamic and subject to rapid and even abrupt changes. Actual results may differ materially from those contained in or implied by these forward-looking statements due to risks and uncertainties associated with our business, including those we have disclosed in our most recent filings with the SEC, including our Annual Report on Form 10-K and our quarterly reports on Form 10-Q. Any forward-looking statements that we make on this call are based on assumptions as of today and we expressly disclaim any obligation or undertaking to update or revise any of these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures, a reconciliation of GAAP to non-GAAP measures is included in our quarterly report on Form 10-Q and in today’s earnings press release. In addition, the comparable sales metrics given on today’s call are on a constant dollar basis. The press release and accompanying quarterly report on Form 10-Q are available under the Investors section of our website at www.lululemon .com. Before we begin the call, I’d like to remind our investors to visit our investor site, where you’ll find a summary of our key financial and operating statistics for the quarter, as well as our quarterly infographic. Today’s call is scheduled for one hour, so please limit yourself to one question at a time to give others the opportunity to have their questions addressed. And now I’d like to turn the call over to Calvin. Calvin McDonald: Thank you, Howard and welcome everyone to our call today. I’m happy to be here to discuss quarter one and share with you our strong start to 2023, which shows the continued momentum in the business. As you’ve read in our press release, we delivered top and bottom-line results that exceeded our guidance. We continue to engage with guests across the globe and drive our business with new and innovative technical products. On today’s call, I’ll provide updates on our quarter one performance, our community-based model, which is powered by our new membership program. I’ll also share highlights on our product performance, as well as our international business, and then I’ll turn it over to Meghan for a review of our financials and the guidance update. Then we’ll take your questions. So lots to share, let’s get started. In quarter one as I mentioned, the business delivered strength across both the top and bottom line. Revenue increased 24% versus last year, balanced across category, channel, and region. Women’s was up 22%, men’s was up 17% and accessories was up 67%. Comparable sales grew 16% in stores and 18% in our e-commerce business, and by region, North-America grew 17% and international increased 60%. Within international, we saw a meaningful acceleration in the Greater China business with revenue increasing 79%. EPS was strong as well, increasing 54% versus last year to $2.28. This strength was driven by revenue, gross margin, and SG&A, all coming in better than our guidance. So a great start to the year, fueled by our product and people. For today, I’d like to devote some time to talk about our community-based model. Not only does our approach allows us to connect uniquely and authentically with our guests, it also drives incrementality of spend and increases LTV as guests engage more with our brand. We are celebrating our 25th anniversary this year and community has been at the core of our brand since day-one. Within North-America, eight months ago, we embarked on an expansion of our model with our essentials membership program. Through this free-to-join program, we gain deeper knowledge on how our guests like to sweat and what aspects of our brand are most meaningful to them. We can leverage the data and insights to help develop future activations and invite them to the events that are most relevant to them and inform our product pipeline with opportunities around unmet needs. Our stores are an integral part of this ecosystem, as they provide connection points within local communities across the world and serve many purposes, including allowing our guests to interact with our educators, to learn about our products, the technical innovations that can be found within our assortment and the unmet needs they solve. Secondly, our stores act as hubs for our local ambassadors and fitness studios. Guests looking for new ways to sweat in their neighborhood, need only enter the local Lululemon store where our educators will point them to the best studios in town. Thirdly, our stores are the focal point for local events that range from hosting run clubs and other sweat sessions, to parties and community celebrations. And finally, our stores provide support for some of our larger-scale activations, such as our 10K runs, product launches including footwear, and our Lululemon Studio launch last fall. In quarter one we saw a meaningful increase in the number of community events, compared to the same period last year. And this brings us back to the pre-pandemic levels. Key celebrations in the quarter included our Align campus hall pass event to increase awareness of our new Align styles with our younger guests and exclusively for essential members, we ran six events across three cities in Houston, Chicago and Boston, which were a great success and hugely oversubscribed. Most recently, May has been a big month for activations. We went live with our new Lululemon Studio digital app earlier this week. The app, which will help us broaden our TAM, offers guests in the U.S. access to our industry leading content for only $12.99 per month, without needing to purchase hardware. We announced our further initiative. Further, we will demonstrate how far women can go when they’re supported with resources and product innovations typically reserved for men. This initiative will include a scientific research program, which takes a holistic approach to addressing the existing Sachs and Gender data gap in Endurance performance, new women’s first product innovations, community activations, and a give back component to support young women. In addition, the program will culminate in a multi-day women’s only ultra marathon starting on the International Women’s Day 2024. At its core, this initiative supports Lululemon’s commitment to innovation, solving for unmet needs, and driving brand awareness. In addition, we tapped into dupe culture with our Align Legging Dupe Swap event in L.A. Our team set up a two-day pop-up at the Century City Mall and ask guests to trade in their dupe leggings for a pair of our iconic Align Leggings. For us, the primary purpose of this event was new guest acquisition and increasing brand awareness for being the original in leggings. Overall, it was a resounding success. It generated more than 1 billion earned media impressions and was covered by national and international media outlets in addition to creating viral social media buzz. About 50% of the guests who traded in dupes are new to our brand. Approximately half of the guests who attended, some of whom started waiting in lines as early as 3 a.m., were under 30 years old. And while I won’t get into specifics, the leggings that guests traded in ran the gamut in terms of brands and price points. We view our community model as one of our biggest competitive advantages. With connection points across both the physical and digital, our ecosystem powered by membership supports our leadership position in developing and cultivating omni guest relationships. We engage with guests in ways that are more than just transactional by creating deeper connections and more holistic relationships. This in turn builds our brand awareness, drives purchases and contributes to our strong financial performance. Let’s shift now to our product innovation. Guests responded well to our spring merchandise assortment as we continue to bring compelling innovation across our core and play activities in footwear. In women’s, we saw continued strength in many of our key franchises, including SCBA, DEFINE and Align. When looking specifically at women’s bottoms, we saw growth of 22%. While women’s bottoms is our most mature category, our teams continue to update and enhance existing styles, bring innovation via new fabric technologies and create new styles and silhouettes that solve for unmet needs. In quarter one, our strength in women’s bottoms was driven by our iconic Dance Studio pants, which has always been a guest favorite and is currently experiencing a resurgence in popularity; the newest additions to our Align franchise, including the Mini Flare and Wide Leg; and are incredibly soft and smooth upstream bottoms. In men’s, guests continue to respond well to our iconic ABC, Commission and Pacebreaker franchises. In accessories, I’m thrilled with the strength we continue to see across our assortment. While it is the smallest of our three major merchandise categories, it is a growing piece of our business that we fuel with innovation, just as we do across women’s and men’s. In quarter one, guests responded well to our collection of bags, backpacks and duffles. And we continue to bring newness and innovation into our footwear assortment. In quarter one, we launched an updated and enhanced version of the Blissfeel running shoe. And just last week, we launched the Blissfeel Trail. This shoe was our first road-to-trail running shoe designed to offer traction and durability for guests who love to run on the trails and off the road. Our Be Planted initiatives are also driving product innovation in support of our 2030 goal to make 100% of our products with sustainable materials and end-of-use solutions. For Earth Day in April, we debuted our first capsule collection made with plant-based nylon in collaboration with Geno, a leader in the sustainable material space. More recently, we announced a new partnership with Australian and viral tech start-up, Samsara Echo, to scale circularity through textile-to-textile recycling, which is a very cool technology. Together with Samsara, we’re working towards recycling our apparel back into new products, bringing us one step closer to our end-to-end vision of circularity. This partnership, along with our other Be Planted initiatives, including Like New and our collaboration with Geno, is the latest example of how we are taking a leadership position in our sector and driving toward a circular ecosystem by 2030. Turning now to our product pipeline. Let’s take a look at quarter two. We’re continuing to build out our golf and tennis collections with versatile styles that can be worn both on and off the course and court. The second installment of our Get Into It campaign launched two weeks ago and featured both technical shorts and new on-the-move styles for both him and her. And for men, we’ll be expanding our offering of train tops with new styles using our Dry Sense fabric technology. These are just a few examples of how we continue to bring innovation into all areas of our assortment, solve for the unmet needs of our guests, increase wallet share and grow our brand awareness. Before I turn it over to Meghan to discuss our financials, I’ll take a moment to share some geographical highlights with you. As you know, one of the three key pillars of our Power of Three x2 plan is international. We have a target to quadruple our business outside North America between 2021 and 2026. This will be driven predominantly by our existing markets, but we’ll be entering some exciting new markets as well. In 2022, international represented only 16% of our revenue, and I remain optimistic about our runway of global growth. As I stated earlier, our business remained strong in North America and across our international regions. In quarter one, revenue in North America increased 17%, while we saw a 60% growth in international. In Greater China, we experienced a significant sequential acceleration in the business relative to quarter four as the effects of COVID-19 subsided. In total, revenue in Greater China increased 79% in quarter one, ahead of our expectations and just one more sign of the potential within this market. I had a chance to visit Shanghai in mid-April for the first time in three years, and it was great to see how much our brand has grown in the city. We walked through the neighborhoods we serve, visited our new stores, and I was impressed by the incredible brand experiences we are bringing to the local community. In addition, spending time with our educators as they engage with guests and bring our culture to life is always one of my favorite parts of being in market. In EMEA, we’re off to a great start in Spain, a market that we entered last fall. And with the help of a franchise partner, we recently opened our first store in Tel Aviv with Israel becoming the 24th market globally for Lululemon. We know that the Israeli guest has been engaging with our brand while traveling to other regions, and now we’ll be able to bring our product innovation and community and guest experiences directly to them in their home market. In APAC, business remains robust as well. And in the coming months, I’m pleased that we will enter Thailand with our first store in Bangkok. Our approach to increasing brand awareness and growing revenue internationally is rooted in the same tenets as what has fueled our success in North America. This includes our multichannel direct-to-consumer model, our community-based approach to brand building, our innovative product assortment and the deep and direct connections we have with our guests. I’m excited for what the future holds for our global business as we continue to execute the Power of Three x2 growth plan. And with that, I’ll now turn it over to Meghan. Meghan Frank: Thanks, Calvin. I’m happy to be here today to discuss our recent financial performance and provide you with our outlook for Q2 and our updated guidance for the year. In Q1, sales, gross margin, SG&A, EPS and inventory all came in better than our guidance. Guests responded well to our spring merchandise assortment, we saw sales trends accelerate in Greater China, and we connected with our guests via multiple activations throughout the quarter. 2023 is off to a strong start. And based on our guidance, we continue to see solid momentum in Q2. Let me now share the details of our Q1 performance. Total net revenue rose 24% to $2 billion driven by continued strong execution across all parts of the business. Comparable sales increased 17%. In our store channel, comparable store sales increased 16%. We ended the quarter with a total of 662 stores across the globe. Square footage increased 22% versus last year driven by the addition of 83 net new Lululemon stores since Q1 of 2022. During the quarter, we opened seven net new stores and completed three optimizations. In our digital channel, comps increased 18% and contributed $835 million of top line or nearly 42% of total revenue. Within North America, revenue increased 17% versus last year. And within international, we saw a 60% increase versus last year with Greater China increasing 79%. And by category, women’s revenue increased 22% versus last year, men’s increased 17%, and accessories grew 67%. It’s also great to see ongoing strength in traffic across both channels. In both stores and digital channels, traffic increased approximately 30%. This speaks to the strength of our omni operating model as we engage with our guests in ways most convenient to them. Gross profit for the first quarter was $1.15 billion or 57.5% of net revenue, compared to 53.9% of net revenue in Q1 2022. The gross profit rate in Q1 increased 360 basis points versus last year and was driven primarily by the following: a 430 basis point increase in product margin, resulting predominantly from lower airfreight as well as regional mix. Markdowns were in line with last year. Occupancy and depreciation leveraged 10 basis points in the quarter. These improvements were partially offset by a 30 basis point increase in product and supply chain costs driven by ongoing investment in product development and supply chain. In addition, FX deleveraged by 50 basis points, which was predominantly offset by a 40 basis point FX benefit within SG&A. Moving to SG&A. Our approach continues to be grounded in prudently managing our expenses while also continuing to strategically invest in our long-term growth opportunities. SG&A expenses were approximately $748 million or 37.4% of net revenue compared to 37.7% of net revenue for the same period last year. SG&A came in better-than-expected due to leverage on higher-than-planned sales and, to a lesser extent, a shift in timing of certain investments. Operating income for the quarter was $401 million or 20.1% of net revenue compared to 16.1% of net revenue in Q1 2022. Tax expense for the quarter was $119 million or 29.1% of pretax earnings compared to an adjusted effective tax rate of 27% a year ago. The increase relative to last year is due primarily to accruing for withholding tax on our unremitted earnings in Canada and a decrease in tax deductions related to stock-based compensation. Net income for the quarter increased 54% to $290 million or $2.28 per diluted share compared to $1.48 for the first quarter of 2022. Capital expenditures were $137 million for the quarter compared to $111 million in the first quarter last year. The increase relates primarily to store capital for new locations, relocations and renovations and also technology and supply chain investments. Turning now to our balance sheet highlights. We ended the quarter with $951 million in cash and cash equivalents and nearly $400 million of available capacity under our revolving credit facility. Inventory grew 24%, in line with sales growth and was $1.58 billion at the end of Q1. We remain comfortable with our inventories, and we’re well positioned to continue to fulfill guest demand. At the end of Q2, we expect inventory growth of approximately 20%. And we continue to expect inventory growth to be relatively in line with sales growth in the second half of 2023. We repurchased approximately 300,000 shares at an average price of $336. At the end of Q1, we had $646 million remaining on our $1 billion repurchase program. Let me shift now to our guidance outlook. We continue to be mindful of the uncertainties in the macro environment, and as a result, we remain prudent as it relates to planning the business. That being said, we’re pleased with the strength we experienced across the business in Q1 and also the start we’ve seen to Q2. The strength affords us the opportunity to invest in our strategic growth pillars while also delivering on our financial commitments we’ve laid out in our Power of Three x2 growth plan. Let me begin with Q2. We expect revenue in the range of $2.14 billion to $2.17 billion, representing growth of 15% to 16%. We expect to open 9 net new company-operated stores in Q2. We expect gross margin in Q2 to increase 200 to 220 basis points relative to Q2 of 2022. This will be driven by lower airfreight expense, offset somewhat by strategic investments to support future growth, including supply chain, distribution centers and product teams as well as modest deleverage on occupancy and depreciation. In Q2, we expect our SG&A rate to deleverage by 190 to 210 basis points relative to Q2 of 2022. While a portion of this deleverage relates to the timing shift of certain investments, it also reflects our strategic decision to invest more in initiatives to grow brand awareness relative to our initial expectations. These initiatives include top-of-funnel brand building and community activations. When looking at operating margin for Q2, we expect approximately 10 basis points of expansion, inclusive of our decision to increase investment into certain of our strategic initiatives. Turning to EPS. We expect earnings per share in the second quarter to be in the range of $2.47 to $2.52 versus adjusted EPS of $2.20 a year ago. Shifting now to the full year 2023. We now expect revenue to be in the range of $9.44 billion to $9.51 billion. This range represents growth of 16% to 17% relative to 2022 and is better than our Power of Three x2 growth plan. We expect to open approximately 50 net new company-operated stores in 2023 and complete approximately 25 co-located remodels. This will contribute to overall square footage growth in the low teens. Our new store openings in 2023 will include 30 stores to 35 stores in our international markets with the majority of these being planned for China. For the full-year, we now forecast gross margin to increase between 180 to 200 basis points versus 2022. The expansion relative to last year is driven predominantly by lower airfreight expense. For the full-year, we now expect airfreight to be down approximately 190 basis points versus 2022. When looking at markdowns for the full-year, we continue to expect them to be relatively in line with last year in 2019. Turning to SG&A for the full year. We now forecast deleverage of 150 to 170 basis points versus 2022. While we continue to plan the business prudently, our sales trend has been strong. As I mentioned earlier, this gives us the opportunity to invest behind our Power of Three x2 growth pillars while also delivering operating margin this year ahead of our goal for modest expansion annually. When looking at operating margin for the full year of 2023, we now expect it to increase by 30 to 50 basis points versus last year. For the full year 2023, we expect our effective tax rate to be approximately 30%, an increase over the 2022 adjusted effective tax rate of 28.1%. This is in line with our longer-term tax rate expectations we provided as part of our Power of Three x2 plan and reflects the increase we expect as a result of accruing for Canadian withholding taxes. For Q2, we expect our effective tax rate to be approximately 30%. For the fiscal year 2023, we now expect diluted earnings per share in the range of $11.74 to $11.94 versus adjusted EPS of $10.07 in 2022. Our EPS guidance excludes the impact of any future share repurchases. We continue to expect capital expenditures to be approximately $660 million to $680 million for 2023. The increase versus 2022 reflects investments to support business growth, including a continuation of our multiyear distribution center project, store capital for new locations, relocations and renovations and technology investments. A range of $660 million to $680 million is approximately 7% of revenue, in line with our current Power of Three x2 target of 7% to 9%. With that, I’ll turn the call back over to Calvin. Calvin McDonald: Thank you, Meghan. Across Lululemon, we are excited about the opportunity ahead of us. We continue to monitor the environment around us, but 2023 is off to a strong start, and we’re pleased with our trends as we’ve entered quarter two. Given the strength of our product pipeline, our unique approach to building communities, our international growth prospects and our initiatives to grow brand awareness, I’m optimistic that we will continue to deliver on the goal set forth in our Power of Three x2 growth plan. And in closing, I want to express my deep gratitude to the leaders and teams across Lululemon who continue to deliver these results and bring our culture to life. I look forward to taking your questions now. Operator? Q&A Session Follow Lululemon Athletica Inc. (NASDAQ:LULU) Follow Lululemon Athletica Inc. (NASDAQ:LULU) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Rick Patel with Raymond James. Please go ahead. Rick Patel: Thank you and good morning, everyone. Good afternoon, rather. Can you dig a little deeper into the sources of the revenue beat versus your expectations? And as you look ahead, which categories and geographies do you have the most confidence in as we think about the rest of the year? Calvin McDonald: Great. Thanks, Rick. I’ll talk about the drivers overall of our business and then chat quickly on how I see sort of the different regions continue to perform the rest of the year. At a high level, our business model is uniquely different versus our peers with some key competitive advantages, which begin with our D2C omni operating model. Second is clearly our product driven by our innovation platform of Science of Feel. And then within that, our product assortment is supported with a large portion which is nonseasonal; the versatility and multiple wear occasions, which cross both sweat and social; as well as the frequency of our new innovative drops that guests wait for and have come accustomed to; and finally, the community connection that we drive through a lot of our initiatives and then recently, the launch of our Essential memberships program and Lululemon Studio. And if we zoom out the drivers of our business pre, during and post the pandemic are still very relevant today, and that is the importance of product versatility as it relates to apparel; guests living an active and healthy lifestyle; convenience expected by our guests, which really speaks to our strength in an omni operating model that we’ve been investing in for many years; and then finally, focus on both physical, mental and social well-being all supporting the brand positioning. And those continue to be the drivers that separate us from others and fuel our performance. And when I look at regional performance, as we’ve shared, strong growth in North America, internationally with international, all at double-digit growth. And I expect that to continue as we see balanced growth in every market across gender, category and activity. And with the product pipeline, I don’t see that changing. So I think still balanced and very healthy growth ahead. Rick Patel: Thank you, Calvin. Operator: The next question comes from Adrienne Yih with Barclays. Please go ahead. Adrienne Yih: Great, thank you. Congratulations on a great start to the year. Calvin, I wanted to talk about sort of kind of entry-level pricing strategy as you enter new markets, China, Spain. How do you price into those markets at the onset? And then how do you think about building price on a long-term basis, being able to raise those in those markets over time? And then Meghan, if you could just talk to us about kind of the relative segment margin, how we should think about the relativity between North America, APAC/China, I guess, would be the primary driver there, and EMEA. Thank you very much. Calvin McDonald: Thanks, Adrienne. On pricing, we enter markets with our similar premium positioning of the brand with the intent to sell at full price with markdowns being used only as a means to exit through seasonal shifts in product and not leverage promotional discounting in order to fuel and create demand. We go in with the intent of having parity — a close range of parity around markets. And then we make adjustments either because of cost of operating within the market, it could be import taxes or other elements. And there may be a slight shift as a result of local competition and strategically. But a tight band and always with the intent of selling full price with moderate discounting, leveraging markdowns as a typical course to exit. So a very similar policy in positioning of supporting full price. Meghan Frank: Great. And Adrienne, in terms of regional profitability, we saw meaningful expansion in our operating margin for the quarter relative to last year and would have experienced that across both our channels and our regions. And then in terms of how we think about the relative margin rates by region, North America is our most profitable, followed by APAC, China within that is the highest, and then EMEA. Adrienne Yih: Great. Thank you very much. Congrats again. Meghan Frank: Thanks. Operator: The next question comes from Mark Altschwager with Baird. Please go ahead. Mark Altschwager: Thank you for taking my question. Really nice acceleration in the international business. I guess, as we think about the revenue guidance for the year, obviously, you raised overall today, but just curious if there have been any changes to your thinking relative to three months ago in terms of the contribution from North America versus international over the remaining quarters? And then kind of just drilling down in China, you’ve had some unique activation events over the past few months. I’m curious your learnings there. And any data or anecdotes you have on how the brand is being perceived in some of the newer markets you’ve entered? Any differences in what the product mix looks like in core versus fast trend or sweat versus on-the-move in some of these newer markets and newer consumers? Meghan Frank: Thanks, Mark. So in terms of top line for the balance of the year, we’re obviously coming off of a very strong quarter, which exceeded our expectations at 24% growth. We did guide to 15% to 16% for Q2 and then 16% to 17% for the full-year, so both above our Power of Three x2 targets. So feeling well positioned for the balance of the year. We’re not breaking out the regional performance, but still see meaningful opportunity across both our North America and international regions, obviously, international being a bit outsized, as Calvin mentioned, given the strength we continue to experience and see, particularly in our China region. Calvin McDonald: I’ll — on China and the activations that you referenced, as you know, our go-to-market strategy is about building community relationships in connection locally, either through ambassadors and then into and with our guests. And that strategy is working incredibly well in China. We’ve done a number of activations both at the local level, store level as well as larger events. We have a few planned for this summer and into the fall. And those are driving the brand awareness, which I think I’ve shared with everyone before is in the single digit. So we have a huge opportunity to keep building brand awareness and consideration. As we enter new markets, that is one way as well that we are driving brand awareness and consideration. We have good success in our Tier 1 cities and ability to keep building stores as well as in Tier 2. And in each of those cases, stores are performing — all stores are performing ahead of plan. So we’re very pleased with the way the brand is being received, built upon that community model and driving momentum in all new markets that we enter. We now have 101 stores with plans to continue to open this year and then into next moving forward. When I look at the overall mix, I’d say our men’s and women’s business is almost similar to that of North America, which is good considering the age of the brand there. So it’s becoming quicker, earlier, the North America dual-gender brand. And we’re pleased with the balance between both OTM and sweat. The brand is still rooted as a performance premium brand, and it’s playing to our strength of versatility and wear occasions across lounge and social that we’re seeing in that market. So very pleased with how product is being received and the momentum, and it really is built upon community activations as you alluded to. Mark Altschwager: Thank you. Operator: The next question comes from Lorraine Hutchinson with Bank of America. Please go ahead. Lorraine Hutchinson: Thank you. Good afternoon. Meghan, can you talk about some of the investments that you’re pulling forward? What do they pertain to? And then maybe just a little bit more detail on plans to increase brand awareness in China outside of just opening stores. Thank you. Meghan Frank: Great. Thanks, Lorraine. So in terms of SG&A investments, we’re obviously experiencing strong top line, and we’ve seen some recovery in our airfreight expense for the balance of the year. So we see an opportunity to push into investments into our road map behind our Power of Three x2 growth pillars. So specifically, those would be in market expansion in our international regions, enhancing, I would say, guest experience, omni capabilities, as well as digital and guest support and then important foundational investments across the business. And these would also include brand awareness opportunities where we continue to push in there for the balance of the year and then also higher depreciation on current and prior year investments in terms of capital expenditure. And then can you remind me the second part of your question, Lorraine? Lorraine Hutchinson: The plans to build brand awareness in China. Calvin McDonald: I’ll take that, Lorraine. So in addition to the stores, as you mentioned, which are one of our top vehicles to do and achieve brand awareness and consideration, we also activate a number of campaigns and do so locally. So they may take a global campaign and then activate it locally, build upon it. That’s the example of the Get Into It campaign that we did globally, which was all around our women’s leggings initiative. They also will create a market-specific activation campaign, which we’re in right now called Worn By Us, which is a fantastic campaign where they are celebrating and highlighting all the ambassadors that we have relationships with their favorite products and telling their story of inspiration and how they live a well-being life. And we have many more of those plans. So we definitely invest in campaign and traditional brand marketing in that market to achieve the awareness and consideration opportunity. And leveraging digital, which is a big part of our business. We expanded channels. We have .cn, we have Tmall, we added JD. We continue to innovate and do a variety of initiatives across WeChat, leveraging the WeCom platform for a lot of our one-to-one and one-to-many initiatives and plugging into our community. So there are a lot of exciting things. And as you know, we have a leader in Sanan that is based in Mainland China in Shanghai. We have a specific SSE office where we have talent and resources that are specifically focused on driving these initiatives and building the business in Greater China and Mainland China. So those are just a few of the initiatives that have been executed — executing, but we have a team on the ground that’s empowered to build that business. Lorraine Hutchinson: Thank you. Operator: The next question comes from Dana Telsey with Telsey Group. Please go ahead. Dana Telsey: Goof afternoon. And congratulations on the results. As you think about the benefit in the margin of the 430 basis points, I believe, of freight reduction, how should we think of that through the year? And what are you seeing in terms of AUR? And with the extensive product innovation this year, how are you planning AUR? And are you seeing any difference regionally, and even globally, in terms of level of reception to new products and consumer differentiation? Thank you. Meghan Frank: Thanks, Dana. In terms of airfreight, so we are expecting it to be down 190 basis points now for the year. So that is now 50 basis points above 2019 levels. So we made some great headway there. We did experience 430 basis points product margin expansion in Q1, which was primarily driven by airfreight. We will see the year-over-year comparison moderate throughout the year with Q4 being close to flat to last year, and we’ll continue to monitor and push into opportunities there. I’d say in terms of AUR, we’re not expecting any material change to our AUR strategy in terms of the assortment. And then I’ll let Calvin take the last part. Calvin McDonald: Yes. Hi, Dana. Dana, in terms of product newness and how it may differ globally, one of the benefits of our business is that predominantly a global assortment strategy drives the momentum across every market and region. And obviously, there’s a huge number of benefits to that. And there are a few nuances by market and some that we design into. So one in particular in APAC is fit, where we have a whole different fit classification for our leggings, for our bras and for inseams on the men’s bottoms. And we introduced that a few years ago, and it has really helped in driving those categories in those markets. Footwear, as you know, we’ve rolled out in only a few international markets. So even though we see demand in — for that category and guests asking for it, as of now, it’s in Mainland China, it’s in the U.K. and in North America. Seasonality is an obvious factor. And then the only other difference that I would call out is we can see and do see differences globally based on the power of social media in certain platforms. So in markets in which a lot of the U.S.-based social influencers have a large voice, we see similar trends, the Everywhere Belt Bag, the defined jacket. And in markets where we don’t see the same type of U.S.-based social media influence, there are other trends, and we don’t see quite the distortion in these items. But overall, I think the main message is outside of fit, which is by design, a global assortment strategy that is more similar than not and drives the momentum across every market. Dana Telsey: Thank you. Operator: The next question comes from Paul Lejuez with Citigroup. Please go ahead. Tracy Kogan: Thanks. It’s Tracy Kogan filling in for Paul. First, I was wondering if you could tell us the progression in the quarter by month and whether you saw any falloff at all in the U.S. business as some others have seen. And then secondly, I was just hoping you could give us your current views on the competitive landscape in the U.S. and the macro backdrop. Thanks. Meghan Frank: Thanks, Tracy. In terms of months, so we don’t break out monthly performance specifically. But what I would share is that we saw double-digit comp increases each month of the quarter. February was our strongest month followed by April and then March. And coming off of the 24% sales growth, we’re pleased to be able to guide to 15% to 16% in Q2 and then 16% to 17% for the full year. Obviously, planning multiple scenarios as we move into the balance of the year but feel well positioned. Calvin McDonald: And in terms of competitive and macro, we continue to, as we always have, monitor the actions that are taking place both in the competitive landscape. I think I’ve talked before about pricing. That was a strategic decision last year to take very minimal price activity, and that allowed us to continue to support our full-price selling, in particular when most others had to course-correct and pull the promotional lever to adjust. And we’re going to continue to manage that. We are seeing inventory levels come in better positioning. So although I’m anticipating further discounting in the marketplace, I don’t expect it will be worse than it has been, and our business has continued to perform well during that heavily promoted period. And as you saw, we got our inventory this quarter ahead of guidance and in line with our revenue number. So from a competitive perspective, I think we’re well positioned and have an exciting, innovative pipeline of product to come for the back half of this year, and that always fuels our business. And I’m excited with what I see and what’s coming for both the male guest and our female guest. On macro, with the uncertainty, as we’ve done for the past 2 years, we’re going to continue to plan the business for multiple scenarios, monitor it. Our guest metrics were healthy in Q1 in terms of both traffic transaction and new guest acquisition, but we’re continuing to monitor and we’ll adjust as we need to. Tracy Kogan: Great. Thank you. Operator: The next question comes from Matthew Boss with JPMorgan. Please go ahead. Matthew Boss: Great. Congrats on another great quarter. So Calvin, on the broad-based global strength of the brand, have you seen any change with the North America core consumer? Can you elaborate on drivers of the outside store comps that you’re seeing? And just any overall change in global momentum that you’ve seen here in May? And then Meghan, with markdowns 40 basis points favorable to 2019 in the first quarter, I guess, can you elaborate on full-price selling trends, your better-than-planned inventory? And just does this create potential opportunity in the back half of the year as we think about markdowns and the opportunity in terms of a year ago? Calvin McDonald: I’ll take the first part. In terms of our guest metrics, they remain very strong. We’ve seen no change in our cohort behavior in terms of frequency of purchase or engagement. In addition, in quarter one, transactions by existing guests increased 22% and our transactions by new guests increased 28%. And traffic was also strong across both channels with stores up over 30% and e-comm up approximately 30%. And when I look globally across every region, that behavior, we don’t share the numbers specifically, but the general behavior of very healthy new guest acquisition, very healthy transaction and engagement with existing guests as well as traffic to both channels continue. Some of the differences, what’s driving. One, brand awareness and consideration is low and represents a significant runway of growth and opportunity for our business. And as we build new doors, as we continue to feed incredible, exciting, innovative product, that is helping to fuel our business and will continue to, as I’ve alluded to. I mean international was 16% of our revenue and represents a significant opportunity for us, as we all know, going forward for this brand. And then from a store performance versus our peer set, while we’re equally able to continue to grow our online business speaks to the strength of our omni guest relationship and strategies. It’s really immaterial where they choose to shop, and the technology links both channels together for a very frictionless fluid flow. And we have guests coming to us and into both channels and interacting with the brand accordingly. And that’s obviously supported by a D2C model that allows them to do that and not have any other intermediary getting in the way of the relationships we have. So I think those are a few of the drivers. But very, very strong guest metrics shared across the regions with opportunity with brand awareness to keep building our business moving forward. Meghan Frank: Great. And then in terms of markdowns, so we were pleased with our performance in Q1. So markdowns flat to 2022 and then as you mentioned, slightly under 2019. Our expectation right now embedded in our guidance is that we continue to expect markdowns to be generally flat year-over-year, which will also make a slot to 2019 levels. And really pleased with our performance in top line in Q1, as well as the full-price trend that was embedded in that. And we’ll continue to closely monitor. Matthew Boss: Great. Best of luck. Operator: The next question comes from Ike Boruchow with Wells Fargo. Please go ahead. Ike Boruchow: Hey, thank you. Meghan, just two quick ones on the model for me just to kind of follow up Matt’s question. Three months ago, you had said you expected higher markdowns year-over-year in 1Q through 3Q. They were flat in 1Q. Now you’re kind of saying that it should be flat the rest of the year. So just where did that — I’m just kind of curious if you could comment on the improvement that you thought versus three months ago. And then now with the airfreight up to 190, is there any additional airfreight potential upside into fiscal ’24? Or would that kind of give you like fully recaptured freight dynamics at that point? Thanks. Meghan Frank: Great. Thanks. Yes, I’d say the change in markdown performance really came through the outperformance on top line and the portion of that, that came through full-price sales. So when we look at the balance of the year, we’re expecting generally in line for the full year, but there is an outperformance in Q1. And then for airfreight, we are now 190 basis points down to last year, still 50 basis points above 2019 levels. We do expect over the longer term to continue to push into recouping all of that airfreight amount. So I think too soon to put a fine point on 2024, but we continue to make good progress on that line item, and we’ll continue to look for opportunities to optimize. Ike Boruchow: Thanks. Operator: The next question comes from Alex Straton with Morgan Stanley. Please go ahead. Alex Straton: Great, thanks for taking the question. Congrats on another great quarter. Just firstly, did you guys observe any deviation in purchase behavior by household income level across the quarter? And then secondly, just zooming out, margins sit hundreds of basis points above pre-COVID levels. It’s really amazing. So can you just walk us through the puts and takes of that? Is it just sales leverage or other pieces — moving pieces there would be helpful. Thanks a lot. Meghan Frank: Great. In terms of guest metrics, nothing material by household income. We were pleased, I would say, overall guest metrics, both existing and new gas metric trends, above 20% for the quarter. And then can you remind me sort of the second part of your question? Alex Straton: Just margin sitting so much higher than pre-COVID levels, yes, the key puts and takes there? Meghan Frank: And sorry, are you speaking specifically to gross margins? Alex Straton: Both gross and operating. Meghan Frank: Yes, so our operating margin is pretty flat to 2019 levels. And then I’d say in terms of gross margin, we’re well above given the composition of our business has shifted to be — we pulled back somewhat on new store openings. The cost of that is within gross margin. And then we’ve invested more deeply behind the digital portions of our business. It’s in SG&A. And then, obviously, a big piece through scale and revenue outperformance. Alex Straton: Perfect. Thank you. Operator: The next question comes from Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach: Good afternoon. Thank you for taking the question. Calvin, I was hoping you could speak to the opportunity to build on the success of the platform strategy that you’ve built so far. How are you thinking about balancing new innovation within key platforms like the Align versus building out new product platforms that can be built upon in the future? And then Meghan, can you elaborate on your inventory outlook? What is the path to improve inventory turn from here? And how should we be thinking about the time line to replacing that pre-pandemic inventory turnover rate? Thank you. Calvin McDonald: Hi, Brooke. In terms of product, we definitely think of it through the lens of a hero-item strategy, a franchise expansion strategy and then newness that could either show up as a new item and/or franchise. So that’s what has been fueling our business. And then equally in that, not only bringing newness but going back as well as updating like we did in this quarter, for instance, on our Pace Breaker short, for instance, for him where we took a fantastic single hero item and we’ve innovated it with a number of changes that have been incredibly well received in the franchise lineup. We’re always looking at strengths in ways in which the positioning of that, either through fit, versatility functionality and/or fabric can be extended into additional unmet needs for the guest. The Align being one of our strongest franchises, we introduced the Align dress this quarter, which was incredibly well received. And equally building new franchises, either through the introduction like we did last year with footwear, which we’ve declared as a test and learn for us. But we’re excited with the initial results and success in being able to build that forward into a very positive business in general. And there are additional ones that we’ll be launching later this year that really fit into that franchise category that we’re really, really excited about. So we definitely take a strategy across category activity, hero-item franchise, look for ways to expand, look for ways to update and then obviously ways to create new and then — and build from that. Meghan Frank: Great. And then in terms of inventory, so our expectation is we’ll be approximately 20% at the end of Q2 and then inventory in line with sales in the second-half of the year. We will still have opportunities, as you mentioned, to get our inventory turns back to historical levels. We have seen some material improvements in supply chain and lead times but not all the way back to historical positioning. So too soon to say when we’ll move back to those levels, but that would be the goal over the longer term. Brooke Roach: Thank you very much. Calvin McDonald: Operator, we’ll take one more question. Operator: The next question comes from Abbie Zvejnieks with Piper Sandler. Please go ahead. Abbie Zvejnieks: Great, thanks for taking my question. Just on the growth of the Other segment, can you break out, I guess, or just comment on what of that is driven by Lululemon Studio versus other components? And then any numbers you can give on early subscriptions or learnings or loyalty numbers? Thank you. Meghan Frank: Yes. In terms of the Other segment, we aren’t breaking out Lululemon Studio as a portion of that. But that bucket also contains strategic sales, seasonal stores and outlets, which would be a larger revenue component and the material driver in that bucket. And then in terms of early statistics? Calvin McDonald: Well, we just launched — so a couple of things in terms of that. We just launched a few days ago our digital app for Lululemon Studio, which is $12.99 a month that gives guests access to the same content that you can get but without the hardware purchase. We’re excited to introduce that. We think it will expand the TAM and allow us to offer that offering into the membership program. Last quarter, I talked to the membership number of Essentials, which after six months was a real strong start, over 8 million. We’re not going to share that number quarterly, but I will indicate it’s continued very strong momentum and continue to grow. So we’re excited about Essential memberships, how it’s going to support our community, fit into Lululemon Studios, the benefit of sweat and other means to interact with our guests and drive both LTV and incrementality. And early with having these tools all supporting the membership program, we’ll share more as we move forward. But excited as we continue to see strength in that Essential membership base grow. Operator: That’s all the time we have for questions today. Thank you for joining the call, and have a nice day. Follow Lululemon Athletica Inc. (NASDAQ:LULU) Follow Lululemon Athletica Inc. (NASDAQ:LULU) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Salesforce, Inc. (NYSE:CRM) Q1 2024 Earnings Call Transcript May 31, 2023 Salesforce, Inc. beats earnings expectations. Reported EPS is $1.69, expectations were $1.61. Operator: Welcome to Salesforce Fiscal 2024 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would like to hand over the […] Salesforce, Inc. (NYSE:CRM) Q1 2024 Earnings Call Transcript May 31, 2023 Salesforce, Inc. beats earnings expectations. Reported EPS is $1.69, expectations were $1.61. Operator: Welcome to Salesforce Fiscal 2024 First Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I would like to hand over the conference to your speaker, Mike Spencer, Executive Vice President of Investor Relations. Sir, you may begin. Mike Spencer: Good afternoon and thanks for joining us today on our fiscal 2024 first quarter results conference call. Our press release, SEC filings, and a replay of today’s call can be found on our website. With me on the call today is Marc Benioff, Chair and CEO; Amy Weaver, President and Chief Finance Officer; and Brian Millham, President and Chief Operating Officer. As a reminder, our commentary today will include non-GAAP measures. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings and press release. Some of our comments today may contain forward-looking statements and are subject to risks, uncertainties, and assumptions, which could change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings, including our most recent report on Forms 10-K, 10-Q, and any other SEC filings. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. And with that, let me hand the call to Marc. Marc Benioff: Thanks, Mike, and thank you all for being on the call. On our last call in March, we told you about how Salesforce had radically accelerated our transformation to profitable growth. We share with you how we hit the hyperspace button across the key areas of our transformation, restructuring for the short and long-term, reigniting our performance culture by focusing on productivity, operational excellence, and profitability, prioritizing our core innovations that drive customer success, building even stronger relationships with you, our investors. Our Q1 results show that we continue to make great progress. As I said in March, we’re just getting started with this incredible transformation. We continue to scrutinize every dollar investment, every resource, and every spend and we’re transforming every corner of our company. Our progress over the last 5 months, while it’s very impressive and I cannot be more grateful to our entire team for their leadership. In fact, you may hear me say that several times on this call. Our transformation drove our Q1 financial results. As I said, on our last call, well improving profitability is our highest priority. As a result, we significantly exceeded our margin target for the quarter, delivering a non-GAAP operating margin of 27.6%, up 1,000 basis points year-over-year, incredible. And there’s no greater point of evidence to our transformation than this amazing result following the tremendous operating margin Q4. In Q1, we delivered 8.2 billion in revenue, up 11% year-over-year and 13% in constant currency. We had some amazing wins in the quarter with Northwell Health, Paramount, Siemens, Spotify, NASA, and the U.S. Department of Agriculture, among others. We delivered 4.5 billion in operating cash flow up 22% year-over-year. Our remaining performance obligation ended the quarter at 46.7 billion, an increase of 11% year-over-year. And through Q1, we’ve now returned more than $6 billion in share repurchases. As a result for the third quarter in a row, we ended the quarter with fewer shares year-over-year another amazing point of evidence on this incredible transformation. Now, turning to our financial guidance, while the economy is not in our control, our margins are, which is why we’re raising our margin target for the full fiscal year. For FY 2024, we’re raising our non-GAAP operating margin to 28%, an improvement of 550 basis points year-over-year and we remain confident that we’ll hit 30% non-GAAP operating margins in the first quarter of fiscal year 2025. We could not be more excited about our progress. We’re maintaining our fiscal year 2024 revenue guidance of approximately 34.5 billion to 34.7 billion over 10% projected growth year-over-year. I couldn’t be more proud of how our team has come together, stepped up, and delivered these results. I’ve also been asked numerous times this quarter by our investors and our customers, how we’re able to make so much progress so fast and deliver these incredible numbers? It’s very simple. It’s our Ohana culture. It’s our superpower. And again, I’d like to thank our amazing team for this incredible accomplishment. Last quarter, I told you of how our AI team is getting ready to launch Einstein GPT, the world’s first genitive AI for CRM. At TrailheadDX in March in front of thousands of trailblazers here in San Francisco, that’s exactly what we did. At its foundation, Einstein GPT is open and extensible. Customers can connect to multiple large language models, including from partners like OpenAI and Tropic and others. This is a whole new way to work for our customers, users, and trailblazers. Users on Salesforce are seeing new AI generative features across all of their most common workflows. And while many of these will be created by Salesforce developers, far more will be created by our incredible trailblazer ecosystem. For low code of trailblazers, Einstein GPT will provide a toolset to design generative AI apps built on [reusable props] [ph]. For pro code trailblazers, Einstein GPT will offer an extensible ecosystem of LLM providers with configurable grounding. And Einstein GPT is the combination of tremendous research and engineering by our world-class AI team, and I’d like to congratulate them on this amazing result. And one more amazing result, this week, Einstein, Salesforce Einstein that we’ve been talking about for so many years on these calls, will generate an incredible 1 trillion predictions for our customers, an incredible milestone on our AI journey. We saw more of the incredible work of our AI team at our New York City world tour this month when we demonstrated Slack GPT. Slack is a secure treasure trove of company data that generative AI can use to give every company and every employee their own powerful AI assistant helping every employee be more productive and transforming the future work. Slack GPT can leverage the power of generative AI to deliver instant conversation summaries, research tools, and writing assistance directly in Slack, and you may never need to leave Slack to get a question answered. Slack is the perfect conversational interface for working with LLMs, which is why so many AI companies are Slack first and why OpenAI, ChatGPT, and Anthropic Squad can now use Slack as a native interface. Slack is also delivering integrated sales and service experiences powered by native GPT to be the best interface for all of our Salesforce customers and there’s a lot more magic to come with Slack and generative AI. In this month, we also announced Tableau GPT. At our Tableau conference, we had over 8,000 in-person attendees. Tableau GPT simplifies data analysis for all of our users enabling anyone to inquire about their data using Einstein GPT and obtain AI driven insights at scale. The intelligence and automation that Tableau GPT provides is tremendously important in this area of hyperscale data that we’re all entering. The coming wave of generative AI will be more revolutionary than any technology innovation that’s come before in our lifetime or maybe any lifetime. Like Netscape Navigator, which opened the door, to a greater Internet, a new door has opened with generative AI and it is reshaping our world in ways that we’ve never imagined. Every CEO realizes they’re going to have to invest in AI aggressively to remain competitive and Salesforce is going to be their trusted partner to get them to do just that. Every CEO I’ve spoken with sees AI as a revolution beginning and ending with the customer, and every CIO I’ve spoken with wants more productivity, more automation, and more intelligence through using AI. A great example [of deploying] [ph] this technology is Gucci. We’re working with them to augment their client advisors by building AI chat technology that creates a Guccified [indiscernible] service, well, incredible new voice, amplifying brands, storytelling and incremental sales as well. It’s an incredibly exciting vision for generative AI to transform which was customer service into now customer service, marketing, and sales, all through augmenting Gucci employee capabilities using this amazing generative AI, but we can only do all of this with trust. Our customers need to understand where their data is going and they must be able to maintain data integrity and access and privacy controls. Large customers must maintain data compliance as a critical part of their governance, while using generative AI and LLMs. This is not true in the consumer environment, but it is true for our customers, our enterprise customers who demand the highest levels of this capability. Where customers who for years have used relational databases as the secure mechanism of their trusted data, they already have that high level of security to the row and sell level. We all understand that. And that is why we have built our GPT trust layer into Einstein GPT. The GPT trust layer gives connected LLM secure real time access to data without the need to move all of your data into the LLM itself. It’s an incredible breakthrough for our customers and working with LLMs in a secure and trusted way. While they’re using the LLMs, the data itself is not moving and being stored in the LLM. That is what our customers want. They can be sure that the customer data is where they know it is, where they can be assured that it is for their compliance and for their governance. And I cannot be more excited about our AI CRM and delivering on this future of trusted AI through our new Salesforce GPT trust layer. Finally, I can’t talk about AI without talking about the success of our data cloud. Data Cloud is the heart of customer 360 and now our fastest growing cloud ever. Data Cloud created a real-time Intelligent Data Lake that brings together and harmonizes all of our customers’ data in one place. In Q1, we closed one of our largest healthcare industry deals ever with Northwell Health, New York’s largest private employer. They have 21 hospitals, 900 patient – 900 outpatient facility or ambulatory facilities, and their own medical school all in New York. By integrating DataCloud with Health Cloud, Tableau, MuleSoft, while our entire customer 360, Northwell is improving patient care by bringing together its vast data resources to create a single source of truth and using AI to govern data, use, and maintain regulatory compliance. This is the future of our customers and our industry. It’s AI, plus data, plus CRM. And of course, this AI revolution is just getting started, which is why we’ve invested 250 million in our new AI venture fund to fuel startups developing our trusted generative AI vision. We’ll be talking more about this at our AI Day event on June 12th in New York City, and I hope that you’ll join me there. To wrap up, we’re transforming every corner of our company. We’re laser focused on our short-term and long term restructuring, improving productivity and performance, prioritizing our core innovations and delivering for our shareholders. As a result, productivity is up, profitability is up, revenue is up, cash flow is up, and we dramatically increased our margin guidance. And just like the cloud, mobile and social well, AI, this revolution is a new innovation cycle. It’s going to be a new spending cycle as well, which is going spark a massive new tech buying cycle. And we’ve led the industry through each of these cycles and I couldn’t be more excited for our future as we continue on a path to our long-term goal to make Salesforce the largest most profitable enterprise software company in the world, and the number 1, safest and most trusted AI CRM. With that, Brian, I’ll turn it over to you. Brian Millham: Thanks, Marc. As Marc said, we’re continuing our transformation across every part of our company. Our focus on performance culture and operational excellence contributed to our strong first quarter results. Since our last call, we’ve removed layers to get closer to our customers and to complexity out of our business to help us accelerate through the rest of the year. We clearly defined our return and remote office guidelines for our employees, and it’s been great to get together even more in our offices and with our customers around the globe. I had the chance to visit [many of our office] [ph] this quarter and the energy is incredible. As you heard from Marc, our transformation plan continues to deliver top and bottom line growth as we help our customers increase productivity, drive efficiency, and become AI First Companies. But we’re still operating in an uncertain macro environment. Customers continue to scrutinize every deal, and we see elongated deal cycles and deal compression, particularly in our more transactional revenue streams like SMB, create and close, and self-serve. Also in Q1, our professional service business started to see less demand for multi-year transformations, and in some cases delayed projects as customers focused on quick wins and fast time to value. But for this reason, we saw strong performance from some of our fast time to value efficiency focused products with sales performance management, sales productivity, and digital service all growing annual recurring revenue above 40% in the quarter. As customers look to reduce complexity and achieve faster time to value, they’re expanding their adoption of Salesforce clouds, a key growth strategy for us. The world’s most recognized companies are relying on Salesforce more than 90% of the Fortune 100 used Salesforce and they average more than five of our clouds. This is why we’re so excited about our AI plus data plus CRM strategy. As Marc explained, we’re building Einstein GPT and Data Cloud into every cloud and our Customer 360 and we’re perfectly positioned to help our customers harness the phenomenal power of AI. Our core offerings remain resilient. In Q1, 9 of our top 10 deals included sales, service, and platform. Industry clouds continue to be a tailwind to our growth, and we saw momentum with great customers like Northwell, USDA Rural Development, and NASA who we showcased at World Tour DC in April. Once again, eight of our industry clouds grew ARR above 50%. I met with hundreds of customers in the quarter and we hosted 700 meetings in our innovation centers with our top customers and prospects. Generative AI is top of mind for all of them. As they look to benefit from the intelligence automation and cost savings that Salesforce is uniquely positioned to deliver. We’re seeing tremendous appetite for our new generative AI products starting with Einstein GPT, Slack GPT, and Data Cloud. Our generative AI products will be a catalyst for our future growth. As Marc mentioned, Data Cloud continues to be one of our fastest growing products and we had great wins in the quarter with companies like Major League Soccer and Giorgio Armani. Armani uses Data Cloud to deliver hyper personalized online and in-store experiences, real time engagement, and curated shopping recommendations. We can see how Data Cloud and Einstein GPT are going to create experiences that weren’t possible before and really drive growth. In an environment where customers are optimizing their current [tech stacks] [ph], integration and automation continue to be efficiency drivers. MuleSoft again delivered strong results with wins at Siemens, [Cinnova] [ph], and Vodafone. For the first time, Salesforce was ranked number 1 in integration by market share in the latest IDC software tracker, a great testament to our MuleSoft team. Tableau is unleashing the power of our Data Cloud, unlocking customer data and delivering actionable real time insights. In the quarter, we had great wins at customers like Union Bank of the Philippines, Discovery Financial Service, Moderna, ADT Solar, and Alaska Air. We’ve made great investments to reaccelerate Tableau, including new leadership along with product innovations like Tableau GPT, and revenue intelligence, now one of our fastest growing add-ons. I’m really encouraged by the Slack team who has created an ambitious product roadmap with generative AI at the center. In Q1, we saw amazing momentum with customers like the California Office of Systems Integration, Paramount Global, Breville, and OpenAI, and rolled out an AI ready platform, Slack Canvas, and app integrations with ChatGPT in Anthropic’s Claude. Overall, I could not be more thrilled with our offerings and the market position, especially as it relates to delivering on the promise of AI. We’re looking forward to continuing the energy and momentum at our AI day in just a couple of weeks. I’m very proud of the teams and of our partners. Their focus on customer success continues to be outstanding. As Marc said, our productivity is up, profitability is up, revenue is up, cash flow is up. We’re increasing our margin guidance and sales forces leading the way as the number one AI CRM. Now, over to you Amy. Amy Weaver: Thank you, Brian. As Marc said, a key part of our transformation to profitable growth is short and long-term restructuring of the company. We have now largely completed the restructuring announced in January, and we’re completing our comprehensive operating and go to market review. As we shift to the implementation phase, we’re executing against three key pillars, optimization of resources and organization structure, product investment prioritization, and operational rigor. We continue to view sales and marketing and G&A as the primary drivers of leverage. While R&D remains an important investment area. Our profitable growth framework, disciplined capital allocation strategy, and opportunity to drive shareholder value are represented in our actions and in our results. Now, turning to our results for Q1’s fiscal year 2024, beginning with top line commentary. For the first quarter, revenue was 8.2 billion, up 11% year-over-year or 13% in constant currency with the beat primarily driven by strong momentum in MuleSoft, and more resilient core performance. Geographically, we saw strong new business growth in parts of EMEA and LatAm, specifically Switzerland, Italy, and Brazil, while we experienced continued pressure in the United States. In Q1, the Americas revenue grew 10%, EMEA grew 12% or 17% in constant currency. And APAC grew 16% or 24% in constant currency. From an industry perspective, manufacturing, automotive, and energy all performed well, while high-tech and financial services remained under pressure. Q1 revenue attrition ended the quarter at approximately 8%. As expected, we saw a modest increase in Q1. Partially attributed to the inclusion of Tableau in the metric. We also noted some incremental weakness in our marketing and commerce attrition. As Marc said, non-GAAP operating margin finished strong in Q1 at 27.6%, driven by our disciplined investment strategy and accelerating our restructuring efforts. Q1 operating cash flow is 4.5 billion, up 22% year-over-year. This includes a 910 basis points headwind from restructuring. Q1 free cash flow was 4.2 billion, up 21% year-over-year. Turning to remaining performance obligation or RPO, which represents all future revenue under contract. This ended Q1 at 46.7 billion, up 11% year-over-year. Current remaining performance obligation or CRPO, ended at 24.1 billion, up 12% year-over-year in both nominal and constant currency, ahead of expectations driven by strong core performance, partially offset by continue, create, and close softness. And finally, we continued to deliver on our capital return commitment. In Q1, we returned 2.1 billion in the form of share repurchases bringing the total returned to more than 6 billion since the program was initiated last August, representing more than 38 million shares. Before moving to guidance, I wanted to briefly touch on the current macro environment that Brian discussed. The more measured buying behavior persisted in Q1. And as Brian noted, in Q1, we started to see weakness in our professional services business. We expect these factors to persist, which is incorporated in our guidance. Let’s start with fiscal year 2024. On revenue, we are holding our guidance of 34.5 billion to 34.7 billion, representing over 10% growth year-over-year in both nominal and constant currency. The strength in our Q1 performance is offset by the pressure in our professional services business previously discussed. For fiscal year 2024, we are raising non-GAAP operating margin guidance to 28%, representing a 550 basis points improvement year-over-year. This guidance increase is driven by the acceleration of our restructuring efforts and also includes reinvestment in targeted areas, namely in R&D. I’m proud of our progress and remain confident in our trajectory as we progress towards our 30% non-GAAP operating margin target in Q1 2025. We also remain focused on stock based compensation and continue to expect it to improve this year to below 9% as a percent of revenue. Before moving to EPS, on restructuring, we now expect the charges in FY 2024 to come in towards the higher end of the range previously provided in our last earnings release. As a result of these updates, we now expect fiscal year 2024 GAAP EPS of $2.67 to $2.69, including estimated charges for the restructuring of a $1.11. Non-GAAP EPS is now expected to be $7.41 to $7.43. And we are raising our fiscal year 2024 operating cash flow growth to be approximately 16% to 17%, which now includes a 14 point to 16 point headwind from restructuring. As a reminder, we will see an increase in our cash taxes in fiscal 2024 as we draw down our remaining net operating losses. CapEx for the fiscal year is expected to be slightly below 2.5% of revenue. This results in free cash flow growth of approximately 17% to 18% for the fiscal year. Now to guidance for Q2. On revenue, we expect $8.51 billion to $8.53 billion, growth of approximately 10% in both nominal and constant currency. CRPO growth for Q2 is expected to be approximately 10% year-over-year in nominal and constant currency. Our guidance incorporates the momentum of our execution in Q1, offset by the persistent measured buying behavior and a decline in professional services fixed fees contribution. The professional services impact represents approximately a 1 point headwind to growth. For Q2, we expect GAAP EPS of $0.79 to $0.80 and non-GAAP EPS of $1.89 to $1.90. And as we focus on shareholder return and disciplined capital allocation, we continue to expect to fully offset our stock based compensation dilution through our share repurchases in fiscal year 2024. In closing, we continue to transform every corner of the company. We are hyper focused on delivering the next wave of innovation led by Data Cloud and Einstein GPT. And Salesforce is well-positioned to remain the market leader in this new AI first world. We are committed to delivering long-term shareholder value, and I personally want to thank our shareholders for their continued support. Now, Mike, let’s open up the call for questions. Mike Spencer: Thanks, Amy. Operator, we’ll move to questions now. I ask that everyone only ask one question in respect for others on the call. In addition, I’d like to introduce Srini Tallapragada, our Head of Engineering, who will be joining us for Q&A today. With that Emma, let’s move to the questions. Q&A Session Follow Salesforce Inc. (NYSE:CRM) Follow Salesforce Inc. (NYSE:CRM) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Your first question today comes from the line of Kirk Materne with Evercore. Your line is open. Kirk Materne: Hi, yes. Thanks very much and congrats on a good start to the year. Marc, you’ve been through a number of cycles from a technology perspective. I was just kind of curious where you think we are in terms of people investigating AI versus when the spending cycle around it might kick-in? Can you just give us an idea of, you know, sort of your thoughts on that and really just the opportunity for you all to monetize AI with your product base? Thanks. Marc Benioff: Well, I think this is the absolute question of the day, which is we are about to enter an unbelievable super cycle for tech and everyone can see that. This is an incredible opportunity for not only Salesforce, but our entire industry. I mean, perhaps only a year ago or less than a year ago, no one on this call even knew what GPT was. Today, ChatGPT is the fastest growing consumer product of all time, and has transformed many, many lives. It’s definitely not just the technology of this lifetime, but maybe any lifetime. It’s an incredible technology. And every company is going to have to transform because every company is going to have to become more productive or automated more intelligent through this technology to be competitive with other companies. And just yesterday, I’m in a room here at the top of Salesforce Tower on the 60th floor, and we have the CEO of a very large bank here. And like every other sales call I’ve made in the last quarter, there’s only one thing that customers want to talk about, and that’s artificial intelligence and specifically, generative AI. Of course, we have been a leader in this area with Einstein, more than 1 trillion transactions delivered this week, but these are primarily predictive transactions built on machine intelligence, machine learning, and deep learning. But in 2018, deep learning evolved and became much more sophisticated and became generative as these neural networks expanded their capabilities and also the hardware went to another level as well. So, now we have this incredible new capability. It’s a new platform for growth, and I couldn’t be more excited. But yesterday, there were many questions from my friend who I’m not going to give you his name because he’s one of the – the CEO of one of the largest and most important banks in the world. And I’ll just say that, of course, his primary focus is on productivity. He knows that he wants to make his bankers a lot more successful. He wants every banker to be able to rewrite a mortgage, but not every banker can, because writing the mortgage takes a lot of technical expertise. But as we showed him in the meeting through a combination of Tableau, which we demonstrated and Slack, which we demonstrated, and Salesforce’s Financial Services Cloud, which he has tens of thousands of users on, that banker understood that this would be incredible. But I also emphasize to him that LLMs, or large language models, they have a voracious appetite for data. They want every piece of data that they can consume, but through his regulatory standards, he cannot deliver all that data into the LLM because it becomes amalgamated. Today, he runs on Salesforce, and his data is secure down to the row and cell level. He knows that readers don’t block [riders] [ph] that there’s all types of security provisions and regarding who can see what data about what account or what customer. And when you put it into an LLM, those permissions are not understood. So, that is a very powerful moment to realize that the way that LLMs operate is in a way state where they’re kind of consuming all this data and then giving us that information back out, well, that Salesforce’s opportunity. That’s why we built this GPT trust layer. And through the GPT trust layer and rebuilding all of our apps, including Slack and Tableau, but as we demonstrated him yesterday, a new Sales Cloud, a new Service Cloud, a new marketing cloud, and what we’ll show on June 12 in New York City, a complete reconceptualization of our product line. What that means for this customer and for every customer is that they have an opportunity to transform their business. And for Salesforce, that also means an opportunity to transform ourselves and for our industry, a new super cycle where every company will have to transform to be AI first. Operator: Your next question comes from the line of Keith Weiss with Morgan Stanley. Your line is open. Elizabeth Porter: Great. This is Elizabeth Porter on for Keith Weiss. Thanks for the question. I wanted to ask on the potential disruption from rebooting the sales enablement process. Are we past the point of seeing disruption or could that be a future risk? And if so, how is it included in guidance. The CRPO guidance for 10% looks like a bit of a slowdown despite the easier comp. And Amy, you called out pro services a one-point headwind. But just any other factors we should keep in mind that may create a challenge over the next couple of months? Thank you. Marc Benioff: Well, I’ll tell you that. I think that as you know, in Q1, we went through tremendous disruption with human resources in our company, and it was very disruptive to all of our Ohana. And I’m so grateful to them for how they supported the whole company, all the customers and themselves during what was probably one of the most disruptive quarters that I’ve seen and yet we delivered these incredible numbers and this incredible technology vision going forward. In terms of enablement of the sales organization, its ability to kind of move forward, that is not, I would say, a material part of what happened in the quarter or what’s going to happen for the year. Our sales organization remains with a very high level of productivity, but let me turn it over to Brian to speak directly to his strategy on delivering the year. Brian Millham: Yes, Marc, thank you. I appreciate it. And Elizabeth, thank you for the question. I think you’re referencing some comments we made on previous calls about enablement being an important strategy for us as we saw during the pandemic, not as many of our AEs and SEs and leaders were as enabled as we would like. We’ve made those changes, and we’ve really invested in the time to make sure our AEs understand our product portfolio, the entire customer 360, and we’re on sort of the next generation of enablement. As Marc just talked about, this new AI wave is going to create a huge opportunity for us. And we need to make sure that we’re investing in the enablement to bring our teams along. It’s been a very short window around this innovation, and we’ve got some work to do on this, but we’re very, very excited with our path forward, our position in the market. All that we’re doing with our customers, the demand we’re feeling from our customers. Marc mentioned it, and I had the same experience, every CEO in the world is talking to us about generative AI right now, and we are investing heavily to make sure our account executives, our sales teams, in fact, the entire company is able to articulate our value proposition to our customers. So, Amy, I don’t know if you have any further comments there? Amy Weaver: Sure. Elizabeth, you mentioned CRPO in professional services, so let me jump in on that. For our guide for this next quarter, we are seeing some pressures from the macro situation and then also specifically from professional services. And there’s a bit of a nuance with ProServ that I want to make sure people understand. So, if you back up, our customers can contract for professional services in two ways, either on a time and materials basis, which is typically used for smaller projects or on a fixed fee, kind of milestone basis. For purposes of CRPO, we only include projected revenue from fixed fee deals. One of the things that we are seeing right now is not only a professional services as a whole same pressure, but more customers are choosing to contract on a time and materials basis, which is not included in our CRPO. So, as a result, we’re seeing, kind of a double pressure there. And I’m expecting a full one-point headwind to CRPO for the quarter from professional services. Mike Spencer: Thanks Elizabeth. Emma, let’s move to the next question please. Operator: Your next question comes from the line of Brad Sills with Bank of America. Your line is open. Brad Sills: Oh, wonderful. Thanks. I wanted to ask a question to Brian, I think, here on the efforts here to improve productivity. You mentioned removing some layers here. My question is, we think of all these actions that you’re taking as drivers of margin expansion, but are you starting to see some early traction here on the sales productivity front, such that perhaps that’s driving some upside here across the business, perhaps larger deals now that you’re seeing coming out of the field and pipeline and some of the deal closure? Thank you so much. Brian Millham: Thanks, Brad, for the question. I really appreciate it. As you know, we’re operating in a constrained environment right now. And so, we are really focused on this productivity measure and metric for our organization right now, investing heavily, as I mentioned earlier, and the enablement part of our organization. Also looking at other ways to drive productivity. And one of the things that we’re talking quite a bit about right now is pricing and packaging, bringing together logical products that we can be selling in a single motion versus our go-to-market, which is largely aligned by product., how do we focus on a larger average deal size for every transaction, and so big investments on that front, really a strong focus on productivity as it relates to moving people up market as well. We’re thinking about self-serve in the bottom end of our market. How do we drive a self-serve motion, automated motion at the low end of our market to bring our account executives upmarket to drive higher productivity in the sales organization? So clearly, a big motion for us right now. Feel very good about our big deal motion. Actually in Q4, we saw some – sorry, in Q1, we saw some very good big deal execution from the team. That is not really an area that has held us back. We feel very good about our ability to transform companies and transact these large businesses. It really is the velocity business that has held us back a bit on our create and close some of the SMB transactions. So, we have a clear focus in this area to drive the productivity with our plans going into Q2 and beyond into Q4. Mike Spencer: Thanks, Brad. Emma, next question please. Operator: Your next question comes from the line of Brent Thill with Jefferies. Your line is open. Brent Thill: Amy, regarding Americas, that was a pretty large decel, one of your slowest growth quarters, I think, ever in Americas. The rest of the world did decel, but maybe not quite as the magnitude of the Americas. Can you just speak to what happened there in that region? Amy Weaver: Sure. So thanks, Brad, for the question. The Americans did see a deceleration, a 10% year-on-year revenue growth, compared to 17% in EMEA and about 24% in nominal APAC. We are continuing to see most of the pressure in North America. There were some real pockets of acceleration in EMEA and in LatAm, particularly in Switzerland, I think Brazil, Italy. So, we are seeing some good things, but North America has taken the brunt of the deceleration. Brian, do you want to come in and see if you can address that in more detail? Brian Millham: Sure. Yes. I think when we think about our business from an industry perspective, we have a very nice footprint of our great technology companies and financial services company, both of which were a bit slower than we would have liked in the Americas in Q1. And so, as we think about the all-in size of our Americas business, those industries felt a little bit more of the economic headwinds in the quarter in Q1. And so, I think a bit of a slowdown from that perspective is a result you’re seeing in the Americas business. Mike Spencer: Thanks, Brent. Emma, next question please. Operator: Your next question comes from the line of Mark Murphy with JPMorgan. Your line is open. Mark Murphy: Thank you very much. And I’ll add my congrats. So Marc, it feels like the tech and software industry has had a recession without the broader economy being in a recession quite yet, and that’s very unusual. Do you think with all the purging and optimizing of IT budgets, which is already taking place, plus Salesforce’s headcount optimization already being underway that perhaps the next recession might actually be more manageable or easier to navigate than what you had seen in some of the prior cycles? Marc Benioff: Well, I think that this is a great question. And I tried to address it on the last call. I just really think you have to look at 2020, 2021 was just this massive super cycle called the pandemic. I don’t know if you remember, but we had a pandemic a couple of years ago. And during that, we saw tech buying like we never saw. It was incredible and everybody surged on tech buying. So, you’re really looking at comparisons against that huge mega cycle. And that is what I think is extremely important to understand, the relative comparisons. And that is where my head is at, which is I am constantly comparing against what happened in 2021, but also looking at 2020 and 2019. That’s a little bit different than 2008 and that’s a little bit different than 2001. We didn’t exactly have these huge mega cycles that kind of we were exiting. And I – that’s also what gives me tremendous confidence going forward and what we’re really seeing is that customers are absorbing the huge amounts of technology that they bought. And that is about to come, I believe, to a close. I can’t give you the exact date, and it’s going to be accelerated by this AI super cycle. Mark Murphy: Thank you. Mike Spencer: Thanks, Mark. Emma, next question please. Operator: Your next question comes from the line of Brent Bracelin with Piper Sandler. Your line is open. Brent Bracelin: Good afternoon. I wanted to circle back to the generative AI discussion, if we could. I totally understand how large enterprises are turning to Microsoft, given the productivity tools and suite that they have, but as you start to engage with customers, what’s resonating relative to the Salesforce Gen AI journey? Is it the data layer and Customer 360 messages resonating? Is it the app layer around sales automation functionality that you’re going to offer? Just double quick on what customers are coming to Salesforce and engaging the you around some of the new things that we’ll hear about it sounds like in June. Marc Benioff: Well, I think that when you look at our artificial intelligence strategy, which we’re talking to the largest, most important companies and governments in the world, it has to be architected around security. It has to be architected around compliance, around trust. It has to be architected around governance. And this is very important. And of course, we’re also architecting it around being open. That is, we’re working with many AI companies to provide the best solutions for our company. Of course, we have a tremendous relationship with OpenAI. We also just invested in Anthropic [indiscernible] many of these companies. But I think ultimately, this is going to be a solution that enterprise customers are going to come in and make sure that their data is protected. And it’s also protected down at the user level. And Srini, do you want to come in and talk about exactly what we’re doing to make sure that we’re delivering the best possible solutions for our customers for AI? Srini Tallapragada: Yes, Marc. So, I think I met about 70 customers in the last quarter. And like Marc was saying, the only conversation everybody is interested is on – and while everybody understands the used cases, they’re really worried about trust. And what they are looking for us is guidance on how to solve that. For example, so we are doing a lot of things as the basic security level, like we are really doing tenant level isolation coupled with zero retention architecture, the LLM level. So the LLM doesn’t remember any of the data. Along with that, they – for them to use these used cases, they want to have – they have a lot of these compliances like GDPR, ISO, SOC, [Quadrant] [ph], they want to ensure that those compliances are still valid, and we’re going to solve it for that. In addition, the big worry everybody has is, people have heard about hallucinations, toxicity, bias, this is what we call [model trust] [ph]. We have a lot of innovation around how to ground the data on 360 data, which is a huge advantage we have. And we are able to do a lot of things at that level. And then the thing which I think Marc hinted at, which is LLMs are not like a database. These intra-enterprise trust, even once you have an LLM, you can’t open the data to everybody in the company. So, you need ability to do this – who can access this data, how is it doing both before the query and after the query, we have to build that. And then we have to be not only open, but also optimized. We are running an open – the way we’ll run is, we’ll run like a model [indiscernible] because one of the things everybody has to watch out is it’s great, but what about the cost to serve, not all models are equal. So, we are going to run this and pick very – we are going to pick a very cost-optimized curve, so the value is very high. And our Salesforce AI research has a lot of sales for state-of-the-art models and industry cases, which we are optimizing to run at very low cost and high value. Add to that, we’ve got the Trailblazers platform, which allows low code, high code, and many other things, and we’re going to optimize sort of jobs to be done for each industry and jobs. That’s really what they’re looking for because they have been using our AI platform. Like Marc mentioned, we already do 1 trillion transactions per day. And by the way, the data cloud, just in a month, we are importing more than 7 trillion records into the data layer, so which is a very powerful asset we have. So, coupled with all of this is what they are looking for guidance and how we think we can deliver significant value to our customers. Marc Benioff: Srini, I want to ask you a question. In January, you published a paper in nature from your research team, which was called large language models, generating functional protein sequences across diverse families, and you really showed something amazing, which was that deep learning language models have shown this incredible promise that you just articulated in various biotechnological applications, including protein design, engineering, and you also described very well one of our models that we’ve created internally, ProGen, which was a language model that can generate protein sequences with predictable function across large protein families. I was very impressed with that. And the entire research team deserves a huge amount of congratulations. So, when you look at that, especially dramatically and semantically correct natural language sentences for diverse topics or how you’re going to use that inside our platform against other models that you’re seeing like Llama, OpenAI’s model, Anthropic and others, when will Salesforce use our own models like [CoGen] [ph], ProGen, T-code, our lit model, when will we use an outside commercial model like an OpenAI or an Anthropic? And when will we go to an open source model like we’ve seen emerge so many of those, including like Llama. Srini Tallapragada: Yes. I think you hinted something very important. I think, as you know, Marc, we have – our I research team is one of the best-in-class model – state-of-the-art models from different areas. The way we are thinking of it is like anything else, where the world is going to go, which we strongly believe is going to be multiple models. And depending on the used case, you will pick the right models, which will provide you the value at the lowest cost. Where we have to run with highly regulated industries, where the data cannot leave the trust boundary or where we have significant advantage, where we can train on industry-specific data or Salesforce-specific – 360-specific data, like, for example, our FX model are helping our customers implement or our flow, we will use our internal model. Where we need more generated image models or something where it needs public image databases, we may use a coherent or an OpenAI. It depends on the use case and which is why, at a given request, a secure trusted gateway will decide smartly which is the best used case, which is the model, and we always keep running the [indiscernible], which is what I mean. So today, one particular model may be good. Tomorrow, something else will come, and we’ll behind the team flip it, but our customers don’t need to know that. We will handle all of it. We’ll handle the model trust. We’ll handle all the compliances and all behind the scenes. And this is always what we promise to our customers, we’ll always future-proof. That’s the Salesforce promise to our customers so that they can focus on the business used cases. Marc Benioff: So just one last follow-up question. You’ve described very well the GPT trust layer, which I think is going to be a significant amount of value added that we’re going to provide to our customers that’s going to be quite amazing. And then you develop these specific grounding techniques, which are going to allow us to keep our customers’ data safe and not be consumed by these voracious large language models, which are so hungry for all of our customers’ data. What is going to be the key to actually delivering this now across regulated industries? Srini Tallapragada: I think the key is innovations we are doing, which people will see starting next month is around what we call [from generation] [ph] and grounding. These are techniques, which we’ll have to do, but it will work only because we have – all of this as based on underlying data. We have the Data Cloud, where we have all the 360 data, which is there. So, we’re able to ground these models and do it. So, there are a lot of other techniques, which are very technical, which we put it on our block. But that’s the innovation that we’re doing. And you have to remember that Salesforce also is a metadata model. So, we have a semantic understanding of what our customers are trying to do. We’re going to leverage the Metadata platform and do this grounding automatically for our customers, of course, while keeping the trust. That’s the base line. Marc Benioff: Absolutely. Thank you so much, Srini. Mike Spencer: Emma, next question please. Operator: Your next question comes from the line of Raimo Lenschow with Barclays. Your line is open. Raimo Lenschow: Hi, thank you. Question for Amy or Brian maybe more. The improvement in profitability or the raised guidance for profitability and cash is that all timing? Can you talk a little bit about that? Is it just timing or are there other factors we should consider in here? Thank you. Amy Weaver: So Raimo, well I’ll start and then I can turn it over to Brian for a little bit more color. So, in terms of the great Q1 that we just saw, really pleased to see us coming in at 27.6% and also really pleased about the 28% – [the raise] to 28% for the full-year. What really drove the 27.6 was two things. It were the actions that we took that we announced in January with the restructuring. Executing on that, as well as having a very disciplined reinvestment strategy, and that led to that. And that’s also where we’re going to see this going through the rest of the year, driving the expansion 28% and then also putting us on track for the 30% margin in Q1 of next year. As I look through overall at transformation, I would really divide it into two stages benefits that we’re getting from that initial transformation. And again, that’s what you’re seeing in Q1 and this year. And then the second stage, which is really as we’ve been going through this comprehensive operating and go-to-market review, that review is going to enable the second phase of our transformation, and that’s something that’s going to be ongoing and long-term over the next few years. You’ll see benefits to our margin in outer years beyond FY 2024. Brian, anything you would add? Brian Millham: Yes, thanks for the question. When we think about longer-term structures, we obviously took the action in Q1. But longer term, we’re looking at things like how do we leverage comp plan redesign to drive better efficiencies in our organization going forward. How do we continue to look at self-serve at the low end of the market to drive better efficiencies in our organization. So, resellers as a potential investment that we’ll make in emerging markets is long-term leverage on the efficiency gains. So lots of things that we’re doing that will be in sort of the Phase 2 oriented around process improvement and systems improvement. And again, as I mentioned, top plan design that will drive better efficiencies in the organization. Mike Spencer: Thanks, Raimo. Emma, let’s go to next question please. Operator: Your next question will come – is from Karl Keirstead with UBS. Your line is open. Karl Keirstead: Okay. Great. I’ll direct this to Amy as well. Amy, congrats on that margin improvement. I’ve got a two-parter both related to margins. First, what is the timing of the receipt of that Bain operational review that might ostensibly kick off the second phase of cost cutting? And then secondly, you and Brian talked about this reinvestment in R&D and investing heavily around AI. I’m wondering if those planned investments are greater than you anticipated when you initially set the guidance three months ago, such that you need to run a little bit harder on OpEx management to offset it and keep delivering on your stated margin targets? Thanks so much. Amy Weaver: Great. Thanks, Karl. So first on the timing. As I mentioned, we’ve been doing this end-to-end comprehensive operating and go-to-market review. The entire company has been involved in that. There’s really no stone unturned. We’re getting close to the end of that process, and then we will be moving into the implementation. You’ll be hearing more about that in future quarters. Turning to reinvestment. We are keeping a very close eye on reinvestment, very excited particularly about artificial intelligence. So, much of what Srini has been talking to you about, I don’t view this as a greater investment from what we were looking at earlier. We’re really going along with our current plans. We are looking at operating expenses management, and we’re looking at it seriously every day, but that’s not something that has changed. Mike Spencer: Thanks, Karl. Operator, we’ll move to our last question now, please. Operator: Our last question comes from the line of Kash Rangan with Goldman Sachs. Your line is open. Kash Rangan: Hi, thank you very much team. Congratulations on putting up terrific operational results, and a good cash flow, good margins, et cetera. Marc, you talked about a super cycle of buying and technology in the years ahead. Can you just parse for us, if you don’t mind, what is new about generative AI as far as Salesforce as opportunities are concerned, netting out against what Einstein has been able to accomplish for you – for the company? And how does it show up in the product in terms of productivity? What are the scenarios by which customers can experience this amazing productivity? And how can you charge more for delivering that, kind of value? Thank you so much. Marc Benioff: Well, thanks, Kash, for giving me the opportunity to talk about our AI vision, and I’m also going to ask Srini again to fill in some of the details. But I think it started to occur to me – I think folks know, I have – my neighbor is Sam Altman is the CEO of OpenAI, and I went over to his house for dinner, and it was a great conversation as it always is with him. And he had – he said, Oh, just hold on one second, Marc, I want to get my laptop. And he brought his laptop out and give me some demonstrations of advanced technologies that are not appropriate for the call. But I did notice that there was only one application that he was using on his laptop and that was Slack. And the powerful part about that was I realized that everything from day 1 at OpenAI have been in Slack. And as we kind of brainstormed and talked about – of course, he was paying a Slack user fee and on and on, and he’s a great Slack customer. We’ve done a video about them, it’s on YouTube. But I realize that taking an LLM and embedding it inside Slack, well, maybe Slack will wake up. I mean there is so much data in Slack, I wonder if it could tell him what are the opportunities in OpenAI? What are the conflicts, what are the conversations? What should be his prioritization? What is the big product that got repressed that he never knew about? And I realized in my own version of Slack at Salesforce, I have over 95 million Slack messages, and these are all open messages. I’m not talking about closed messaging or direct messaging or secure messaging between employees. I’m talking about the open framework that’s going on inside Salesforce and with so many of our customers. And then I realized, wow, I think Slack could wake up, and it could become a tremendous asset with an LLM consuming all that data and driving it. And then, of course, the idea is that is a new version of Slack. Not only do you have the free version of Slack, not only do you have the per user version of Slack, but then you have the additional LLM version of Slack. And for each one of our products in every single one of our categories, there’s that opportunity to upsell and cross-sell into the next version of generative AI, not just with Slack, but you can also imagine, for example, even with Salesforce, the ability as we’re going to see in June, that many of our trailblazers are amazing low-code, no-code trailblazers, but soon they’ll have the ability to tap in to our LLMs like ProGen and Cogen that have the ability to code for them automatically. They aren’t coders. They didn’t graduate computer science degrees. And if they need to write a sophisticated Apex code or other code, it can be a challenge for them, but because you know what is there only 8 million or 10 million coders in the whole world – but now with LLMs, everybody can start to code. That’s an amazing productivity and augmentation of everybody’s skill set. And that’s a great way to look at what could happen, for example, with our core products, but even with Tableau, which has tremendous programmatic engine as well or even MuleSoft, which is a highly programmatic product that then coupled with an LLM can have the ability to go forward. But of course, those LLMs are highly trained models for those specific types of code, and then that is something that we would add on either through partnership or through our own LLM, as Srini described, it’s another layer of value that we can provide to our customers. In all cases, customers are going to be more productive. They’re going to be more automated, and they’re going to be more intelligent. And as we look at some of the examples that we’ve given like at the New York World Tour, you saw our Marketing Cloud do something very cool that it couldn’t do even just 6 months ago. It segmented the database on its own. It wrote an e-mail on its own. Of course, it required editing, and it also built a landing page on its own. That was amazing. Or as we saw at the Tableau conference, we saw Tableau being able to create its own visits or visualizations that was incredible. And what we saw at our Trailhead DX, we saw Einstein GPT which started to do these amazing next-generation things. And I think in each of these areas, we can offer more value, but we must do it in the auspices of trust, data integrity and governance. And that is what we have been working on now for a considerable amount of time. Of course, we’ve led – we have always wanted to be the Number 1 AI CRM. And we are, if you look at Einstein’s transaction level, I think that that’s enough evidence right there. But I think this idea of generative AI, this starts to reconceptualize every product and we will start to build and develop not only extensions to all of our current products, but entirely new products as well. And we have a lot of exciting ideas of things that we can do to help our customers connect with their customers in a new way using generative AI. Srini, do you want to come in and talk about that? Srini Tallapragada: Thanks, Marc. So, I think the way I see it is this AI technologies are a continuum that is predictive then they generate, and the real long-term goal is autonomous. The initial version of the generative AI will be more in terms of assistance. And like Marc was saying, we are seeing like the most common used case everybody understands implicitly is self-service bots or in the call center or agent-assistant assistance, which I think really helps productivity. But the other used cases, which we are going to see, and in fact, I have rolled out our own code LLMs in our engineering organ, we are already seeing minimum 20% productivity. And in those cases… Marc Benioff: Well, that’s a very key point. Isn’t it? That you’re seeing a 30% productivity increase in your own engineers using our own LLM. Srini Tallapragada: 20%, we are seeing minimum. In some cases, up to 30%. Now, a lot of our customers are asking the same. We are going to roll Einstein GPT for our developers in the ecosystem, which will not only help not only the local developers to bridge the gap, where there’s a talent gap, but also reduce the cost of implementations for a lot of people. So there’s a lot of value. This assistant model is where we’ll see a lot of uptick. And then I think the fully autonomous cases, for example, in our own internal used cases with our models, we are able to detect 60% of instance and auto remediate. That requires a little bit more fine-tuning and we’ll have to work with specific customers to get to that level of model performance. So, I see this is just the start of this [cut] [ph]. The resistant model is the initial thing to build trust and a human in the loop and validate it. And then as the models get better and better, we’ll keep taking used cases where we can fully automate it. Marc Benioff: And address this one issue that a lot of customers come in like they did yesterday, and they tell us they think they’re just going to take all of their data, all their customer data, all of their information and put it into an LLM and create a corporate knowledge base, and it’s going to be one amalgamated database. Why is that a false prophecy? Srini Tallapragada: Because even today, any example you see, even though we have hundreds of Slack channels, there are a lot of specific Slack channels, which only you want access to. You don’t want that. LLM doesn’t know. There is no concept of – it combines all this information. So, unless you put the layer both before who can access the data and then when it generates response, what he can do, you don’t want one wealth manager to generally generate a report, an account report where you’re mixing customers’ balances. So there are a lot of trust issues we have to solve. So, LLMs are good for a lot of very creative generative used cases, initially, where it’s public data that everybody can use it. Those are used cases. I think there is enough of low-hanging fruit in the initial phases with assistant model, which we’ll solve. The really complex automated cases, the role level, record level sharing, we have a lot of techniques, which we are developing, which we will do. It’s also a research area, too. That one, I think we should be tempered with expectations, but there’s enough of, like I said, the develop, for example, I gave product example there’s enough of productivity which we will get. Marc Benioff: Well, we’re really excited to show all of this technology at our AI Day on June 12 in New York City. And then also when we get to [Dreamforce GPT] [ph], we’re going to have an incredible demonstration of this technology. Mike Spencer: So with that, we want to thank everyone for joining us today, and we look forward to seeing everyone over the coming weeks. Have a great one. Operator: This concludes today’s conference call. You may now disconnect. Follow Salesforce Inc. (NYSE:CRM) Follow Salesforce Inc. (NYSE:CRM) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

ChargePoint Holdings, Inc. (NYSE:CHPT) Q1 2024 Earnings Call Transcript June 1, 2023 ChargePoint Holdings, Inc. beats earnings expectations. Reported EPS is $-0.15, expectations were $-0.17. Operator: Ladies and gentlemen, good afternoon, my name is Lisa, and I’ll be your conference operator for today’s call. At this time, I would like to welcome everyone to the […] ChargePoint Holdings, Inc. (NYSE:CHPT) Q1 2024 Earnings Call Transcript June 1, 2023 ChargePoint Holdings, Inc. beats earnings expectations. Reported EPS is $-0.15, expectations were $-0.17. Operator: Ladies and gentlemen, good afternoon, my name is Lisa, and I’ll be your conference operator for today’s call. At this time, I would like to welcome everyone to the ChargePoint First Quarter Fiscal 2024 Earnings Conference Call and Webcast. All participant lines have been placed on a listen-only mode to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. I would now like to turn the call over to Patrick Hamer, ChargePoint’s Vice President of Capital Markets and Investor Relations. Patrick, please go ahead. Patrick Hamer: Good afternoon and thank you for joining us on today’s conference call to discuss ChargePoint’s first quarter fiscal 2024 earnings results. This call is being webcast and can be accessed on the Investors section of our website at investors.chargePoint.com. With me on today’s call are Pasquale Romano, our Chief Executive Officer and Rex Jackson, our Chief Financial Officer. This afternoon we issued our press release announcing results for the quarter ended April 30th, 2023, which can also be found on our website. We’d like to remind you that during the conference call, management will be making forward-looking statements, including our outlook for the second quarter of fiscal 2024. These forward-looking statements involve risks and uncertainties many of which are beyond our control and could cause actual results to differ materially from our expectations. These forward-looking statements apply as of today and we undertake no obligation to update these statements after the call. For a more detailed description of certain factors that could cause actual results to differ, please refer to our Form 10-K filed with the SEC on April 3rd, 2023 and our earnings release posted today on our website and filed with the SEC on Form 8-K. Also, please note that we use certain non-GAAP financial measures on this call which reconcile to GAAP in our earnings release and for certain historical periods in the investor presentation posted on the Investors section of our website. And finally, we’ll be posting the transcript of this call to our Investor Relations website under the Quarterly Results section. And with that, I’ll turn it over to Pasquale. Pasquale Romano: Thank you, Patrick, and thank you all for joining us today. We delivered a strong first quarter. Revenue was at the high end of our guidance range at $130 million and non-GAAP gross margin sequentially improved two points to 25%. To put these results into perspective, we achieved a 59% year-over-year growth rate in the first quarter and the second largest quarter in ChargePoint’s history. We did that while the EV installed base in North America and Europe are still in single-digits, and the EV market is only at the beginning of a decade’s long growth cycle. We also achieved this growth in the midst of a challenging macroeconomic environment. Diversification across verticals and geographies continues to contribute resilience to our business. So while we saw less growth in North American Commercial and Residential than we would have liked due to what we believe is a delay in discretionary purchases we continued to see overall growth and margin improvement. Rex will address guidance for the second quarter. But just to give you a sense of the magnitude of the long-term opportunity ahead of us, the midpoint of that guidance would make Q2 the largest quarter in ChargePoint’s history. You’ll also hear Rex talk about non-GAAP adjusted EBITDA. To give some context, we use non-GAAP adjusted EBITDA as a key measure of the health of our business as we drive towards profitability and as we disclosed in our proxy statement filed last week. This metric is one of the two components of our annual management bonus programs. Beneath the top-line results, we’re continually improving our operations and investing for future scale. We have consistently improved gross margins while recovering from supply chain issues making meaningful changes to the cost of our products and optimizing our operations. Also as we scale, we are carefully managing our operating expenses while making the necessary investments in our support operations and internal business systems. We are committed to delivering dependable infrastructure to our customers. So drivers can find it, use it and depend on it everywhere. Turning back to Q1, we saw two areas of particularly strong growth, Europe and fleet. For the first time in our history, Europe delivered over 20% of ChargePoint’s quarterly revenue. Meanwhile, Q1’s fleet billings more than doubled year-over-year despite supply limitations on vehicles entering the segment relative to demand, and as a percentage of billings, fleet increased from Q4. We’re encouraged to see continued resilience in these growth areas. Beyond the financials, we continued to focus on our products. We offer industry-leading hardware and software for nearly every fueling vertical. Our solutions help our customers deliver the kind of EV driver experience that will continue to accelerate EV adoption across North America and Europe. In brief, better charging infrastructure delivers a better driver experience, which drives more value across the entire EV ecosystem. The positive feedback loop for growth that benefits ChargePoint, our partners and EV drivers in the environment. We are betting on the continued changeover from fossil fuels to electric drive regardless of OEM or vertical. And as a result, we believe we are an index for the electrification of mobility. Before handing off to Rex, let me update you on a few key statistics to give you a little more color on our continued growth. On the network side, we give drivers and ecosystem partners access to approximately 745,000 EV ports in North America and Europe. 243,000 of these are active ports under management on the ChargePoint network up from 225,000 ports last quarter and we recently passed a milestone of over 500,000 roaming ports. These roaming ports are critical to delivering a world-class ecosystem to ChargePoint’s drivers site host customers and strategic partners such as OEMs and fuel card providers. Approximately 21,000 of the 243,000 ports on the ChargePoint network are DC fast-charging up from approximately 19,000 at the end of Q4 and approximately one-third of our overall ports are located in Europe. We count 76% of the 2022 Fortune 50 and 56% of the 2022 Fortune 500 as our customers. This reflects excellent penetration given our land and expand strategy, the stickiness of our solutions, and our strong rebuy rates. From an environmental perspective as of the end of the quarter, we estimate that our network now has fueled approximately 6.3 billion electric miles avoiding approximately 252 million cumulative gallons of gasoline and over 1.25 million metric tons of greenhouse gas emissions. So when you put all that together, it shows that despite the current economic environment, ChargePoint growth continues. We made significant progress against our long-term road map ensuring that ChargePoint scales ahead of this remarkable market opportunity. We’re running a highly differentiated business that is not CapEx intensive. And as you’ll hear from Rex, we’re heading into the black while we turn the world green in the early innings of the EV transition Rex, over to you for financials. Rex Jackson: Thanks, Pasquale. As a reminder, please see our earnings release where we reconcile our non-GAAP results to GAAP and recall that we continue to report revenue along three lines. Network charging systems, subscriptions, and other, network to charging systems is our connected hardware. Subscriptions include our cloud services connecting that hardware, assure warranties, and our ChargePoint-as-a-service offering where we bundle hardware, software and warranty coverage into recurring subscriptions, other consists of professional services and certain non-material revenue items. As Pasquale indicated, we had a solid Q1 with revenue of $130 million, up 59% year-on-year and above the midpoint of our previously announced guidance range of $122 million to $132 million, down seasonally as expected from Q4, Q1 was notably the company’s second largest quarter ever and a good start for the year when compared to Q1 contributions over the past two years. Network charging systems at $98 million was 76% of Q1 revenue, down from $122 million and 80% in Q4, due to typical seasonality. Q1 revenue from network charging systems grew 65% year-on-year. Subscription revenue at $26 million was 20% of total revenue, up 49% year-on-year, up sequentially, and again above the $100 million annual run rate we referenced in our last call. Our deferred revenue which is future recurring subscription revenue from existing customer commitments and payments continues to grow, finishing the quarter at $205 million up from $199 million at the end of Q4. We’re especially encouraged to see this continued growth in our recurring revenues in the very early days of what we believe is a decade’s long EV adoption curve. Other revenue at $5 million and 4% of total revenue increased 20% year-on-year. Turning to verticals, first quarter billings percentages were commercial 63%, fleet 24%, residential 11%, and other 2% reflecting a particularly strong performance in fleet. Commercial grew 44% year-on-year, while fleet was up 129%. Residential grew at 13% year-on-year, and maintained its generally consistent billings percentage. From a geographic perspective, Q1 revenue from North America was 79% and Europe was 21%. As Pasquale mentioned, Europe continues to outpace North America on a percentage basis of 70% year-on-year. Turning to gross margin, non-GAAP, for Q1 was 25% up sequentially from Q4 is 23% and up eight points from 17% in Q1 of last year. This improvement is primarily a combination of diminishing supply chain and logistics expense pressures, significant operational improvements and better scale. We continue our considerable investment in our driver and host support infrastructure because we believe support and reliability, our critical differentiators for both drivers and our customers. We expect continued improvement in non-GAAP gross margin this year. Non-GAAP operating expenses for Q1 were $85 million a year-on-year increase of 2% and a sequential increase of 6% primarily reflecting payroll taxes as well as annual compensation increases effective April 1st. As we look out to the rest of 2023, we will manage expenses carefully and expect to deliver improvements in operating leverage. As you may recall in calendar 2020 and 2021, our OpEx which reflects significant forward investments in our business, was at approximately 100% of our revenue. In 2022, we took that down to 53% in Q4 and 69% for the year. In Q1, we were at 66% given revenue seasonality, but again expect continued improvements this year, particularly in the second half. Given this trajectory, I’d also like to expand on Pasquale’s comments regarding non-GAAP adjusted EBITDA. We added this metric and the associated reconciliation today in our press release with the goal of better illustrating our path to profitability. To calculate adjusted EBITDA, we take our non-GAAP net income loss and add back interest, taxes and depreciation. The depreciation component is low. Thanks to our business model. Using this metric, Q1 non-GAAP adjusted EBITDA was a loss of $49 million a year-on-year improvement of 27%. We look to cut this loss further by approximately two-thirds by Q4 of this year. Looking at cash, we finished the quarter with $314 million, down from $400 million last quarter. As in prior quarters, the primary driver of our negative cash flow is operating loss. In Q1, we also managed to break free on a number of supply chain issues and move our inventory solidly from raw materials and WIP or work in progress, to finished goods meaningfully increasing our inventory level, which helped us avoid leaving business on the table as we have been forced to do in recent quarters. This build helped us in Q1 and sets us up well for Q2 and for Q3. Inventory will vary as we look forward, but we expect it will grow with the business. We used our ATM very likely in Q1, adding $18 million in cash through the program. We will evaluate use of the ATM on a quarter-by-quarter basis and also continued to assess non-dilutive liquidity options. To close on a couple of other key figures, stock-based compensation in Q1 was $24 million consistent with the past three quarters. Our annual compensation cycle includes equity. So we expect our annual step-up and stock-based compensation in Q2 to be approximately $8 million and to be fairly constant for the ensuing three quarters. We had approximately 353 million shares outstanding as of April 30, 2023. Turning to guidance for the second quarter of fiscal 2024, we expect revenue to be $148 million to $158 million, up 41% year-on-year at the midpoint. We are committed to being adjusted EBITDA positive in Q4 of calendar 2024 and remain committed to being cash flow positive by Venezuela. In summary, we’ve achieved the growth we expected to achieve despite significant headwinds. We continue our march to profitability even while we invest in operational excellence at scale. Our differentiated business model is not CapEx intensive and our adjusted EBITDA metric, which we consider to be a strong indicator of the overall health of our business gives us confidence in our trajectory. With that I’ll turn the call back to the operator for questions. Q&A Session Follow Chargepoint Holdings Inc. (NASDAQ:CHPT) Follow Chargepoint Holdings Inc. (NASDAQ:CHPT) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] We’ll take our first question from Gabe Daoud with Cowen. Gabe Daoud: Hey, thanks guys, I appreciate all the prepared remarks, maybe Pasquale. I just wanted to hit on the comment earlier in your prepared remarks just about some of the commercial and residential, we missed that you guys noted, just curious if you could give a bit more color on how that may be snaps back as we progressed through the rest of this year and maybe what’s kind of embedded in your own internal forecast. Pasquale Romano: So, hi, Gabe. It’s a very simple answer. Actually, the beauty of this market is the utilization pressure sits there because EVs keep — we keep converting the installed base from fossil fuel to electric vehicle. Businesses right now, all businesses, commercial businesses that have a discretionary need for charging for their employees or their customers can adjust timing to deal with the macroeconomic uncertainty. So the need doesn’t go away, but the optionality to delay addressing that need in some of our commercial customers exists. What I’ll point you to though is something that we’ve commented on in previous earnings calls as we went through the pandemic. The mix in our business by vertical shifted pretty meaningfully during the pandemic because we went into an abrupt work from home situation and other areas of the business because we’ve been broadly placed across verticals and geos, other places in the business picked up the slack. So we didn’t have to deal with the massive discontinuity financially. You’re seeing that I think play out here again. So we still I think turned in very aggressive growth on a quarter-to-quarter basis, Q1 this year to Q1 last year. It’s a healthy percentage step-up in the geo-diversity especially given that Europe is now 20% of the business and performing strong and fleet up 200% year-over-year similar Q1 to Q1. It’s just evidence that as the macroeconomic water balloon exerts its pressure on the different verticals that we’re diverse enough to take up the slack. So we’re not in a position where we think the demand has gone away and that it’s perished, we’ll get it back as the macroeconomic situation clears up, hope that answered it. Gabe Daoud: Yeah, that’s great color. Thanks, Pasquale. Maybe as a follow-up just and — maybe I’ll ask just about the mix shift or just the billings and the price momentum that you reported in fleet in particular. Could you maybe just give us a bit more color on where exactly are you seeing that strong growth and strong demand within fleet? Is it last mile logistics? Is it I guess on the light-duty vehicle side just given how we’re still vehicle constrained on medium and heavy duty? But just curious I guess is what can you say on fleet, what’s really driving the momentum there and then is it also more fleet momentum in Europe versus the US? Or is it fairly similar? Thanks guys. Pasquale Romano: It’s easier to go backwards with your follow-up question. It’s pretty balanced between Europe and North America fleets. As I said in my prepared remarks, it’s vehicle limited right now, if OEMs were producing vehicles in quantities to match demand, you’d see faster penetration and conversion from fossil fuel to electric. It’s actually well aligned with a softer macro in that everyone’s looking for cost savings obviously and these are meaningful — these vehicles are meaningful components of the cost structures of the businesses that they serve and what that’s done is it’s slanted as I’ve mentioned by the way consistently in previous calls, it’s slanted to land, but not much expand within a customer. And so that’s, I think, just a good indicator for things to come in the future. When that starts to uncoil, it’s complicated, given that there is a bit of a dependency there on vehicle OEMs producing things at scale. One of the bright spots that I mentioned before regarding fleet is transit because that’s the most mature segment. And so we continue to see that segment do quite well, but there has been no general shift in mix between the quarters, that’s worth — that’s materially worth reporting. Gabe Daoud: Okay. Okay, great. That’s helpful. Thanks, guys. I’ll take the rest offline. Operator: We’ll take our next question from Colin Rusch with Oppenheimer. Colin Rusch: Thanks so much guys. Can you talk a little bit about the dynamics in the US commercial market? Can you give us a bit more detail on what’s happening with commercial property owners as they work through cost of capital changes, rental rates and looking at upgrading amenities? With the sales cycle, it looks like conversations you’re having with folks around when and kind of volume of deployments? Pasquale Romano: Colin, the conversation is not any different now than it’s been in the past. The commercial conversations tend to be a mixed bag of are you dealing with the tenant? Are you dealing with the property manager? Are you dealing with the landlord? Are you dealing with all of the above in combination? So it really is situational. And that hasn’t changed. You are seeing property developers and property managers take a more keen interest right now in charging as an amenity more broadly in their portfolio versus in hotspots driven more by tenant — kind of tenant activities. But I think, in general, because the dominant situation there is return to office and as you’ve seen in many statistics that have been reported, we are not — we’re moving to — we’re moving back to a larger component of in-office. But we certainly haven’t snapped back all the way. So that’s probably the biggest component in commercial shift is if people aren’t driving to the office, so workplace charging component will continue to basically move down proportionately to effectively the utilization in the parking lot at office buildings. It doesn’t mean that there isn’t charging going in. It just goes in proportional to the number of days folks are in the office. We will also remind you is it’s not — if you go in three days or if you go in five, it generates the same amount of utilization pressure in the parking lot on these three days if they are synchronized. So there’s a lot of puts and takes there. And I think as this continues — and it gets confused by a lot of other things that are going on in the macro as well, it gets — the complexity goes up. So we’ve got good visibility into it and we’re managing it closely. Colin Rusch: Excellent. That’s super helpful. I’ve got two other things. Just looking for an update there and then maybe a little bit disparate, some of the permitting streamlining efforts that are going on at state level and even at a national level, if you could just give us a sense of anything that you’re tracking very closely there that could be meaningful for the business and then also the potential to consolidate some of these not — these non-fully networked chargers, whether it’s in the US or Europe and how that opportunity is changing for you guys near-term? Pasquale Romano: It is easier to take that one backwards. If you look at consolidation of non-network chargers, there’s a lot of programs, a lot of, I mean, not that our revenue is primarily subsidy dependent, but almost all I can think of anyway subsidy programs have a requirement for the charger to be managed connected to some port of network and meet some set of requirements either at the most basic level for reporting, but usually includes some energy management to give some benefits to the grid. So what you should think about there is a lot of the unmanaged chargers that are out there, will likely get replaced with managed chargers because if they don’t have the necessary communication and processing gear, it’s easier to just tear them out, most of the work by the way is in laying the electrical infrastructure leading up to the chargers. So that’s a very cost-effective swap out. That’s not something that we see as significant yet as a replacement cycle, only because the market is scaling so quickly, the growth sort of swamps it, but I would expect that those things would change out over time. With respect to permitting, I just want to point you to a couple of things in the prepared remarks. If you look at the total ports on our network in terms of activated and under management and that means they’ve not only gone through full installation, but they’ve also gone through software activation. That means the customers decided how they want to use it all that sort of stuff. And we went from 225,000 ports in Q4, to 243,000 ports and you can read the remarks, but that was spread pretty uniformly between DC and AC. What’s interesting in that is the pipeline is already built into our numbers because that is not representative of the ports we sold last quarter. That’s representative of the ports that we sold at some previous months or set of months that have gone through the construction and installation process and the activation process which is not an instantaneous thing in time. So this — you’re seeing in the port growth rate the shadow of the permitting delays print through. Now, for the big stuff, right, the big corridor fast-charging programs, a lot of the big fleet transit programs. Yeah, we see permitting delays continue to be a challenge for our customers. But again that has been a challenge for our customers, for a while, we absolutely would applaud to any change in permit streamlining or utility interconnect streamlining because it will certainly help accelerate, it will accelerate some of the customers’ ability to add the necessary infrastructure. So headline delays are built into our numbers, built into our guide, they’re built into our numbers. They’re built into everything that you’re hearing from us. If we can make it go faster, it’s upside. Operator: [Operator Instructions] We’ll take our next question from James West with Evercore ISI. James West: Hey, good afternoon guys. Hey, Pat. Thanks, Rex. Wanted to ask about the announcement out of Tesla and Ford, a couple days ago, their alignment, the opening of the sort of the supercharger network and what your thoughts were around that? I mean is it a nothingburger? Or is it something to be expected? Is it showing us that there’s two superchargers out there? What’s the — what’s your take on that? Rex Jackson: So I could have bet if one of you would have asked that question. So the shortest way I think to crystallize it in your mind is that, Tesla has been an outsized player, right now they are still sitting around 70%-ish market share in the United States in terms of vehicles in the installed base and that’s Supercharger network has been around since the beginning of the time that we’re in revenue and if it weren’t for Tesla’s on the road, our customers would have no reason to buy a ChargePoint charger because the dominant car there, up to now, and they’re generating effectively the utilization pressure in the parking lots that are causing across vertical, across all our verticals, customers who want to buy our products and services. So the net-net is the Supercharger network whatever effect it’s having is built into our numbers, okay? Now with that said, our fast chargers, in particular, because on the AC chargers side, Tesla ships with an AC adapter since the beginning of time, it’s easy, it doesn’t impair anything. So that’s a — there’s literally no impact there. On the AC side, I mean on the DC side, our chargers have modular cables and modular holsters. So the ability for us to address if the need arises, the ability in particular use cases to add a direct Tesla cable versus using an adapter like people use today, is possible we’re now spending time obviously thinking about innovative ways to not have to increase what is very expensive element and extra cable on a charger to be able to get around some of those problems. So stay tuned, we’ll be pretty innovative there but I wouldn’t — I don’t read it as a bad thing for us long-term at all. James West: Got it. Okay, thanks. Operator: We’ll take our next question from Morgan Reid with Bank of America. Morgan Reid: Hi, everyone. Thanks for taking my question and nicely done on the growth drivers in fleet in Europe. Just curious if you can maybe elaborate on how we should think about that strength through the rest of the year. Just wanting to understand how those two segments, in particular, are expected to scale through the year here after some nice growth here in the first quarter. Pasquale Romano: I would expect fleet to continue to be strong, these are customers that are electrifying for hard business reasons. There is no discretion in electrification. It’s competitive in the long-term for fleets, for most fleets and then in the long-term, drops our cost structure and there’s a long learning curve and optimization cycle. So they need to start today to not have it be an impediment to their business in the long-term. So we expect that segment regardless of the macroeconomic environment to be very strong on a go-forward basis. Europe is ahead of the US currently in EV adoption. We expect it to continue to be strong. There is a more consistent policy mandate across all of Europe supporting the transition from electric drive to — from fossil fuels to electric drive, now correspondingly in the long-term, we don’t see any major difference between the US and Europe. Remember OEMs have to operate internationally and supply chains and cost structures will shift favorably to EVs over the not-too-distant future. So I think it’s an inevitable conclusion that in both markets, you’ll see a conversion rate but currently, Europe is for all the reasons I mentioned going to continue to be I think very strong for the company. So we would expect that we would see strong growth from that sub-vertical or sub-geo I should say. Morgan Reid: Great. Thank you. And then also, can you just talk about how we should think about the OpEx discipline through the year? And you all talked about kind of scaling operating leverage towards a positive inflection later this year. Just curious if you can kind of help quantify the moving pieces there as you look to continue scaling the topline again still a very disciplined OpEx line. Pasquale Romano: Yeah. So the short answer is we have a number in Q1 and we’d like to stay close to that number for each of the rest of — the next three quarters of this year, obviously there’ll be some variations last year, we were very consistent going out of the gates and staying close to it. So I think we’re going to try to operate within a pretty tight range. Morgan Reid: Great. I’ll take the rest offline. Thanks. Pasquale Romano: Thank you. Rex Jackson: Thanks, Morgan. Operator: We’ll take our next question from Matt Summerville with D.A. Davidson. Matt Summerville: Thanks. First, just a question on gross margins up 200 bps sequentially, how should we expect that to kind of play out as we move through the year? Should we expect a similar kind of step function improvement quarter-on-quarter something a bit more conservative to that? And what are the main levers to gross margin improvement as we sit here for the balance of your fiscal ’24? Pasquale Romano: Yeah. So I think, as we said, we expect continued improvements. I don’t think anyone here would say that ’25 is a place that we should be parking our electric vehicle for these to go up, whether it goes up a point or two or whatever, quarter-on-quarter, we might be seeing, is very mix-dependent, but I’m confident that we’re going to head towards the numbers we’ve discussed before, towards the end of the year, I don’t want to peg it to a number, but it’s going to be better in Q4 than it is today. So expect it to continue to decline this year. Matt Summerville: And then with respect to the comment you made Rex towards any of your compared remarks. Are you thinking cut the EBITDA loss by roughly two-thirds between now and the fourth quarter, so say going from $49 million to say $16 million or thereabouts? Is the entirety of that bridge just scale from the revenue growth you’re expecting? Or are there actual cost and expense cuts that are contemplated in there? Thank you. Pasquale Romano: It’s actually all of the above. Clearly, grow the revenue line, which we would hope to do, consistent with what we’ve done in prior years because you start in Q1 and you end up in Q4, Q4 is a lot better than Q1. So clearly that helps. We expect gross margin to improve during the year that definitely helps a lot. And then if we are disciplined on OpEx and keep that in flattish territory, you can make the math work pretty quickly. Operator: We’ll take our next question from Mark Delaney with Goldman Sachs. Mark Delaney: Yes, good afternoon, and thanks very much for taking my question. I was hoping to better understand some of the supply chain dynamics, I guess in terms of the P&L impact and stick to the gross margin theme first. You guys have been talking about how much of a headwind to gross margin, supply chain, I think at one point, it was something like 900 basis points of a headwind, where does that stand as of this most recent quarter in terms of the impact. And then more broadly supply chain, if you could speak around, how you see that progressing? And do you think supply chain hold you back in terms of hitting your shipment target for the balance of the year? Thanks. Pasquale Romano: Yeah, thanks for the question, Mark. So to start, the PPV/supply chain impact that we’ve been talking about, it’s probably closer to five and six points per quarter. There is logistics charges. We can take it up another quarter two and then we have had a couple of write-offs that we did last year that impacted us. So I just want to frame that the percentage points there, it’s really closer to five or six that are specifically, supply chain, no question that has gotten much, much better from a supply perspective. So we really snapped through this quarter and I was glad to see. I think I actually said in prior calls jeez I’d love to build some inventory, right, because we’ve had to lead business on the table in prior quarters and backlog out of whack. So we’re back to a nice rhythm now. I think from a build perspective there, as you can imagine, there are some prior deals that we had to cut that gets supplied that’s now sitting in inventory. So you won’t see a 100% of the supply chain impact disappear overnight. We obviously have to work that through existing inventory and sell that through, but I would say from an operational perspective, logistics are pretty much back to normal, which is a real-time thing. However you don’t. And then the supply chain thing also back to a really good place. So once we work through any existing inventory that had those higher prices previously will be hitting our stride. So but I think it’s fair to say that we are well past the worst of it. Mark Delaney: Thank you. Operator: Our next question comes from Stephen Gengaro with Stifel. Stephen Gengaro: Good afternoon, gentlemen. One thing for me, I wanted to get your read on NEVI funding, kind of where we stand and what your thought processes on timing, but also, do you have insights into kind of where your customers are in the process as far as trying to secure funding? Pasquale Romano: Sure, Stephen. So just to give you some hard facts around NEVI, there are exactly four states where applications on NEVI proposals are due back within shortly, in general, a little over half the United States has programs that are effectively live where we’re working applications and comments that I’ve made in the past have not changed and that we work across the board with our customer base where the customers are aligned well positionally with position requirements, their location requirements within the NEVI program as well as having the right amenity structure, giving a driver something to do that they would want to do, while they are on a road trip. So combining those two things, we are orchestrating responses to the NEVI program, and sometimes by the way, we’re in multiple applications as the technology provider with different sets of folks from our customer base, that’s generally how we approach it. So think of us as trying to put together this set of optimal sites to meet the state’s requirements by looking into our customer base or potential customer base and trying to orchestrate that. Stephen Gengaro: Okay, great, that’s helpful. So would you expect like an inflection point when the funds are flowing? Or do you think it will be a kind of a more smooth, smooth, just kind of realization of those revenues over time? Pasquale Romano: Yeah, so Stephen, this is what I referred to as an all whoosh no bang industry. If you think about what I just said there, right? It’s all whoosh and no bang. So the timing of all of this stuff, while you will see NEVI starting as we get into 2024 to start to build momentum, right? It’s going to build — it’s going to build along — there’s not going to be a sharp discontinuity where you suddenly going to go vertical on something like that just is this market just doesn’t let you state programs and how state programs are implemented, just doesn’t let you state programs and how state programs are implemented. Just doesn’t let you look at the VW Appendix D programs that contributed to our revenue and it contributed to it in a smoothly increasing way over that program and we would expect NEVI bigger in magnitude to have a similar impact. So I wouldn’t expect some discontinuity out there in the future. The sun and the moon and the stars could align and that could happen just not consistent with history. Operator: We’ll take our next question from Bill Peterson with JPMorgan. Bill Peterson: Yeah, hi, good afternoon and nice to see the gross margin improvement. Just like to clarify in terms of the guidance for this current quarter, it sounds like what you’re saying in some of the trends you saw in the first quarter, are to continue, but just want to make sure still continued relative strength in Europe and fleet, still some I guess discretionary slowdown in commercial and residential. Is that the right way to think about it? Or are there some other areas that are starting to unlock or I guess when does the commercial and residential start to unlock? Is it — I mean we’re kind of past the debt ceiling. What are people, I guess, waiting on at this point from your vantage point? Rex Jackson: Yes, Bill, thanks for the question. First of all, in looking forward to Q2, we did not put parameters around that. But to your point, residential is a function of the sale of cars, right? So keep an eye on how fast EVs move from OEMs into the hands of consumers and that’s a hard one to gauge, but it does look like the OEMs are catching up on their ability to deliver which is great. Commercial is tied to mostly the back to work, although there’s a lot of new construction and other areas where it’s just an imperative because this isn’t a nice to have anymore. This is infrastructure you’ve got to put in. So as the commercial sector — it’s happier and less constrained. Obviously, I think that will be down back to the benefit of our business. Thank goodness in both — in the commercial sector for our existing customers because they keep coming back. So they are a very, very nice underpinning for our existing revenue and what we’re looking at in Q2. And then fleets, you didn’t mention fleet, but fleets, a little harder to predict because it’s — it’s funny on the front end, it tends to be smaller than you would expect. And then on the middle and the back end, it’s bigger than you would expect in terms of per customer. So that could be a little [indiscernible] but Q2 is just a blend of the stuff that we see. I don’t know that it’s going to be meaningfully or wildly inconsistent with the stuff we’ve seen in Q1. Bill Peterson: Yes. Okay. Thanks. That’s a good leading to my second question. So you’ve given some good parameters that you do expect some gross margin, I guess, expansion kind of keep OpEx for any flattish. So that’s really good to back into the two-thirds improvement on the fourth quarter. But I guess, holistically, if we think about third-party forecast, IHS has nearly 60% EV growth in the US this year. I think it has above 60% EV growth in Europe for the calendar year. Your current quarter kind of 40%, 41% year-on-year growth, but is there any reason to think in the back half of the year that at least your network systems, charging systems growth wouldn’t be in that kind of range? Rex Jackson: Well, I wouldn’t put that, frankly, I haven’t thought about it and exactly that those percentage terms. I do think that — the one comment I made in my prepared remarks, to look at the shape of the year and our ability and then saying we think we can cut the adjusted EBITDA loss by approximately two-thirds. It tells you we’re thinking we’re going to have a pretty bad second half, right? So I wouldn’t express in percentage terms, but I would say we’re obviously looking forward to a very strong second half, which is frankly what we’ve done in the last two years in a row. Operator: We’ll take our next question from Alex Potter with Piper Sandler. Alexander Potter: Perfect. Thanks. I had a question, I guess, on customer satisfaction, uptime reliability. I know you’ve done a big focus for the company, those metrics maybe in the past weren’t where you would want them to be. Just interested in knowing maybe what inning you’re in, in terms of addressing that, both, I guess, qualitatively, but also to the extent possible to translate that into P&L impact growth would also be useful and interesting. Thanks. Pasquale Romano: A lot of angles on the answer to that question. First of all, I can’t speak for other charging manufacturers, but we’re very proud of the reliability of our systems and the uptime. We’ve had a variety of different packages for parts and labor warranty programs since the beginning of the company. We’ve encouraged customers to purchase those programs. We have a very high attach rate of those programs, as we’ve commented on that before. All our chargers are connected to our network effectively. So we have good visibility as to general uptime on the network and whether the chargers are in a catastrophic state of failure or not. There are a few mechanical failures we cannot spot, but we have drivers that have a nice little mobile app in their pocket and boy, will they tell us when something is broken. They’re a good canary in a coal mine from a network hygiene perspective. And with that said, we are doubling down now even harder on network hygiene. We are — because of inventory relief, we now can turn around spare parts very, very, very quickly, next business day in most cases. That was not true during the pandemic. There was some delay there because obviously, we were impacted and we had no — we were hand-to-mouth on inventory. So I think that hurt the entire industry in terms of repair cycle delay, that has subsided now. We have completely revamped our support operations across the board, driver support, station-owner support, especially in fleet. We have a lot of new programs in fleet for parts and labor warranty, training of self-maintainers, forward stocking of spares, et cetera. So we think we’re actually in quite good shape with respect to our ability to handle that. We’re not going to get over confident. We’re going to continue to watch it closely. And it is, as you’ve seen in my prepared remarks, multiple times now, it is a big rotation. There was a question earlier that Rex took with respect to operating expense and operating expense focus areas and any focus area changes. And what we’ve consistently said over the last several earnings calls, is that we have lived inside what is a flattish envelope for operating expense, but we are not living inside a flattish operating expense with respect to our efforts on reliability, support operations, et cetera. So we are moving emphasis because we believe that, that is the biggest differentiator you can have right now. Is — it has to be reliable, and we’ve commented also previously the construction of our products are not only from a hardware perspective, looked at from a software point of view inward. So they’re designed for all the features that we think are great, but they’re also designed to be repaired at an incredibly rapid rate and also to be able to support forward stocking of spare parts so that there can be effectively a minimum number of subcomponents we build all our charging infrastructure out of, so it can be very easy to support the repair cycle that will need to support to meet the uptime requirements of most of our customers. So huge investment on our side. Absolutely huge. Operator: Our next question comes from Shreyas Patil with Wolfe Research. Shreyas Patil: Hey, thanks so much for taking my question. You guys have talked about how there is more diversity amongst your verticals as it relates to your revenue. Is there anything to consider in that from a margin perspective? I think in the past, you’ve talked about the workplace charger business being the strongest, fleet was a little weaker due to higher DC fast charging mix. Just curious how we should think about that. Rex Jackson: Yes. So it’s actually more product-specific as opposed to vertical specific but — so single-family home is single-family home, right? And that has a margin. We’ve talked about that. It tends to be healthy, but not as strong as some of the AC products that we put into our commercial and fleet operations. Strongest margins are long-standing AC products, which we’ve recently upgraded to higher power and made some other improvements. But — so where AC goes, you get a better margin and that can be commercial or fleet. And then obviously, we put a lot of effort behind a very robust DC portfolio, which is everything from model that fit in certain applications to what we call our Express Plus, which is modular architecture and the margins on those are getting — are good and getting better. We actually had really good progress because the brand new products and you’ve launched at a lower number than you ultimately expect to do. So I wouldn’t say it’s by vertical, it’s by product because all of our products — our products go into both of the major verticals, commercial and fleet. So I hope that helps you. But it’s — so think of it more from a product perspective. Operator: We’ll take our next question from Brett Castelli with Morningstar. Brett Castelli: Yeah, hi, thank you. Just following up actually on that previous question. Rex, you mentioned the rollout of the new CP6000, I think, on the AC side. Can you just kind of talk about sort of the mix between that new product and the more legacy product that you’re seeing today? And then also, can you touch on any margin differences between the new product versus the legacy? Thank you. Pasquale Romano: I’ll talk about the space that is carved out for itself, so to speak, and Rex can address the margin question in particular. We brought out the 6k not to replace the 4k series. We brought it out as a high-end product. It has a lot of things that obviously roll down over time into lower-cost products, but it’s the flagship currently and it also, for applications, where it’s needed, can provide more power per port and that is not necessary in most medium-duration parking scenarios. So it is not applicable necessarily to every single vertical, although it may have other features that make it applicable to other verticals because it has features across the board that are superior to the 4k product. Without getting into too much detail on the mix because it’s so vertical specific, what I will say is the fleet segment, if it goes with an AC more in a light commercial situation is typically using the 6k or are more lightweight products for light commercial, it is not typically using the 4k product, although we do have some fleet scenarios that use that. So the uptick in fleet, in particular, there’s some correlation there. And the 6k is the primary product we use in Europe. So from the commentary that I made — the primary AC product, I should say, that we use in Europe. So the comments that I made regard to fleet and Europe strength and the corresponding strength in the 6k, those one pulls the other, right? The fleet and the Europe business are more 6k dependent than they are 4k dependent. Rex, I’ll let you take the margin question. Rex Jackson: Yes. So from a margin perspective, the 6k, as Pat said, it’s premium product, higher performance, better features, obviously, we’re evolving the product portfolio in a positive way. It actually has similar margins in North America to the 4k. It’s not all the way there yet but it’s nice to be able to build a next-gen product and to preserve margin on that in the process. And then what’s helping us in Europe, as you may recall, we on the AC side, because of local requirements, et cetera, we’ve had to leverage third-party hardware, and now we don’t have to do that anymore because the 6k is a product that is legal and certifiable and works in both North America and Europe. So that’s been a nice improvement from a margin perspective for us in Europe. Operator: Our next question comes from Itay Michaeli with Citi. Itay Michaeli: Great. Thanks. Good afternoon. Just two quick ones for me. First, I was hoping you could maybe comment roughly on what you’re seeing on utilization of your charges, particularly among commercial customers. And I know not every customer is looking to maximize utilization per se, but curious what you’re seeing there? And second, for Rex, just in terms of the inventory build in Q1, maybe how should we think about working capital at a high level the rest of the year? Pasquale Romano: Two very different questions. I’ll take the first, Rex, you take the second. In terms of utilization, our sales team obviously is — sees utilization data as to our customers. It’s a standard reporting feature in our network. And the utilization has to be measured in the context of the hours of operation at the site. I’ll give you — so it’s hard to comment on utilization in the network as a whole and have that be meaningful because in any subvertical, the utilization is measured differently because it’s measured during hours. And the easiest example to give you is a stadium. We have a lot of stadium customers. The stadium is only active when there’s an event at that stadium. Measured on a utilization basis over a 24-hour, on a 365-day year basis, stadiums have horrible utilization unless there’s an event and then they’re 100% booked. So it all goes down to how you measure it. And utilization is very, very strong across the board. And if you want to see the best proxy for that, look at comments that we’ve made in the past about the rebuy rates. The rebuy rate tends to be the majority of the revenue within a quarter because as Rex mentioned in an answer to one of his questions, the initial buy is smaller than you think it should be and the follow-on buys are bigger than you expect them to be. And that’s because the customers start out with some experimentation, especially in the commercial segment where it’s more discretionary. And then they see the utilization and let that drive the expansion. So because the rebuy rate is so strong, it’s the best proxy you guys can use for, is the utilization on the network? Is it strong and is it growing? Rex Jackson: Yes, and very quickly on the inventory working capital question. No question in Q1, our inventory popped up almost $50 million. In truth, that’s actually a blessing not a curse because we went from a lot of long lead time items and a lot of stuff in raw materials to being able to kick things up and get some bills and we have low obsolescence risk on these products. So getting through that and having a blend to inventory of good finished goods that we can move and therefore, we have pretty back-end loaded quarters like most companies. And so knowing that you can ship, what you need to ship at the end of the quarter to meet demand is a really good thing. So I think the inventory will come down meaningfully on a percentage basis relative to revenue. If you look at like the size of the company, the question is bigger than it needed to be in Q1, but those the reasons because we’re coming out of the supply chain issue. And then working capital generally, we bring in inventory down relative to that, that will help as the company grows. And so I actually think that, that part of the picture will definitely improve later this year. Operator: We’ll take our next question from Joseph Osha with Guggenheim Partners. Joseph Osha: Hi, thanks. I just have one question. We talked a little bit about NEVI earlier. I’m wondering, given the timetable and the ambition of the CARB Advanced Clean Fleets rule, what your thoughts are about how that might begin to layer into your business? Thanks. Pasquale Romano: I mean you saw the strength in the fleet business. And so also the fleet business is one of — is interesting. California obviously usually leads the way in the United States with respect to innovation and policy and incentives. But because it’s just good for business to electrify your fleet from a cost structure perspective, we’re seeing a fleet business that’s pretty pervasive across Europe and the United States and not necessarily hotspoted just in California. And like any program, and this is very in line with the comments on NEVI, it doesn’t hit you all at once, it tends to build. So it will contribute. It will contribute over time because it will drive vehicle electrification but again, I don’t expect it to drive, it just can’t move. And remember, you need the vehicles to be able to have demand for the charging infrastructure and that’s the biggest variable there. You can have the incentive structure there, but it doesn’t necessarily mean that the vehicles are going to follow in perfect order. Operator: Thank you, everyone. This concludes today’s presentation. We appreciate your participation, and you may now disconnect. Follow Chargepoint Holdings Inc. (NASDAQ:CHPT) Follow Chargepoint Holdings Inc. (NASDAQ:CHPT) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Dell Technologies Inc. (NYSE:DELL) Q1 2024 Earnings Call Transcript June 1, 2023 Dell Technologies Inc. beats earnings expectations. Reported EPS is $1.31, expectations were $0.86. Operator: Good afternoon, and welcome to the Fiscal Year 2024 First Quarter Financial Results Conference Call for Dell Technologies Inc. I’d like to inform all participants this call is being […] Dell Technologies Inc. (NYSE:DELL) Q1 2024 Earnings Call Transcript June 1, 2023 Dell Technologies Inc. beats earnings expectations. Reported EPS is $1.31, expectations were $0.86. Operator: Good afternoon, and welcome to the Fiscal Year 2024 First Quarter Financial Results Conference Call for Dell Technologies Inc. I’d like to inform all participants this call is being recorded at the request of Dell Technologies. This broadcast is the copyrighted property of Dell Technologies Inc. Any rebroadcast of this information in whole or part without the prior written permission of Dell Technologies is prohibited. Following prepared remarks, we will conduct a question-and-answer session. [Operator Instructions] I’d like to turn the call over to Rob Williams, Head of Investor Relations. Mr. Williams, you may begin. Rob Williams: Thanks everyone for joining us. With me today are Jeff Clarke, Chuck Whitten, Tom Sweet, Yvonne McGill and Tyler Johnson. Our earnings materials are available on our IR website and I encourage you to review our materials and presentation, which includes additional content to complement our discussion this afternoon. Guidance will be covered on today’s call. During this call, unless otherwise indicated, all references to financial measures refer to non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating income, net income, and diluted earnings per share. A reconciliation of these measures to their most directly comparable GAAP measures can be found in our webdeck and our press release. Growth percentages refer to year-over-year change, unless otherwise specified. Statements made during this call that relate to future results and events are forward-looking statements, based on our current expectations. Actual results and events could differ materially from those projected due to a number of risks and uncertainties, which are discussed in our webdeck and SEC filings. We assume no obligation to update our forward-looking statements. Now, I’ll turn it over to Chuck. Chuck Whitten: Thanks, Rob. Our Q1 results demonstrate our strong execution and the power of our model in what remains an uncertain macroeconomic environment. At the summary level, we delivered revenue of $20.9 billion, operating income of $1.6 billion, diluted EPS of $1.31 and cash flow from operations of $1.8 billion. Consistent with our commentary in recent quarters, the demand environment remains challenged and customers are staying cautious and deliberate in their IT spending. We continued to see demand softness across our major lines of business, all regions, all customer sizes, and most verticals. That said, we did see pockets of stronger demand performance worth noting: The CSG business performed sequentially better than our expectations at the time of our Q4 earnings call, and we did see some early signs of demand stabilization in commercial PCs in our small and medium business segments and across our transactional business. In storage, we saw continued demand growth in PowerStore, our marquee midrange offering, and in PowerFlex, our leading software defined storage solution. PowerStore has grown for 11 consecutive quarters since its release, and PowerFlex has now grown for seven consecutive quarters. And in servers, we saw an increase in demand for our AI optimized solutions. Interest has been particularly strong for our new purpose built 16G server for artificial intelligence, the PowerEdge XE9680, though we caution that we are early in the demand cycle for AI infrastructure and it will take time to translate to the P&L. In what was a challenging demand backdrop, we executed extremely well and stayed focused on what we could control. We maintained pricing discipline even as competitors continued to reduce excess channel inventory, our average selling prices increased, and we delivered strong sequential and year-over-year gross margin performance given lower input costs. We continued to maintain strong cost controls, reducing operating expenses by 6%. Since Q1 of last year, we have reduced operating expense by $240 million and will continue to focus on prudent cost management as the year progresses. Our supply chain performed well. We reduced inventory by approximately $800 million in Q1 and by $2.3 billion over the last year, and our lead times and backlog have normalized post pandemic and ahead of competitors. And we are clearly focused on relative performance. We again gained share in calendar Q1 in Commercial PCs excluding Chrome, the most profitable segment of the market and our focus, and we expect to gain share in Q1 in storage when IDC results come out later this month. Though we anticipate some fluctuations in share performance as the year progresses, given the timing of industry backlog reduction, we remain confident in our ability to remain a structural share gainer over the long-term. We also pressed forward on a substantial innovation agenda. Last week, we hosted our annual Dell Technologies World event with more than 10,000 attendees and made several big announcements as we advanced our strategies in multicloud, edge, AI, security, hybrid work and as-a-Service solutions. In multicloud, we introduced three APEX Cloud Platforms developed with Microsoft, Red Hat and VMware to seamlessly extend cloud platform operating environments to on-premise environments. We also announced new APEX Cloud Storage for public cloud offerings, bringing Dell’s industry-leading block and file enterprise storage capabilities to Azure and AWS environments and delivering on the promise of Project Alpine announced last year. We delivered on the vision of Project Frontier, introducing Dell NativeEdge, our software platform that makes it easier for customers to manage, simplify and secure their entire edge estate with a single solution. We announced Project Helix, our collaboration with NVIDIA that enables customers to quickly deploy generative AI on-premises at scale using their own proprietary data safely and securely. Under APEX, we met our commitment to extend as-a-Service capabilities across our full portfolio with the addition of compute and PC as-a-Service. And finally, we announced Project Fort Zero, a collaboration with over 30 partners to develop a US Department of Defense validated solution that will ease the adoption of Zero Trust security in private clouds. Looking ahead, we expect the cautious IT spending environment to continue in Q2. We expect CSG to perform closer to historical sequentials given the pockets of commercial PC demand we saw in Q1 and the duration of the PC downcycle relative to prior cycles. We expect Q2 ISG spending to remain muted as customers scrutinize and prioritize spend, though customers continue to move forward with digital investments, sales cycles continue to lengthen given the macroeconomic uncertainty. And as the industry inventory levels continue to normalize, we expect an increasingly competitive environment relative to Q1. Ultimately, we have confidence in the long-term health of our core markets and the advantages of our business model. Data continues to increase exponentially in both quantity and value, and customers see us as a trusted partner ready to help them navigate the complexities of multicloud, edge, AI, data management and hybrid work. We remain the industry leader in all our key solutions categories, are central to our customers’ technology agendas, and have a strong track record of delivering on our commitments in any environment. So, short and long-term, we will stick to the playbook that has served us well across multiple cycles: focusing on customers, driving differentiated relative performance, delivering against our innovation agenda, prudently managing costs, maintaining pricing discipline and investing for the long-term. Now over to Tom for the detailed Q1 financials. Tom Sweet: Thanks, Chuck. We’re pleased with our Q1 execution given the current environment. We delivered revenue of $20.9 billion, down 20%, with strong gross margins and operating cost management. Currency remained a headwind and impacted revenue by approximately 290 basis points. Gross margin was $5.2 billion and 24.7% of revenue. Gross margin rate was up 2 points, driven by lower input costs and pricing discipline. We did see increased pricing pressure in Q1, but were selective on deals depending on the customer and the opportunity. Expect us to continue to focus on the more profitable segments of the market and remain disciplined on pricing. Operating expense was $3.6 billion, down 6%, driven by lower marketing and headcount related costs, and 17.1% of revenue given scaling. We will continue to actively manage our overall spend as we move through the year. Operating income was $1.6 billion and 7.6% of revenue, due to a decline in revenue, partially offset by a higher gross margin rate and lower operating expense. Our quarterly tax rate was 22.7%. Net income was $963 million, primarily driven by lower operating income and to a lesser extent a higher tax rate. Diluted EPS was $1.31, down 29%, due to lower net income, partially offset by a lower share count. Our recurring revenue in the quarter was approximately $5.6 billion, up 6%, and our remaining performance obligations, or RPO, was approximately $39 billion, which was down 7% due to a reduction in backlog, partially offset by an increase in deferred revenue. Deferred revenue was up primarily due to increases in services and software maintenance agreements. ISG revenue was $7.6 billion, down 18%, driven by soft demand in servers and storage. We delivered storage revenue of $3.8 billion, with demand growth in PowerStore and PowerFlex. While Q1 is seasonally our softest storage quarter, we did see customer decisions extend out and some deal sizes reduced. Servers and networking revenue was $3.8 billion. We saw server ASPs continue to expand and our mix of high value workload servers increased as we continue to sell deeper into customers’ digital agenda. ISG operating income was $740 million or 9.7% of revenue, down 2 points, primarily due to a decline in revenue partially offset by a better gross margin rate. Turning to CSG. The PC market has continued to slow since June of last year, and the market declined sharply in calendar Q4 and again in calendar Q1, down 29% in units. Our fiscal Q1 CSG revenue was $12 billion, down 23%, primarily driven by a decline in units, partially offset by higher average selling prices in Commercial and Consumer. In a continuation of trends we’ve seen in recent quarters, Commercial fared better than Consumer. Commercial revenue and Consumer revenue were $9.9 billion and $2.1 billion, respectively. CSG profitability was strong in Q1 with operating income of $892 million, or 7.4% of revenue, up 20 basis points, driven by a higher gross margin rate and lower operating expenses. We remain focused on Commercial and the high-end of Consumer, relative performance and executing our direct attach motion for services, software, peripherals and financing. Turning to DFS and APEX. Customer interest remains high in consumption and financing models that provide both payment flexibility and predictability. Our Q1 Dell Financial Services originations were $1.8 billion. DFS ending managed assets reached $14.3 billion, up 9%, while the overall DFS portfolio quality remains strong with credit losses near historically low levels. During the quarter, we continued to see APEX momentum, including an increase in the number of APEX customers that have subscribed to our as-a-Service solutions. Turning to our cash flow and balance sheet. Our cash flow from operations was seasonally very strong at $1.8 billion, aided by our focus on working capital efficiency. As Chuck mentioned, we reduced inventory by approximately $800 million in Q1 and by $2.3 billion over the last year through disciplined execution and improvement in our supply chain, and our receivables balance benefited from strong collections this quarter. Our balance sheet remains strong, and we ended the quarter with $9.2 billion in cash and investments, down $1 billion sequentially due to $1.1 billion of core debt paydown and $527 million of capital returns, offset by free cash flow generation. Our core leverage ratio improved sequentially to 1.7x as we prepaid our billion dollar note due in June. Turning to capital allocation. We will continue our balanced approach, repurchasing shares programmatically to manage dilution while maintaining the flexibility to be opportunistic. In Q1, we repurchased 6.1 million shares of stock for $251 million and paid $276 million in dividends. Now, I’ll turn it over to Yvonne to cover our guidance. Yvonne McGill: Thanks, Tom. Turning to guidance. We expect Q2 revenue to be in the range of $20.2 billion and $21.2 billion, or between down 3% and up 1% sequentially, with a midpoint of $20.7 billion. Currency continues to be a headwind, and we are expecting a roughly 200 basis point impact to Q2 revenue. We expect CSG revenue to be roughly flat sequentially and ISG down in the low single digits sequentially. With inventories normalizing across the supply chain, we expect a more competitive pricing environment. Given Q1 profitability combined with more muted sequential component cost deflation, we expect gross margin rates to be down roughly 50 basis points sequentially. We expect our Q2 diluted share count to be between 733 million and 738 million shares and our diluted EPS to be $1.10, plus or minus $0.10. For the full year, we’re maintaining our FY ’24 revenue expectations, down between 12% and 18% and down 15% at the midpoint. Given Q2 guidance, this implies a return to sequential growth in the second half of the year. Interest and other will be up approximately $100 million as we fund DFS originations in a higher interest rate environment. For our tax rate, you should assume 24%, plus or minus 100 basis points. We are increasing our expectation for diluted earnings per share to $5.50, plus or minus $0.25. In closing, expect us to continue to be disciplined in how we manage the business in the current macro environment, focusing on what we can control and delivering for our customers. While there is near-term uncertainty, we have strong conviction in the growth of our TAM over the long-term. We are committed to delivering our value creation framework with a revenue CAGR of 3% to 4%, a diluted EPS CAGR of 6% or higher, and a net income to adjusted free cash flow conversion of 100% or higher over time. We have returned $5 billion to shareholders over the last six quarters through share repurchase and dividends, approximately 96% of our adjusted free cash flow over that time period, well in excess of our 40% to 60% return target. We value our relationships with our shareholders and we are actively listening to your feedback. We increased our annual dividend by 12% last quarter and we recently put in place new governance enhancements to our Board and oversight structure. Ellen Kullman has been elected by our Board as lead independent director with robust oversight responsibilities, and our Board committee members are independent directors. Also, with recent S&P Global eligibility rule changes, we are encouraged about the potential for future inclusion in the S&P 500 index. Now, I’ll turn it back to Rob to begin Q&A. Rob Williams: Thanks, Yvonne. Let’s get to Q&A. We do ask that each participant ask one question to allow us to get to as many of you as is possible. Let’s go to the first question. Q&A Session Follow Dell Inc (NASDAQ:DELL) Follow Dell Inc (NASDAQ:DELL) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. We’ll take our first question from Erik Woodring with Morgan Stanley. Erik Woodring: Hey, good afternoon, guys. Thank you for taking my question. Tom, maybe this question is for you, or Yvonne, and that is, you just beat the first quarter by $0.50, you only raised the full year guide by $0.20. And then, on the revenue side, we’re seeing some moving pieces, but just as a little bit different than what you expected last quarter in terms of, last quarter you talked about sequential revenue growth through the year, now you’re talking about a little bit of a weaker 2Q. And so, can you just help us understand some of the moving pieces? Why seasonality might look a bit different today than what you thought 90 days ago? And why the first quarter beat doesn’t flow through fully through the year? Thank you. Yvonne McGill: Hi, Erik. Thanks. I’ll start off here. So, we did raise EPS given where we landed in Q1. In Q1, you really did see the strength of our model. So, we were happy with that performance. But with the channel inventories and backlog clearing across the industry, as well as access to lower-cost components, we’re expecting a more competitive environment going forward in the second quarter and beyond. The other areas we’re looking at around component costs expecting to be deflationary in the second quarter. And you’ll see that resulting in some gross margin dilution going forward. All of these areas were contemplated in the guide we gave. And I want to reiterate, it’s still early in the year, right? It’s the first — we just finished the first quarter, and so, we want to make sure that we maintain balanced approach there and with our priorities around relative performance balancing growth and profitability and continuing prudent cost control. Erik Woodring: Super. Thank you so much. Operator: Thank you. And our next question will come from Wamsi Mohan with Bank of America. Wamsi Mohan: Yes, thank you so much. I was wondering if you could talk about how you’re thinking about pricing and share? And maybe also reference, how you’re looking at elasticity of demand as a response to pricing? I think, Yvonne, you just said it’s definitely a more competitive environment. So, where is Dell going to be kind of flexing more in its ability to drive more share with price, and in what areas do you think that that won’t be quite as much, where there might not be as much elasticity of demand? Thank you so much. Chuck Whitten: Hey, Wamsi, it’s Chuck. Thanks for the question. Look, I don’t think our posture has changed over multiple quarters on that topic. We maintain a balanced approach to profitability, and we are finding in the current environment, whether it’s the CSG business or in servers or storage, there’s just not a lot of price elasticity out there to use. If there is a place in the business where we see elasticity, it’s in the Consumer business, which is a very small portion of what we focus on. So, look, the pricing environment as we’ve seen it through Q1 has been more challenged. We’re certainly seeing more aggression out there. That always presents to us deals that we could choose to take at a margin-losing proposition, and we tend to steer clear of those. We — if we don’t see a path to margin recovery, we tend to not play. So, even in the falling deflationary environment, that’s the posture we’re taking. I would say across the business generally, we’ve seen TRUs remain stable and that’s both a function of, I think, that pricing discipline as well as the power of our direct model. Our attach in our CSG business as well as in our ISG business was good in Q1 and that helped offset that competitive pricing pressure that we saw across the portfolio. Jeff Clarke: Maybe one other quick comment to build on what Chuck said, Wamsi, is look, we’re committed to long-term journey. That’s part of the model that Chuck referred to in our prepared remarks. I think, we’ve also been consistent that not all share gain in all categories is equivalent. So, our focus continues to be in what we think are the advantaged opportunities for us, commercial PCs, workstations, high-end consumer PCs and gaming, and the opportunities that exist in our broad storage portfolio and server business, that’s where we will focus on share gains. We’re a long-term share acquirer or gainer and we’ll continue to do so. Rob Williams: All right. Hey, thanks for the question, Wamsi. Operator: And our next question will come from Amit Daryanani with Evercore. Amit Daryanani: Thanks for taking my question. I guess, you pushed out fairly impressive performance in the free cash flow side this quarter. So, I was hoping you could talk about, A, just free cash flow generation for the company broadly, how do you really think about it for the year? And is there any way to think about what normalized cash cycle day should look like for Dell? That would be really helpful. And then, B, I think, Tom, you talked about in the press release about how shareholder return is in excess of your target. Does that mean we should start to think about buybacks consistently outpacing your prior framework or anything on the buyback? That would be helpful. Thank you. Tom Sweet: Hey, Amit, it’s Tom. Let me start with your second part of that question and then I’ll pivot over to Tyler, so he can chat about how we think about free cash flow in the context of the financial model. Look, I mean, I think the shareholder return over the last six quarters has been — I think we’re right around $5 billion of overall capital return and I think that’s roughly about 96% of our free cash flow generation over that period of time. Obviously, part of that was the catch-up from the dilution that came out of the VMware spin, but we’ve been very much focused on how do we return and create shareholder value over that period of time. I also think you’ve seen — you’ve heard from Michael over the last month or two or last quarter or so around the fact that he believes that there is incremental capability and capacity around capital return to shareholders, and that’s something we’re clearly evaluating. As we work our way through that, we’ll continue to be opportunistic in how we think about share buyback relative to other uses of capital. We do have some debt that we’re continuing that we’re focused on paying down this year in addition to the $1 billion that we just highlighted in the call. But look, I think from our commitment to our investor base, is that we’ll continue to drive shareholder value and capital return through a — I think a appropriate level of capital allocation. And then, Tyler, why don’t we turn it over to you and talk about free cash flow for a second. Tyler Johnson: Yes, let me try to frame it maybe talking a little bit about what happened last year and then what we’re seeing now, right? So, last year, we, obviously, had a headwind from a working capital perspective and we — as you know, we’ve got a negative cash conversion cycle and that can be a big driver of what our cash does, and we talked about last quarter how we didn’t expect working capital to be a headwind this year and what you saw in Q1 was obviously a pretty big benefit coming from both inventory and on the receivable side. As I think about going forward and just recognizing, as a reminder, we don’t give guidance, I would think about it this way. I think we saw opportunities in working capital, but it’s not going to improve in a linear fashion, so I think that this is going to happen over time. We remain very focused on it. And as you think about what we’ve talked about in the second half of the year, returning to sequential growth, that would help throw up good cash. So, look, I feel good about the year and where we are. I think that we’ll migrate back towards that one times. And I think to your question about what’s normalized, I think where I would pay attention to is working capital, that has the biggest impact. And as you see us improve there, you’ll see cash improve. Amit Daryanani: Very helpful. Thank you. Operator: And moving on to Toni Sacconaghi with Bernstein. Toni Sacconaghi: Yes, thank you. I’d just like to go back to the Q2 guidance. I think, historically, you were up about 6% to 8% in revenues on a sequential basis. You’re guiding for flat to slightly down. And I think you also commented, or Chuck did in the prepared remarks, that you expected kind of normal seasonal growth in PCs. So, I wanted to understand — I’m still struggling to draw the bridge between normal seasonality and what you’re guiding to. Is this all price? Or do you think the markets are weakening incrementally so that they are below normal seasonality? Or is there something about what happened with backlog this quarter? I was sort of under the impression you were going to build more backlog than normal this quarter, which would point to above-seasonal growth. Maybe you can just help square the circle on how we should think about your guidance relative to seasonality and what the demand outlook out there is. Thank you. Chuck Whitten: Yes, thanks, Toni. Let me start on the CSG portion of the question, and let me hand to Yvonne on unpacking the guidance. But look, I would categorize the client business as still recovering. So, I’d start with the Consumer business, obviously, remains under pressure. The Commercial business showed some pockets of improvement. Our small and medium business performance improved as we called out. And it outperformed large enterprises. That is typically a good leading indicator for us. And our transactional business, which is inclusive of our small and medium business segment, but also reflects the run rate enterprise demand that is out there, also showed some signs of stability as we moved through the quarter. But what has not fully recovered yet is the large bids from the largest customers. And that’s ultimately the demand that we’re going to need to see for a full-scale recovery in the PC market. Enterprises just continue to be cautious about their spending. So that’s what’s factored into our Q2 guidance. We expect CSG revenue to be roughly flat sequentially. That reflects a recovering, but not fully recovered market. I think if you look at it, it’s probably closer to the three-year average sequential, but not yet back to pre-pandemic levels. Yvonne? Yvonne McGill: Thanks, Chuck. Toni, I’d also add, I think our three-year sequential is running at about 4% from Q1 to Q2. So that will be — that’s part of that — and what we’ve flashed obviously is lower than that a sequential at the midpoint down 1% with CSG being flat and ISG being down 4%. So, I think that we’re starting to see that. We also had a — as we disclosed today, a better-than-expected first quarter. And so, that’s having a little bit of an impact in the CSG space also. As I look through the rest of the guide, I think, again, we’ve talked about revenue, but other areas, we’re expecting OpEx to be down sequentially, really in line with revenue at the midpoint. And we’re expecting interest and other to be up about $60 million sequentially. So those are some of those elements that we’re evaluating as we look through the guidance. Tom Sweet: Hey, Toni, it’s Tom. Let me also just add. If you step back and think about the Q1 revenue of $20.9 billion, which obviously came in higher than what our guide was when we talked about this a few months ago. Included in that was some backlog reduction. And yes, backlog in our minds is in a normal range and we think about that as range not a point estimate in our — if you look at our lead times, they are generally in line except for maybe one or two outliers. So, there was between — if you look at our RPO lots, you can see there is roughly a $400 million to $500 million backlog reduction in that Q1 revenue number. And then, so you think from a normalized base of roughly $20.4 billion, then you take a — about a 2% sequential growth, up over 1.5% to 2% sequential out to get to the $20.7 billion, it’s lower than the 4% normal seasonal. There’s also a bit of pricing pressure in there from ASPs, given some of the component cost declines. And so that’s the mix that’s in play right now as you think about that $20.7 billion midpoint guide. Rob Williams: All right. Thanks for the question, Toni. Operator: And our next question will come from Shannon Cross with Credit Suisse. Shannon Cross: Thank you very much. Chuck and Jeff, I’m wondering, can you talk a bit about how you’re seeing AI as it relates to your product set? Enrique was talking about AI PCs. There’s obviously, on the server side I think you had some announcements. But I’m also wondering in your conversations with customers, and I know it’s early days, but how they are thinking about AI deployments where they think the data will reside, where they want to influence? Just I’m curious because you have all these conversations, would be helpful to get some feedback. Thank you. Chuck Whitten: You bet, Shannon. Let me start on the question of kind of the demand we’re seeing and what we’re hearing from customers and I’m going to ask Jeff to jump in on the technical aspects and what we’re seeing in the portfolio. But look I mean, we are seeing a lot of demand for AI-optimized infrastructure, that’s obviously a very good thing for our business. Customers, enterprises, are broadly pursuing and experimenting with AI efforts right now. They’re doing it on-premise and at the edge. And as the leader in infrastructure and data that obviously has, it’s good news for our business. As we said in our prepared remarks, demand for our XE9680, that’s our 16G and first-to-market purpose-built AI server with eight NVIDIA H100 or A100 GPUs has been very good, but we’re also seeing demand across our portfolio. It’s not simply the specialized eight-way GPU servers that can run AI, not everything needs billions of parameters. So, net look, we look at it and say, AI is going to drive demand for our business. It’s going to drive demand for our business on-premise and at the edge, which is incremental growth and profitability for us. I just caution as we said in our prepared remarks, that we are early in the demand cycle and it’s going to take time for that to translate to the P&L. Excitement for AI applications is ahead of GPU supply right now and AI-optimized servers are still a very small part of our overall server mix. So, ultimately to see a full recovery in our server business, it’s going to require mainstream service to accelerate as well. Jeff Clarke: Yes, maybe Shannon, some perspective on use cases. We’ve had AI in our PCs for years. So, I don’t know what was recently said, but we’ve been putting AI in our products across our server portfolio, our storage portfolio, and our PC portfolio for many, many years. So, those that are following it, that’s the right thing to do, it’s putting intelligence into our products to make better experiences for customers is absolutely what we’ve been doing and seeing. We’re excited in the PC with what was announced at Build last week with new versions of Windows 11 with co-pilot and more integrated AI capability. I love it as perhaps a reason to buy a new PC. We got to get that done and get the products out in the marketplace, but that’s a pretty exciting opportunity, being able to use Windows and the different forms of applications in a very different way and a more efficient way. So that’s exciting. And then where all the buzz is, is on generative AI and large language models. And it’s an incredible opportunity. Demand, as Chuck referred to, is been great. I think that continues because quite frankly what customers are trying to do is to figure out how to use their data with their business context to get better business outcomes and greater insight to their customers and to their business. And while there’s a lot of discussion around these large generalized AI models, we think the more specific opportunity is around domain-specific and process-specific generative AI, where customers can use their own data. The datasets tend to be smaller. Those datasets then can be trained more quickly and they can use their business context to help them inform and run their businesses better. We think that’s the opportunity in front of us. And that’s quite honestly why we announced Project Helix last week with NVIDIA; an opportunity to take enterprise AI at scale, make it easy to deploy, easy to design, easy to put and install, and use pre-trained models, tuned models and be able to drive inference out in the data center and at the edge. So, we’re pretty excited about the opportunities in front of us. Rob Williams: All right. Thanks, Shannon, and thanks, Jeff. Operator: And our next question will come from David Vogt with UBS. David Vogt: Great. Thanks, guys. Thanks for all the color. I just wanted to dig into ISG and specifically on the server and storage margin. You mentioned lost volume leverage. Was there anything sort of unique in the quarter that maybe hit margins? I know you had a little bit of a benefit in the fourth quarter that was not sustainable. And how do we think about as demand comes back reasonably to normal, should server margins and storage margins be in that sort of historical 11% to 12% range? And longer-term, what is potentially richer configurations mean for ISG margins? Down the road, as we see, obviously, higher-end use cases and obviously, the talk of the town is AI, but as configurations become richer and richer, does that mean better pricing and ultimately, clearly better margins for the ISG business, or should we expect sort of a run rate that’s more consistent with the past? Thanks. Tom Sweet: Well, hey, David. Let’s talk what we saw in Q1 just for a second on ISG margins. So, in general, what we saw was relatively strong server margins given the cost environment we were in. So, with the inventory work that the team did, the ability to get to the component — incrementally lower component costs was helpful in the server portfolio in Q1. And so, I’m pleased with what we saw from server op margin in Q1. Storage, it’s a slightly different story. Now think about seasonality in storage, typically our softest quarter from a demand perspective and from a shift perspective with storage, and that clearly played out with what we saw in the quarter, generally soft storage demand. And then there we did see some year-over-year op margin pressure given some of the de-scaling that we saw quite frankly with lower revenue, lower gross margin dollars. And some pressure on operating margin there. Now, look, we’ll continue to make sure that we’re adjusting the portfolio and the cost environment as we move forward in that as you go forward. As you fast forward and you think about the opportunity around margins given pricing and component costs, I think there is some opportunity there that we’ll be able to take advantage of as it relates to gross margin dollars, particularly on configuration, as configurations get richer. I do think that as Yvonne and Chuck alluded to that the server ASP dynamic where we’re going to see some declines over time, given some of the pricing dynamics, so I think you’ll get back to more historical norms and storage is generally going to be just what’s the revenue velocity going to look like in the mix within that. Chuck or Yvonne, I don’t know if you’d add anything to that. Chuck Whitten: No, I think you got it. I think the question on AI margins, I would just continue to say, look, we view it as incremental growth and incremental margin dollars. The ASPs of our AI optimized serve are a multiple of our normal server average, and we see lots of opportunities to provide services around this infrastructure. These are critical workloads that are dealing with critical sensitive data. So, we ultimately don’t see it as a commoditized space in the enterprise, but as Shannon alluded to in her question, it’s still early days. David Vogt: All right. Thanks, Tom. Thanks, Chuck. Rob Williams: All right. Hey, thanks, David. Thanks for the questions. Operator: And we’ll take a question from Samik Chatterjee with JPMorgan. Samik Chatterjee: Hi, thanks for taking my question. I guess, just to the question on the second half sort of recovery that you’re expecting more in terms of sequential growth, just wanted to clarify if you’re sort of expecting most of that to be driven by CSG, or maybe what’s your assumption in terms of ISG returning to sequential growth in the second half? And more sort of associated with that, how should I think about the reductions that you are doing on OpEx? Do we start to sort of think that you’d get back to sort of stable OpEx from as you see the business return to growth in the second half? Yvonne McGill: Sure. Let me take that Samik. As we — we are talking about sequential growth in the second half across the portfolio inclusive of ISG and CSG, from an overall standpoint. I think that as we look at OpEx level, and spend level, that’s certainly something that we’ll continue to optimize. But I think overall, you should expect, as I’ve stated earlier, a continued improvement as the year progresses, but in a expected competitive environment. So, I don’t know if anybody has anything else to add. Chuck Whitten: No, you got it, Yvonne. Rob Williams: All right. Thanks, Samik. Operator: And our next question will come from Michael Ng with Goldman Sachs. Michael Ng: Hey, good afternoon, and thank you for the question. I just had one on the segment margins. I think last quarter you said CSG margins might be back in the normalized 5% to 6% range for the year and ISG margins would be 200 basis points to 250 basis points lower than the 15.6% in the fiscal fourth quarter. I was just wondering if that’s still the case or are there any puts and takes that we should consider incrementally relative to last quarter? Thank you. Tom Sweet: Hey, Michael, if you look at, we — I did say that last quarter by the way around CSG, 5% to 6%, it’s come in stronger than what I had anticipated quite frankly, because we got to lower component costs. As we thought, as the inventory management I think was quite strong. So, that combined with the pricing discipline that we talked about in our talk track as well as the fact that quite frankly we didn’t see a lot of elasticity out there, so to burn economics on transactions or customer deals that didn’t make sense to us, we passed on. So, CSG profitability was quite strong, and that’s really a driver of lot of the margin upside or profitability upside we saw in the quarter. As it relates to ISG, it’s sort of a tale of two different sort of the lots, right. The server margins were in the range that I was expecting to be, maybe a little bit stronger than I expected them to be given the component cost declines again. Storage margins were lower than I anticipated, quite frankly, because of the de-scaling that we saw in the P&L, with the lower revenue, which obviously translates into lower gross margin dollars. And even though we’ve taken a number of OpEx actions, those are going to work their way through the P&L as we go through the year. So — yes, so there were some obviously some variances against the guide that we gave and we’ll work through those as we go forward. Rob Williams: All right. Next question. Operator: And our next question will come from Simon Leopold with Raymond James. Simon Leopold: Thank you for taking the question. I wanted to see if you could update us on how you’re thinking about the overall PC market, sort of this idea of what’s the new normal, and where is your place in it and sort of the trajectory given all the moving parts coming out of kind of this post-pandemic normalization, where are we in the cycle, and what’s your expectation for the year? Thank you. Chuck Whitten: Yes, let me build on my prior comments. Look, I don’t think we have a ton to add to our prior public comments on the size of the unit PC TAM. We continue to peg it around 250 million units. And as I always emphasize, the reality is, not all of these PC units are created equal, right? So, on an ASP basis, a commercial non-Chrome PC is 3.6 times more valuable than a Chromebook and premium consumer PC above $800 is 2.8 times more valuable than a mainstream consumer PC. So, when we look at the TAM post-pandemic, what we see is a bigger revenue and profit market than we did going into the pandemic. And that’s the net impact of the PC being asked to do more in a hybrid world. In terms of the refresh cycle, again, as we called out, we see the business moving closer to normal sequential, so the rate of decline in the business has come down, that’s starting to show signs of stability. And look what we know is, we’ve, as an industry, shipped 950 million units over the last three years. We, Dell, shipped 160 million PCs over the last three years. That mix is more heavily notebook. And all of our telemetry data says those devices are still in use. So, you have a commercial PC installed base that’s at the highest levels that we’ve seen since 2014. Given that we’re now entering the fifth quarter of a commercial PC downturn that is typically four to six quarters in length, all of that points to improving sequential growth as the year progress. When and how fast that recovers to be determined, but we certainly see customers having stretched a very large commercial installed base for some time. Jeff Clarke: Yes, I might add since the question was how do we view ourselves going into the pandemic and coming out. We were taking share before the pandemic. We took share through the pandemic. We expect to take share after the pandemic. We are [consolidator] (ph) — we’re consolidating before through and after, we’ll continue to focus on the differentiated aspects of our model, which allows us to attach services, software, and peripherals and drive differentiated performance with our business, which you saw in the quarter. And we are the revenue leader, which is a tribute to what Chuck said, we focus on the most valuable parts of the market where our model is differentiated and our products have an advantage. Simon Leopold: Thank you. Rob Williams: All right. Thanks, Simon. Operator: And we have a question from Tim Long with Barclays. Tim Long: Thank you. Could you talk a little bit — you mentioned the APEX Cloud Services and some mention of the as-a-Service platforms. Could you just give us a sense as to kind of scale of those businesses now? What inning are we in? And do you think this is being aided by the macro? And maybe touch a little bit on profitability for these businesses as they scale? Thank you. Chuck Whitten: Yes, thanks for the question. Let me share what I can. Look, we continue to be really pleased with our APEX strategy and performance. We’re seeing really healthy customer interest and growth, particularly in this economic environment where customers are looking to stretch every IT dollar and they’re looking to optimize cloud spend. Look, as we’ve highlighted in the past, our focus is on trying to offer customers choice across our portfolio and steadily building the customer base and our ARR, while driving technical milestones. So, on the latter, we made important series of APEX announcements at DTW last week, including a number of differentiated multicloud solutions: APEX Cloud Platforms, APEX storage for public cloud and our APEX Navigator offering. And then, we extended our APEX portfolio across our entire business with the addition of APEX Compute and APEX PC-as-a-Service. So, it is now the most comprehensive as-a-Service in multicloud portfolio in the industry, and we’re getting a lot of client and customer interest in that offering. We’re just going to continue to focus on customers. We’ll continue to provide periodic updates on our progress like we did last year in terms of the size of the business. But for now, we’re just focused on expanding the portfolio and the customer interest we’re seeing. Tim Long: Okay. And just profitability as that ramps, if you could touch on that? Chuck Whitten: We’re not disclosing financial parameters around the APEX business. As we’ve said, we’ll do that periodically when we have meaningful milestones to report as we did last year in Q2. Tim Long: Okay. Thank you. Operator: And our next question will come from Sidney Ho with Deutsche Bank. Sidney Ho: Thank you. I want to go back to ISG, server revenue was obviously a lot weaker than storage as you kind of expect it. You guide ISG to be down low-single digit sequentially in the second quarter. Do you expect the trajectory to be different between server and storage? Maybe talk about some of the trends you see in the first month of the quarter? And also, I want to ask about, are you still thinking the group ISG being down mid-teens percentage for the year as you alluded to a quarter ago? Thank you Chuck Whitten: Maybe I’ll start with just the demand environment and Yvonne can talk about the specific components of the guide. Look, it just remains a challenging demand environment clearly in ISG. The caution that we saw enter the spending environment in Q2 of last year continues a year later. Customers aren’t outright canceling digital projects, but they are prioritizing spend and they continue to constrain investments in infrastructure hardware after the burst of pandemic spending the last couple of years. If you look specifically at servers, the most acute demand challenges are in the large bids with the largest customers, that reflects that tightening budget environment and we’re seeing lengthening decision timelines. And look, on storage, as we cautioned during our Q4 earnings call, it’s not immune to the IT cycles, it typically lags servers, but it’s never fully insulated. And after seeing slowdowns in small and medium business in Q4, we saw a slowdown in larger customers in Q1. So, you take our Q4 and our Q1 storage results together, we’re clearly seeing a lull in the storage market. And so that’s what’s inputted into our guidance of ISG down in the low-single-digits in Q2, which just sort of reflects that continued cautious spending environment. Yvonne McGill: Yes. And Chuck I’d add, I think that continues through in our guide for the rest of the year. As you articulated, servers slowed earlier than storage and we started seeing storage slow in Q4. So, we’ll see those both improve as the year goes on sequentially, but obviously, storage is what’s trailing from an improvement standpoint, as we normally see cyclically. Cyclically, that’s hard to say. Rob Williams: All right, great. Thanks for that question. Let’s take one more question and then we’ll turn it over to Tom for a close. Operator: Thank you. We’ll now take our final question from Krish Sankar with TD Cowen. Unidentified Analyst: Hey guys, [Eddie] (ph) on behalf of Krish. Thanks for taking my question. Your comparison storage have expressed positive views on QLC NAND and its potential to replace hybrid and HDD storage system. Given your company’s size and exposure to these types of system, I’m curious to know your thoughts on QLC. I know you guys have a QLC product that you announced last year, but do you think other QLC systems are likely to compete heavily on price with hybrid and HD systems on a per gigabyte basis? Thank you. Jeff Clarke: Yes, over time absolutely, which is why we’re pursuing it [indiscernible] from others, we’ll continue to build across our portfolio. Today, given the compressed pricing of NAND, you don’t necessarily need QLC to meet those cost targets or price targets. But we’re well aware of the dynamics and I think have a very good understanding of the technology given our storage portfolio and our aggregate buy across NAND in our sectors, I think the largest, we understand the dynamics, and plan accordingly. Tom Sweet: Hey, thanks, Jeff. And so, let me do the close here. So, all of you probably know at this point that I did announce my retirement from Dell at end of the second quarter. So, including today’s call, this is my 38th earnings call as the CFO of the company. And so, it’s obviously been an amazing journey as we’ve transformed the company and created shareholder value over the last decade or so with our solution capability, the EMC merger, then of the latest being our spin-out of VMware to our shareholders. And we also have evolved our technology vision, we’re number one in virtually every category, and we’re clearly at the center of our customers’ digital journey. So, I’m pretty proud — I’m incredibly proud, I should say, of the team and the company and what we’ve been able to accomplish, but also wanted to say thank you to all of you for your feedback, your partnership, and your deep relationships that we’ve had with the investment community. So, I’m going to leave the company in strong hands with a great team and great hands with Yvonne as she steps into the leadership role as the CFO. And obviously, I’ll be cheering the company on as we move forward. So, let me just finish by saying thank you, thanks for your support and your trust over the last decade. So, talk to you guys at some point in the future. Take care. Rob Williams: All right. Thanks, Tom. That wraps the call today. Operator: Thank you. This concludes today’s conference call. We appreciate your participation. You may disconnect at this time. Follow Dell Inc (NASDAQ:DELL) Follow Dell Inc (NASDAQ:DELL) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Every year, technology marches forward and militaries across the world seek to implement the next generation of tech into their armed forces. The U.S. Army is no exception, and in fact it is considered one of the most technologically advanced armed forces on the planet. The Army’s latest orders of future attack reconnaissance aircraft prove […] Every year, technology marches forward and militaries across the world seek to implement the next generation of tech into their armed forces. The U.S. Army is no exception, and in fact it is considered one of the most technologically advanced armed forces on the planet. The Army’s latest orders of future attack reconnaissance aircraft prove this as this branch is looking to upgrade its forces. (These 21 military aircraft cost taxpayers more than $100 million each.) The United States Army boasts a range of aircraft that enables it to maintain capability and superiority in various theaters of operation. A sizable fleet of rotary-wing and fixed-wing aircraft provides the U.S. Army with tactical air support and strategic lift capacity. Here is a look at all of the aircraft currently in service in the U.S. Army. To identify all of the aircraft in active service in the U.S. Army, 24/7 Wall St. referenced the 2023 report World Air Forces from FlightGlobal, an aviation and aerospace industry website. We ranked aircraft by the number of units in active service. Supplemental data regarding the type of aircraft, how many are in active service, and how many are on order came from FlightGlobal. Data on each aircraft’s first flight came from various military and historical sources. The Boeing AH-64 Apache stands out as a premier attack helicopter in the Army’s arsenal. The Apache is designed to provide close air support to ground forces. Equipped with advanced sensor systems and a lethal assortment of weaponry, including the Hellfire missile, the AH-64 can neutralize various types of enemy targets. (Also see, every plane in the U.S. Navy.) The CH-47 Chinook complements the aerial support role with its heavy-lift cargo capacity. Designed and produced by Boeing, this tandem-rotor helicopter is famed for its versatility, speed, and long-range. As the primary means of transport for artillery, troops, and supplies, the Chinook allows the U.S. Army to maintain operational readiness and effectively support combat operations. It is also one of the longest-serving aircraft in the Army, dating back to its introduction in 1962. These aircraft enable the Army to support special operations and perform humanitarian missions as well as to conduct various combat roles. With ongoing development and modernization, the Army is well equipped to dominate the skies in the years to come.  Click here to see all the planes in the US Army.  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......»»

Apple stock could be a 'table-pounder' and the debut of its Vision Pro could drive up the company's valuation, some analysts say. Apple Vision ProApple Apple unveiled its new mixed-reality headset, the Vision Pro, on Monday. The stock could be a 'table-pounder,' some analysts said. Others think the 'good news' is already priced in. It will take years to know for sure how successful the Vision Pro really is, tech investor Gene Munster said. Apple unveiled its new mixed-reality headset, the Vision Pro, on Monday. The stock rose nearly 2% to hit an all-time high before the product was announced, but is now trading 0.76% lower at $178 after hours. The tech giant, whose market capitalization currently stands at $2.85 trillion, unveiled its long-awaited first spatial computer during its Worldwide Developers Conference. The device combines artificial intelligence with augmented reality and launches Apple into competition with Meta's lineup of AR/VR headsets. Apple stock could be a "table-pounder" and the debut of its mixed-reality headset could drive up the company's valuation dramatically — still, some analysts maintain that it will take years to know for sure how successful the new augmented reality headset will be, according to analysts. "I understand why shares of $AAPL have pulled back 2% since the announcement. Vision Pro is something that investors will need to try before they believe. There are so many questions I have, that may take months to answer as content and applications build," tech investor Gene Munster tweeted late on Monday.—Gene Munster (@munster_gene) June 5, 2023 Wedbush's Dan Ives thinks Apple's stock is a continued "table-pounder" and its Vision Pro debut is the company's first step on artificial intelligence because developers will use the product to build AI-driven apps. "This is just starting the next leg from a services perspective as well as a mini supercycle. You could argue in the sum of its parts, this is a $3.5 trillion dollar valuation or more," he told CNBC on Monday. Meanwhile, Goldman Sachs analyst Mike Ng said Apple's stock could jump nearly 30% as the new gadget will draw in a new user base and encourage multiple purchases as it develops. He also said Apple has an "attractive" valuation now compared to its own history and relative to other mega-cap tech companies. "Apple's success in premier hardware design and resulting brand loyalty has led to a growing installed base of users that provide visibility into revenue growth by reducing customer churn, lowering customer acquisition costs for new product and services launches, and encouraging repeat purchases," he wrote in a note, according to Marketwatch. However, others like analysts at D.A Davidson think the stock has already priced in the "good news" from Vision Pro's launch. "We believe there are important structural challenges for Apple when it comes to consumer adoption of AR/VR hardware, which could limit the near-term impact on its sales and profitability," Tom Forte, a senior research analyst at the firm, wrote in a Monday note, per Marketwatch. Read the original article on Business Insider.....»»

In this piece, we will take a look at ten crypto stocks billionaires are loading up on. For more stocks, head on over to 5 Crypto Stocks Billionaires Are Loading Up On. Cryptocurrency is perhaps the most disruptive technological effect of the internet revolution over the past few decades. What even the world’s biggest investment […] In this piece, we will take a look at ten crypto stocks billionaires are loading up on. For more stocks, head on over to 5 Crypto Stocks Billionaires Are Loading Up On. Cryptocurrency is perhaps the most disruptive technological effect of the internet revolution over the past few decades. What even the world’s biggest investment banks and the most preeminent economist couldn’t see coming is an entirely new asset class that is not based in anything tangible but only on the countless zeroes and ones that form the fabric of the digital universe. The world’s foremost cryptocurrency Bitcoin has made countless millionaires and perhaps bankrupted even more people. Over the past five years, Bitcoin has returned more than the shares of the world’s largest technology company Apple Inc. (NASDAQ:AAPL). Yet, since Bitcoin has primarily been a growth asset that sees funds flow when either plenty of money is available or when risk appetite is high in a growth environment. It declines during times of economic turmoil. This tiny fact has been true throughout June 2023. This is because 2023 has been a year of cautious optimism about the Federal Reserve finally pausing and then reducing its interest rate cycles. This has led to the stock market and Bitcoin both appreciating this year. However, this upward trend was snapped by the end of the first week of June as the Labor Department released the employment statistics for May 2023. This data showed that the American economy added 339,000 jobs in the month, surpassing estimates. The market, still shaken by the rapid interest rate hike cycle, was in no mood for risk and as a result, Bitcoin dropped by 5%. This drop came despite the fact that unemployment slightly picked up, indicating that as far as the Bitcoin crowd is concerned, the data was a bearish indicator. Bitcoin isn’t the only cryptocurrency you can get your hands on though. And its high price point also makes it quite unattractive despite the ability to make an investment in portions. In fact, there are almost 23,000 different cryptocurrencies that anyone can choose from according to data compiled by CoinMarketCap. Cumulatively, they have a market capitalization of $1.1 trillion, more than thousands of companies, yet lower than the biggest of the biggest firms. So what does the future hold for the cryptocurrency market? Well, Coinbase has an outlook for what to expect from the market this year. It believes that 2023 will continue to provide a stressful environment for Bitcoin miners in particular. This is because of the volatility in energy prices. After the bloodbath of 2022, which saw the market get cut in half, investors are unwilling to put their faith in altcoins. This trend also holds true for the institutional crowd, for which, according to Coinbase, the fundamental thesis for investing in Bitcoin has not changed. Additionally, investing in cryptocurrencies is not limited only to buying the ‘coins.’ There is a diverse ecosystem of companies that operate in the industry, ranging from those that provide a platform to trade the cryptocurrencies to those that provide the hardware and others that do the mining. Looking at some of these industries, the global cryptocurrency market has some growth left in it for the next ten years according to research from Precedence Research. The research firm believes that the market was worth $1.9 billion in 2022 and is expected to grow at a compounded annual growth rate (CAGR) of 12.90% until 2032 to be worth $7 billion by the end of the forecast period. Part of this growth will come from developing countries adopting cryptocurrency, even as North America was the largest market in 2022. There is no mining without hardware, and therefore it’s no surprise that relative to the broader market, this subsegment is also quite lucrative. According to a report from Allied Markets Research released in January 2023, the Bitcoin mining hardware market was worth $528 million in 2021 and should reach $1.7 billion by 2031 through a CAGR of 12.6%. Taking stock of the situation on the ground, management of CME Group Inc. (NASDAQ:CME) shared some light on the cryptocurrency market during its earnings call for the fourth quarter of 2022 where it shared: So, when we look at the digital asset space and the cryptocurrency business at CME, we remain seeing very strong growth in our offering. So, just as a reminder, our approach to the cryptocurrency products as being the regulated venue, offering regulated products in a way that provides bonafide risk management and trusted access to the marketplace. We have seen that value proposition remain true in Q4 with some of the more widespread events in the cryptocurrency space, where we saw record volumes in November, record large open interest holders of 439 holders in the month of November. And that momentum hasn’t slowed down with respect to the adoption and continued growth at CME. What I mean by that is, let’s look at the number of accounts. Typically, we add about 450 accounts per month in our cryptocurrency business. And in November, we added 934, over doubling the normal account opening. And in January, we have seen over 700 accounts €“ new accounts opened with respect to trading cryptocurrency products at CME. That’s really a testament to the marketplace broadly turning to CME in times of stress in the rest of the cryptocurrency ecosystem. When we look at the product development front, we have focused on additional pricing products. These are non-tradable reference rates in real-time indices. We did in last month, introduced three new reference rates around the Metaverse, that complements some of the additional indices we introduced with respect to D5 sector in cryptocurrency as well as the more than dozen so more traditional cryptocurrency tokens that we also have reference rates on. With these details in mind, let’s take a look at some cryptocurrency stocks that billionaires are buying. Out of these, some top picks are CME Group Inc. (NASDAQ:CME), NVIDIA Corporation (NASDAQ:NVDA), and Interactive Brokers Group, Inc. (NASDAQ:IBKR). Photo by andre-francois-mckenzie on Unsplash Our Methodology To compile our list of the top cryptocurrency stocks that billionaires are buying, we first compiled a list of firms that allow crypto trading on their platform, mine cryptocurrency, and make the equipment for crypto mining. Then, the number of their billionaire investors as of the first quarter of 2023 was determined using Insider Monkey’s database of billionaire-owned stocks, and the top billionaire cryptocurrency stock picks are listed below. Crypto Stocks Billionaires Are Loading Up On 10. Greenidge Generation Holdings Inc. (NASDAQ:GREE) Number of Billionaire Investors In Q1 2023: 2 Greenidge Generation Holdings Inc. (NASDAQ:GREE) is one of the oldest companies on our list. Classified as a financial services firm, the company runs cryptocurrency data centers. It is based in Dresden, New York, and was set up in 1935. By the end of Q1 2023, five of the 943 hedge funds part of Insider Monkey’s database had bought a stake in the firm. Out of these, Greenidge Generation Holdings Inc. (NASDAQ:GREE)’s largest shareholder is Seth Fischer’s Oasis Management and its two billionaire investors are Jim Simons and Israel Englander. Along with NVIDIA Corporation (NASDAQ:NVDA), CME Group Inc. (NASDAQ:CME), and Interactive Brokers Group, Inc. (NASDAQ:IBKR), Greenidge Generation Holdings Inc. (NASDAQ:GREE) is a crypto stock popular among billionaires. 9. HIVE Blockchain Technologies Ltd. (NASDAQ:HIVE) Number of Billionaire Investors In Q1 2023: 3 HIVE Blockchain Technologies Ltd. (NASDAQ:HIVE) is a Canadian cryptocurrency mining firm based in Vancouver, Canada. The firm has mining operations in several countries and was set up in 1987. Three of the 943 hedge funds profiled by Insider Monkey had invested in HIVE Blockchain Technologies Ltd. (NASDAQ:HIVE) as of March 2023. All three of these are billionaire-run funds. 8. Marathon Digital Holdings, Inc. (NASDAQ:MARA) Number of Billionaire Investors In Q1 2023: 4 Marathon Digital Holdings, Inc. (NASDAQ:MARA) is a blockchain company based in Fort, Lauderdale, Florida. It primarily operates in the United States. As of the first quarter of 2023, 13 of the 943 hedge funds part of Insider Monkey’s database had held a stake in the firm. Out of these, four are headed by billionaires. 7. Iris Energy Limited (NASDAQ:IREN) Number of Billionaire Investors In Q1 2023: 4 Iris Energy Limited (NASDAQ:IREN) is an Australian company based in Sydney, Australia. The firm operates Bitcoin mining facilities. Insider Monkey’s fourth quarter of 2023 survey of 943 hedge funds revealed that six had bought Iris Energy Limited (NASDAQ:IREN)’s shares. 6. Canaan Inc. (NASDAQ:CAN) Number of Billionaire Investors In Q1 2023: 4 Canaan Inc. (NASDAQ:CAN) is a Singaporean hardware company. It sells Bitcoin mining hardware products and has a global operations base. As of Q1 2023, eight of the 943 hedge funds profiled by Insider Monkey had held a stake in Canaan Inc. (NASDAQ:CAN). Out of these, the largest shareholder is Douglas Harold Hart Polunin’s Polunin Capital with a $3.7 million investment. CME Group Inc. (NASDAQ:CME), Canaan Inc. (NASDAQ:CAN), NVIDIA Corporation (NASDAQ:NVDA), and Interactive Brokers Group, Inc. (NASDAQ:IBKR) are some hot crypto stocks being bought by billionaires. Click to continue reading and see the 5 Crypto Stocks Billionaires Are Loading Up On. Suggested Articles: 15 Most Undervalued Growth Stocks To Buy 10 Best Industrial Distribution Stocks to Buy Now 15 Stocks that will 10x in 5 Years Disclosure: None. 10 Crypto Stocks Billionaires Are Loading Up On is posted on Insider Monkey......»»

In this piece, we will take a look at the ten internet of things (IoT) stocks billionaires are loading on. For more IoT stocks, head on over to 5 Internet of Things (IoT) Stocks Billionaires Are Loading Up On. As a technology, the consumer use of the Internet is entering its fourth decade. And over […] In this piece, we will take a look at the ten internet of things (IoT) stocks billionaires are loading on. For more IoT stocks, head on over to 5 Internet of Things (IoT) Stocks Billionaires Are Loading Up On. As a technology, the consumer use of the Internet is entering its fourth decade. And over the past forty odd years, it has evolved quite a bit. If you’re old enough, you’d remember that connecting to the Internet in the 1990s and the early 2000s required using a dialup modem with its familiar tune of signals being sent to a network to establish a connection. The era of broadband, which came roughly around the same time as the smartphone, and the growth in WiFi devices marked the first major shift in internet use. Consumers were no longer limited either to their desks or to slow speeds to access the web, and as a result, the kinds of applications and data that could be used grew exponentially. This growth came a little while before 3G internet smartphones provided high speed internet right into a consumer’s hands, and the subsequent proliferation of dongles enabled anyone with a laptop to access the Internet as long as there was a supportive telecommunications tower in sight. Settling into the 2020s, it’s all about two main technologies in the Internet scene. These are fifth generation (5G) telecommunications networks and low Earth orbit (LEO) internet satellites. With the latter, you can access the net anywhere on the planet as long as there are satellites orbiting and you have the right equipment such as a dish. With the former, the opportunity for a multi billion dollar industry is at the doorstep of countless firms. This industry is the Internet of Things (IoT) industry. Starting off with the basics, the global IoT industry was worth $399 billion in 2022 and will grow to be worth $486 billion in 2023. From then until 2027, the sector is expected to grow at a whopping compounded annual growth rate (CAGR) of 21.4% to be worth an estimated $1 trillion by the end of the forecast period according to research from The Business Research Company. The research firm adds that Asia Pacific was the largest segment of the IoT market – unsurprising as we’ll find out later when we delve deeper into its myriad of use cases. The Business Research Company adds that automotive use is a major industry to utilize IoT gadgets, and collectively the gadgets will provide companies with vast amounts of data to sift through to generate analytical insights. One key sector that is vastly expected to benefit from IoT devices is the industrial segment. This area involves using machines to manufacture products on a large scale, and the use of IoT gadgets enables manufacturing managers to catch errors, consolidate and gather new data, and ensure real time monitoring of the factory line. Therefore, it’s unsurprising that the industrial Internet of Things industry is quite lucrative.  A research report from Grand View Research shows that this area was worth $321 billion in 2022 and will grow at a CAGR of 23.2% from this year until the end of the decade to be worth $1.6 trillion. Within industrial IoT use, the manufacturing segment commanded an 18% market share in 2022 and will continue to be the largest portion moving forward. In terms of growth rate, the logistics segment is anticipated to outpace the broader market and exhibit a CAGR of 24%. Yet, these estimates are only representative of what money the IoT companies will make. But what about the value they will generate? On this front, McKinsey has some rather stunning estimates. It believes that by 2030, IoT could enable users to deliver an absolute eye popping $12.6 trillion in value – nearly ten times the revenue that IoT companies will generate according to some estimates. The factory segment will account for 26% of this value generation, and healthcare use is expected to come in second place at a best case 14% share. Additionally, and as is the case with most high technology industries (another example being biotechnology), the developed world is estimated to hold the lion’s share (55%) of this value. Rounding off our analysis by taking a look at the situation on the ground, management of smart lighting and other equipment maker Acuity Brands, Inc. (NYSE:AYI) shared during its second quarter of 2023 earnings conference: With our product vitality and service efforts, we make products that deserve to be chosen and our independent sales agents ensure that they are chosen. Product vitality is driving success across our portfolio and during NEXT 23, we introduced several new products. I want to highlight a couple here. The first was the new nLight AIR System Input Device. This is an indoor controller that can be used in multiple spaces, including office, commercial and retail. The device converts analog outputs to wireless broadcast to control intelligent luminaires. This reduces the need for complex wiring solutions during installation and reduces the associated cost for the customer. The second was the nLight AIR rPOD Micro. This is a battery-powered wall switch that can be used as a traditional wall switch or as a remote, providing control from anywhere within a build space. This is a really exciting extension of the technology and an elegant response to our customers’ need for flexibility. These and other products continue to gain market attention. This quarter, several of our architectural lighting brands, A-Light, Eureka and Luminis, won a total of eight Good Design Awards from the Chicago Athenaeum which recognizes products and industry leaders in design and manufacturing that have chartered new directions for innovation. Now moving to our Intelligent Spaces Group. The spaces team continued to perform well, delivering another quarter of solid sales and operating profit growth, driven by the continued success of Distech. Distech is winning because we have the best digital control solutions in the market. It’s technology is open protocol which means you can connect our controller to most new or existing systems in a build space, giving our customers significant flexibility. With these details in mind, let’s take a look at hot IoT stocks finding favor from billionaires, out of which the top ones are DexCom, Inc. (NASDAQ:DXCM), Acuity Brands, Inc. (NYSE:AYI), and NXP Semiconductors N.V. (NASDAQ:NXPI). Syda Productions/Shutterstock.com Our Methodology To compile our list of the list of internet of things (IoT) stocks that billionaires are buying, we first made a list of 36 IoT companies ranging from those that make the IoT devices or their hardware and also those that provide a platform to use the data from the gadgets. Then, the number of billionaire investors that had held their shares as of Q1 2023 was determined, and the billionaires’ top IoT stock picks are listed below. 10 Internet of Things (IoT) Stocks Billionaires Are Loading Up On 10. Belden Inc. (NYSE:BDC) Number of Billionaire Investors: 8 Belden Inc. (NYSE:BDC) makes and sells connectivity products to a variety of industries such as automation, security, and transport. The firm’s products allow for data center operations, machine connectivity, power control, and sensor automation. As of Q1 2023, 25 of the 943 hedge funds part of Insider Monkey’s database had bought a stake in Belden Inc. (NYSE:BDC). Out of these, the firm’s largest investor is Richard S. Pzena’s Pzena Investment Management with a $72 million investment. Belden Inc. (NYSE:BDC) joins Acuity Brands, Inc. (NYSE:AYI), DexCom, Inc. (NASDAQ:DXCM), and NXP Semiconductors N.V. (NASDAQ:NXPI) in our list of the best IoT stocks being bought by billionaires. 9. Johnson Controls International plc (NYSE:JCI) Number of Billionaire Investors: 8 Johnson Controls International plc (NYSE:JCI) is an industrial equipment maker based in Cork, Ireland. The firm provides connected building management, fire control, and other products. 41 of the 943 hedge funds studied by Insider Monkey for their first quarter of 2023 shareholdings had bought the company’s shares. Billionaire Ken Fisher’s Fisher Asset Management is Johnson Controls International plc (NYSE:JCI)’s largest hedge fund investor since it owns 11 million shares that are worth $682 million. 8. T-Mobile US, Inc. (NASDAQ:TMUS) Number of Billionaire Investors: 9 T-Mobile US, Inc. (NASDAQ:TMUS) is a telecommunications carrier. Due to its investments in 5G connectivity infrastructure, it sits at the heart of the IoT industry by providing the products with a connectivity platform. After digging through 943 hedge funds for their March quarter of 2023 investments, Insider Monkey discovered that 89 had invested in T-Mobile US, Inc. (NASDAQ:TMUS). The firm’s largest shareholder in our database is the legendary Warren Buffett’s Berkshire Hathaway with a $759 million stake. 7. Autodesk, Inc. (NASDAQ:ADSK) Number of Billionaire Investors: 9 While generally thought of as a design firm, Autodesk, Inc. (NASDAQ:ADSK) is a crucial player in the enterprise IoT market since it enables customers to consolidate their data under a single platform to generate analytics. Insider Monkey’s March quarter of 2023 survey covering 943 hedge funds revealed that 57 had bought the firm’s shares. Autodesk, Inc. (NASDAQ:ADSK)’s largest hedge fund investor is Ian Simm’s Impax Asset Management with a $253 million investment. 6. International Business Machines Corporation (NYSE:IBM) Number of Billionaire Investors: 9 Another key player in the IoT analytics market is International Business Machines Corporation (NYSE:IBM). Its platform enables customers to integrate up to five hundred devices under a single roof for free to manage their insights and inputs. 49 of the 943 hedge funds part of Insider Monkey’s database had invested in International Business Machines Corporation (NYSE:IBM) during Q1 2023. The firm’s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital with a $673 million stake. DexCom, Inc. (NASDAQ:DXCM), International Business Machines Corporation (NYSE:IBM), Acuity Brands, Inc. (NYSE:AYI), and NXP Semiconductors N.V. (NASDAQ:NXPI) are some favorite IoT stocks among billionaires.   Click to continue reading and see the 5 Internet of Things (IoT) Stocks Billionaires Are Loading Up On.   Suggested Articles: 10 Small-Cap Mining Stocks Hedge Funds Are Avoiding 10 Oil Stocks Billionaires Are Loading Up On 15 Stocks that will 10x in 5 Years Disclosure: None. 10 Internet of Things (IoT) Stocks Billionaires Are Loading Up On is posted on Insider Monkey......»»

CSquared has selected ADTRAN's optical open optical transport technology to accelerate high-speed broadband deployment across Liberia. ADTRAN, Inc. ADTN recently announced that CSquared selected its optical networking technology to boost high-speed broadband deployment across Liberia. CSquared, the sole infrastructure provider in Liberia, intends to leverage ADTRAN real-time fiber assurance to establish a 350 Km core network infrastructure spanning Liberia to Guinea and the Ivory Coast.ADTRAN already assisted CSquared with fiber broadband rollout in other parts of Africa such as Togo and Ghana. The recent deal accentuates the growing acceptance of ADTRAN’s technology and the expansion of its global footprint, which will likely strengthen its commercial outlook in the long term.Optical fibers serve as the fundamental infrastructure for modern-day networks and without effective monitoring, high-speed broadband networks are always at a risk of disruption. ADTRAN’s Advance link monitoring technology (ALM) enriches service providers with real-time actionable insights, allowing them to quickly detect any fault in the system and ensure rapid response. This significantly enhances network performance, optimizes cost and streamlines operations with improved security.The FSP3000 open optical system is a low cost, highly scalable solution that ensures high performance communication, with enhanced power efficiency and lower space utilization. ADTRAN will also deliver FSP150 Ethernet access devices to expedite fast, reliable connectivity with minimized latency and reduce network congestion.Communication infrastructures in many African nations are relatively underdeveloped, making network connectivity inaccessible to a vast portion of the population. With this collaboration, ADTRAN is taking a significant step to boost the digital economy with affordable and robust connectivity and eradicate the digital divide in the region.ADTRAN continues to benefit from solid demand trends of its network solutions, driven by the accelerated expansion of fiber-to-the-home networks, upgrades to in-home Wi-Fi connectivity and the adoption of cloud-based automation tools. It is focused on becoming a top global supplier of access infrastructure and related value-added solutions from the Cloud Edge to the Subscriber Edge through a broad portfolio of flexible hardware and software network solutions. These products enable customers to transition to the fully-converged, scalable, highly-automated, cloud-controlled voice, data, Internet and video network of the future.In addition, the company has enabled service providers to leverage the ADTRAN Mosaic Software-Defined Access architecture that combines modern Web-scale technologies with open-source platforms to facilitate rapid innovation in multi-technology, multi-vendor environments. The Mosaic cloud platform and Mosaic OS, combined with programmable network elements, provide operators with a highly agile, open-services architecture. This helps operators to better compete with Web-scale competition by reducing the time and cost to launch new service, technologies and best-of-breed suppliers as they strive to reduce operational costs while creating and deploying differentiated product offerings.The stock has lost 54.8% in the past year compared with the industry’s decline of 11.3%.Image Source: Zacks Investment ResearchADTRAN carries a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.InterDigital, Inc. IDCC, sporting a Zacks Rank #1, delivered an earnings surprise of 170.89%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 579.03%.It is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company engages in designing and developing a wide range of advanced technology solutions, which are used in digital cellular and wireless 3G, 4G and IEEE 802-related products and networks.Akamai Technologies, Inc. AKAM, carrying a Zacks Rank #2 (Buy), delivered an earnings surprise of 4.86%, on average, in the trailing four quarters. In the last reported quarter, it pulled off an earnings surprise of 6.06%.It is a global provider of content delivery network and cloud infrastructure services. The company’s solutions accelerate and improve the delivery of content over the Internet, enabling faster response to requests for web pages, streaming of video & audio, business applications, etc. Its offerings are intended to reduce the impact of traffic congestion, bandwidth constraints and capacity limitations on customers.Meta Platforms Inc. META, sporting a Zacks Rank #1, delivered an earnings surprise of 15.46%, on average, in the trailing four quarters. Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video-sharing app Instagram and WhatsApp messaging app owing to acquisitions.Meta is considered to have pioneered the concept of social networking, which is why it enjoys a first mover’s advantage in this market. As developed regions mature, Meta undertakes measures to drive penetration in emerging markets of South East Asia, Latin America and Africa. Zacks Reveals ChatGPT "Sleeper" Stock One little-known company is at the heart of an especially brilliant Artificial Intelligence sector. By 2030, the AI industry is predicted to have an internet and iPhone-scale economic impact of $15.7 Trillion. As a service to readers, Zacks is providing a bonus report that names and explains this explosive growth stock and 4 other "must buys." Plus more.Download Free ChatGPT Stock Report Right Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report ADTRAN Holdings, Inc. (ADTN): Free Stock Analysis Report Akamai Technologies, Inc. (AKAM): Free Stock Analysis Report InterDigital, Inc. (IDCC): Free Stock Analysis Report Meta Platforms, Inc. (META): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

The infrastructure upgrade for digital transformation, fiber densification and 5G rollout should help the Zacks Communication - Infrastructure industry thrive despite near-term headwinds. COMM, DZSI and WTT are well poised to benefit from the continued transition to cloud network. The Zacks Communication - Infrastructure industry appears mired in raw material price volatility due to elevated inventory levels amid a challenging macroeconomic environment, uncertain market conditions and sharp inflationary pressure. Moreover, high capital expenditure for infrastructure upgrades for 5G deployment, inflated equipment costs and margin erosion due to price wars have dented the industry’s profitability.Nevertheless, CommScope Holding Company, Inc. COMM, DZS Inc. DZSI and Wireless Telecom Group, Inc. WTT are likely to benefit from higher demand for scalable infrastructure for seamless connectivity amid the wide proliferation of IoT, transition to cloud and related next-gen technologies and accelerated 5G rollout.Industry DescriptionThe Zacks Communication - Infrastructure industry comprises firms that provide various infrastructure solutions for the core, access and edge layers of communication networks. Leveraging proprietary modeling and simulation techniques to optimize networks, the firms offer high-speed network access solutions across Internet protocol, asynchronous transfer mode and time division multiplexed architecture in both wireline and wireless network applications. Their product portfolio encompasses optical fiber and twisted-pair structured cable solutions, infrastructure management hardware and software, network racks and cabinets, fiber-to-home equipment like hardened connector systems, wireless network backhaul planning and optimization products, couplers and splitters, indoor, small cell and distributed wireless antenna systems and hardened optical terminating enclosures.What's Shaping the Future of the Communication - Infrastructure Industry?Infrastructure Ramp-Up: With exponential growth in video and other bandwidth-intensive applications owing to the wide proliferation of smartphones and increased deployment of superfast 5G technology, the industry participants are considerably investing in LTE, broadband and fiber to provide additional capacity and ramp up the Internet and wireless networks. These companies are rapidly transforming from legacy copper-based telecommunications firms to technology powerhouses with capabilities to meet the growing demand for flexible data, video, voice and IP solutions. The industry participants are also focusing on leveraging wireline momentum, expanding media coverage, improving customer service and achieving a competitive cost structure to generate higher average revenue per user while attracting new customers.Demand Erosion: Efforts to offset substantial capital expenditure for upgrading network infrastructure by raising fees have reduced demand, as customers prefer to switch to lower-priced alternatives. Moreover, efforts to build resilient infrastructure facilities to withstand natural catastrophes such as hurricanes and floods add to operating costs. In addition, the latent Sino-U.S. tension relating to trade restrictions imposed on the sale of communication equipment to firms based in the communist country has dented the industry’s credibility and will likely lead to a loss of business. The industry is battling hard-to-mitigate operating risks stemming from volatility in demand, an unpredictable business environment led by the virus outbreak and challenging geopolitical scenarios.Network Convergence: With operators moving toward converged or multi-use network structures, combining voice, video and data communications into a single network, the industry is increasingly developing solutions to support wireline and wireless network convergence. Although these investments will eventually help minimize service delivery costs to adequately support broadband competition and expand rural coverage and wireless densification, short-term profitability has largely been compromised. Nevertheless, the industry players have enabled enterprises to rapidly scale communications functionalities to a vast range of applications and devices with easy-to-use software application programming interfaces. The firms support high user volumes without affecting deliverability and cost-effectively eliminate performance degradation.Depleting Margins: Although the supply chain woes have declined progressively, the industry is facing a dearth of chips, which are the building blocks for various equipment used by telecom carriers. Moreover, high raw material prices due to inflation, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the operation schedule of various firms. Although steps have been taken to address the global shortage of semiconductor chips and devise ways to increase domestic production, the demand-supply imbalance has crippled operations and largely affected profitability due to inflated equipment prices.Zacks Industry Rank Indicates Bearish TrendsThe Zacks Communication - Infrastructure industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #179, which places it in the bottom 28% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate.Before we present a few communication infrastructure stocks that are well-positioned to outperform the market based on a strong earnings outlook, let’s take a look at the industry’s recent stock market performance and valuation picture.Industry Lags S&P 500 & SectorThe Zacks Communication - Infrastructure industry has lagged the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.The industry has lost 40.8% over this period against the S&P 500 and the sector’s growth of 1% and 8.5%, respectively.One Year Price PerformanceIndustry's Current ValuationOn the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is the most appropriate multiple for valuing telecom stocks, the industry is currently trading at 6.64X compared with the S&P 500’s 12.75X. It is also below the sector’s trailing-12-month EV/EBITDA of 11.90X.Over the past five years, the industry has traded as high as 12.05X, as low as 6.42X and at the median of 8.38X, as the chart below shows.Trailing 12-Month enterprise value-to-EBITDA (EV/EBITDA) Ratio3 Communication - Infrastructure Stocks to Keep a Close Eye onCommScope: Headquartered in Hickory, NC, CommScope is a premier provider of infrastructure solutions, including wireless and fiber optic solutions, for the core, access and edge layers of communication networks. Since its inception in 1976, the company has created a niche for itself, helping customers scale network capacity, delivering better network response time and performance, and simplifying technology migration. CommScope expects to capitalize on industry tailwinds driven by the increased adoption of HELIAX SkyBlox, which helps operators to put reliable mobile networks in place. The CommScope NEXT initiative is expected to drive future growth that outpaces the market, optimize business processes and unlock shareholder value. The stock has a long-term earnings growth expectation of 17.2% and delivered an earnings surprise of 8.9%, on average, in the trailing four quarters. It has a VGM Score of A. CommScope carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Price and Consensus: COMMDZS Inc.: Founded in 1996 and based in Plano, TX, DZS offers network access solutions and communications platforms for service provider and enterprise networks in the United States, Canada, Latin America, Europe, the Middle East, Africa, Korea and other Asia Pacific countries. The company is likely to benefit from the secular trend of 5G deployment across the globe with healthy traction in the fiber LAN ecosystem. With better visibility and solid order trends, the company is aiming to gain cost efficiencies and introduce new products to the market. The stock carries a Zacks Rank #3.Price and Consensus: DZSIWireless Telecom Group: Headquartered in Parsippany, NJ, Wireless Telecom manufactures advanced RF and microwave components, modules, systems and instruments. The company is likely to benefit from the secular trend of 5G deployment globally with healthy traction in the fiber LAN ecosystem and a robust portfolio of products and services in the wireless connectivity space. With customized solutions targeting niche segments of large and growing end markets, WTT is likely to benefit from the wide proliferation of 5G, network densification, private networks and satellite communications. The collaboration agreement with NXP Semiconductors further expands its scale of operations and reach with several monetization opportunities for the high-margin business of software stack for private LTE/5G networks. This Zacks Rank #3 stock has gained 43.7% over the past year.  Price and Consensus: WTT Zacks Names "Single Best Pick to Double" From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time. This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.Free: See Our Top Stock and 4 Runners Up >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report CommScope Holding Company, Inc. (COMM): Free Stock Analysis Report DZS Inc. (DZSI): Free Stock Analysis Report Wireless Telecom Group, Inc. (WTT): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Communication-Network Software providers Weave (WEAV), Ribbon (RBBN) and Kaleyra (KLR) benefit from the ongoing digitalization efforts, including a shift to cloud computing and the rapid deployment of 5G-based networks. The Zacks Communication-Network Software industry is suffering from supply-chain disruptions, as well as a shortage of components. A macroeconomic slowdown, the ongoing Russia-Ukraine war, raging inflation and heightened price competition are hurting industry participants. Small and medium businesses have deferred capital spending on infrastructure buildout due to higher interest rates and inflation, which does not bode well for industry participants. Nevertheless, companies like Weave Communications WEAV, Ribbon Communications RBBN and Kaleyra KLR are gaining from the ongoing digitalization efforts that include a shift to cloud computing and rapid deployment of 5G-based networks. The strong demand for network security benefits industry participants as a secure environment is required to run cloud-based applications.Industry DescriptionThe Zacks Communication-Network Software Industry comprises companies that provide software solutions supporting cloud, on-premise and hybrid environments, communication technology solutions, including broadband and Voice Over Internet Protocol (“VoIP”), digital communication services delivered as software-as-a-service, and telecom solutions, supporting the proliferation and the deployment of 5G and 6G networks of the future. There are a few companies that offer solutions based on the Open Radio Access Network standard. Others offer wireless connectivity solutions for mission-critical Industrial Internet applications and services. Solutions from these companies support a variety of industries, including telecommunications, technology, industrial, government, retail, financial, gaming and education.3 Trends Shaping the Future of the Communication-Network Software IndustryIncreased Adoption of Cloud-based Solutions: Rapid digitalization, driven by the disruption caused by the pandemic, has increased the demand for cloud-based applications, virtualized software and container-based software. Applications are being developed in the cloud, which is creating opportunities, and, at the same time, challenges for industry participants in terms of performance and security. Rising cyber-attacks, including Distributed Denial of Service attacks and attacks using malware through Transport Layer Security and Secure Sockets Layer protocols, are redefining the cyber threat landscape. Enterprises are spending more on cloud-based security solutions. Moreover, the software-defined approach is increasingly getting preferred over legacy hardware-centric models due to the need for agility.Growing Importance of Automation Tools: The ongoing rapid transition to the cloud has increased the importance of automation tools. Enterprises are adopting automated tools to deploy and operate security and application services. This is improving performance monitoring and detection, reporting of security anomalies, and reducing overall costs.Rapid Evolution of 5G and 6G Networks: Industry participants are benefiting from a continued rise in demand for data-intensive bandwidth and the need for reduced latency associated with smartphones, tablets and machine-to-machine communication. The proliferation of data centers, big data, cloud-based services, streaming media content and IoT is a key catalyst. The rapid deployment of 5G networks is creating a massive growth opportunity for telecom providers who are using solutions provided by industry participants.Zacks Industry Rank Indicates Bright ProspectsThe Zacks Communication-Network Software industry is housed within the broader Zacks Computer And Technology sector. It carries a Zacks Industry Rank #96, which places it in the top 38% of more than 250 Zacks industries.The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.There are a few stocks worth buying in this prosperous industry. But before we present these stocks, it is worth looking at the industry’s shareholder returns and current valuation first.Industry Lags Sector and S&P 500 The Zacks Communication-Network Software industry has underperformed the Zacks S&P 500 composite and its sector in the past year.The industry has declined 34.2% over this period against the Zacks Computer and Technology sector’s rise of 11.9% and the S&P 500’s increase of 2.9%.One-Year Price PerformanceIndustry's Current ValuationOn the basis of trailing 12-month EV/Sales, a commonly used multiple for valuing network software companies, we see that the industry is currently trading at 1.77X compared with the S&P 500’s 3.26X and the sector’s 3.2X.Over the past five years, the industry has traded as high as 3.66X, as low as 0.28X and at the median of 1.46X, as the chart below shows.EV/Sales Ratio (TTM)  3 Stocks to Buy Right NowRibbon: The Plano, TX-based company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Ribbon is benefiting from higher Cloud & Edge sales driven by increased sales to enterprises. Its initiative to improve operating efficiency by lowering expenses boosts prospects.RBBN stock has declined 0.3% year to date. The Zacks Consensus Estimate for Ribbon’s 2023 earnings has increased by a couple of cents to 27 cents per share over the past 30 days.Price and Consensus: RBBN Kaleyra: This Zacks Rank #2 (Buy) company provides mobile communication services to financial institutions, e-commerce players, over-the-top media providers, software companies, logistic enablers, healthcare providers, retailers, and other large organizations worldwide.Italy-based Kaleyra has lost 10.7% year to date. The Zacks Consensus Estimate for KLR’s current-year loss has widened from 77 cents per share to 14 cents over the past 30 days.Price and Consensus: KLR Weave: This Zacks Rank #2 company is a leading provider of all-in-one customer communications and engagement software platforms for small and medium-sized businesses.Lehi, UT-based Weave has gained 73.4% year to date. The Zacks Consensus Estimate for WEAV’s current-year loss has narrowed from 29 cents per share to 25 cents in the past 30 days.Price and Consensus: WEAV  5 Stocks Set to Double Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%. Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Weave Communications, Inc. (WEAV): Free Stock Analysis Report Ribbon Communications Inc. (RBBN): Free Stock Analysis Report Kaleyra, Inc. (KLR): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research.....»»

Conestoga Capital Advisors, an asset management company, released its “Small Cap Strategy” first-quarter 2023 investor letter. A copy of the same can be downloaded here. The Small Cap Composite rose 12.26% net of fees in the first quarter, compared to the Russell 2000 Growth Index’s 6.07% return. In addition to positive stock selection, rebound by many of […] Conestoga Capital Advisors, an asset management company, released its “Small Cap Strategy” first-quarter 2023 investor letter. A copy of the same can be downloaded here. The Small Cap Composite rose 12.26% net of fees in the first quarter, compared to the Russell 2000 Growth Index’s 6.07% return. In addition to positive stock selection, rebound by many of the higher-growth stocks, which detracted in 2022, and an underweight exposure to the weakest performing sectors of the Index benefitted the strategy in Q1. In addition, please check the fund’s top five holdings to know its best picks in 2023. Conestoga Small Cap Strategy highlighted stocks like Digi International Inc. (NASDAQ:DGII) in the first quarter 2023 investor letter. Headquartered in Hopkins, Minnesota, Digi International Inc. (NASDAQ:DGII) is a business and Internet of Things products and services provider. On May 24, 2023, Digi International Inc. (NASDAQ:DGII) stock closed at $34.43 per share. One-month return of Digi International Inc. (NASDAQ:DGII) was 14.80%, and its shares gained 56.79% of their value over the last 52 weeks. Digi International Inc. (NASDAQ:DGII) has a market capitalization of $1.235 billion. Conestoga Small Cap Strategy made the following comment about Digi International Inc. (NASDAQ:DGII) in its Q1 2023 investor letter: “Digi International Inc. (NASDAQ:DGII): DGII has been a pioneer None. in wireless communication technology and has over 35,000 customers worldwide and owns more than 160 different patents. The company operates two primary segments: Products & Services and Solutions. The Products & Services division primarily sells hardware to enterprise clients to provide business continuity. The Solutions division offers a full suite of solutions for asset monitoring. The Solutions division revenues are recurring as customers typically sign three to five year subscription contracts and they have been installing its sensors and control hubs in 3000-4,000 new sites per quarter for customers such as CVS, Olive Garden and Tim Hortons. We initially purchased DGII for our Micro Cap portfolio in 1Q20 and have now added it to the Small Cap portfolio in 1Q23.” Digi International Inc. (NASDAQ:DGII) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held Digi International Inc. (NASDAQ:DGII) at the end of the first quarter 2023 which was 21 in the previous quarter. We discussed Digi International Inc. (NASDAQ:DGII) in another article and shared Conestoga Capital Advisors’ views on the company. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.   Suggested Articles: 13 Best Basic Materials Stocks to Buy Now Bill Gates’ Most Recent Portfolio: Top 15 Stock Picks 35 Biggest Qatar Companies by Market Cap Disclosure: None. This article is originally published at Insider Monkey......»»

Remark Holdings, Inc. (NASDAQ:MARK) Q1 2023 Earnings Call Transcript May 22, 2023 Operator: Good afternoon and welcome to the Remark Holdings Fiscal First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Fay Tian, Vice President of Investor Relations. Please […] Remark Holdings, Inc. (NASDAQ:MARK) Q1 2023 Earnings Call Transcript May 22, 2023 Operator: Good afternoon and welcome to the Remark Holdings Fiscal First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Fay Tian, Vice President of Investor Relations. Please go ahead. Fay Tian: Thank you, Gary. Good afternoon, everyone and welcome to Remark Holdings fiscal first quarter 2023 financial results conference call. I am Fay Tian, Vice President of Investor Relations for Remark. On the call with me this afternoon is Kai-Shing Tao, Remark’s Chairman and Chief Executive Officer and Mr. Todd Brown, Vice President of Finance. In just a moment, Mr. Tao will provide an update on our businesses, and Mr. Brown will recap our first quarter 2023 financial results. Following these remarks, we will open the call to questions. But before I turn the call over to Mr. Tao, I would like to take this opportunity to remind you that some of the statements made today may be forward-looking statements. These statements involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements reflect Remark Holdings’ current views, and Remark Holdings expressly disclaims any obligation to update or revise any forward-looking statements after the date hereof. This disclaimer is only a summary of Remark Holdings’ statutory forward-looking statements disclaimer, which is included in full in its filings with the SEC. I will now turn the call over to Remark’s Chairman and Chief Executive Officer, Mr. Tao, so he can provide additional information on Remark’s businesses and recent developments. Shing, please take the floor. Thank you. Kai-Shing Tao: Thank you for taking the time to listen to our quarter 1 update. We gave a fairly comprehensive update on our most recent conference call about a month ago, but today, we’ll be more focused on giving some updates. Just like artificial intelligence, where every week yields significant advancement, at Remark, we are no different as each week presents us with new opportunities to attack as the demand of our platform is unprecedented. As you know, with generational opportunities like AI and cloud technology for AI, it takes roughly 10 years from inception to fruition for all the efforts. For Remark AI, we are no different and certainly are not magicians. It took us approximately 5 years to build the foundation to where our AI technology is today and then the next 3 years to win the gold standard of customers around the world. And now our strategy is simple and straightforward: land and expand. Starting in the East, with our Smart Schools business, our business continues to grow as we have now deployed to over 650 city schools in China, consisting of over 1 million students. With schools now coming back online and education remaining one of the most important priorities of China, we are seeing a strong recovery in this particular segment. In addition, some of our new core technology developments in education include our Remark AI education quality evaluation system. Using Remark AI’s computer vision, we are now able to help, analyze and assess student performance in the reading, speaking, art, science and physical education classes. This system has been accepted by many school districts as a standard student performance evaluation tool, and we are now anticipating deployment to over 1,000 schools by the end of this year. Smart communities. After several years of postponement due to COVID, China Mobile is gradually restarting its smart community, and we in turn have resumed our own smart community deployment with them. We’ve completed over 100 smart communities in Q1. Just to remind all of you of the incredible opportunity here. We believe the smart community platform in China to be a multibillion dollar annual opportunity. There are over 160,000 plus number of communities – smart communities, each with an annual upgrade budget for digital transformation of roughly $100,000. Remark AI smart community platform includes facial ID-based resident management system, AI parking system, safety and security system and visitor access control. We had originally commenced our deployment back in Q3 of 2020 and are excited now to resume what we originally started a few years back. In the UK, we continue to build momentum. What started from a little booth at a security trade show in London has now expanded to six-figure contract wins. Our Remark AI platform provides metadata search, people counting, vehicle counting for traffic and parking availability. One key win in the UK is helping with the migrant issue the country is dealing with in Dover. We were awarded this contract earlier this year and now looking to expand into additional opportunities as the UK is looking for ways to better handle the situation. Moving to the U.S. public and venue safety, we continue to complete pilot tests in the public and private venue space and expect to provide more details during the current quarter and beyond. Public safety is the number one priority on every administer, parent’s and student’s mind as guns have been confiscated in both middle and high schools in our hometown of Clark County and Las Vegas, making it a more pressing need for rapid adoption of our solution upon proving efficacy. We started here in Vegas, which is one of the top 5 largest school districts in the country. And we have already commenced similar discussions with the other school districts of comparable sizes as they have the same problems that Las Vegas is facing and are looking for solutions like ours to address them. Obviously, number one issue is weapons detection but extends beyond that. It includes fire and smoke detection, license plate recognition, fight detection, vandalism detection and et cetera. We expect to announce further strategic partnerships with both vendors and system integrators who can benefit from, including Remark AI, as part of their complete product suite solution as we jointly market to the public and private venue sectors previously mentioned. The early demand for both our fixed and mobile Sentry units is unprecedented, and we are currently gathering deposits for shipments in Q3 and Q4, constrained only by the tight supply chain and delivery times. Once again, the budget has already been allocated and the need has been clearly defined, so it is up to us to execute and capture this once-in-a-generation opportunity. We continue to focus on the mutual goals of positive cash flow generation and growth. Our business model is built upon annual multiyear recurring subscription model – revenue that provides a total turnkey AI-powered platform for customers and partners. One of the key advantages to Remark AI is the speed we’re able to move in the versatility of our Remark AI platform. Recently, we were presented with a very small window of opportunity to present our platform to address the 911, 311 call center problems that cities around the U.S. are facing. Our competitors thought we would be unable to answer the call. But in a very short period of time, we presented to the mayor as well as the Head and Chief Technology Officer for over 40 different agencies. In a matter of days, we built a platform that was unique and embraced the latest in AI technology to help address the issues the city was facing. Many of you know the wait times for 311, 911 are very long. A key reason for that is the lack of dispatchers. Our platform will do several things which combine the best in generative AI and computer vision AI. When a caller dials 311, our AI agent will speak to them to help understand the situation. Simultaneously, as they’re speaking with our AI agent, the AI agent fills out the necessary paperwork to document the call. Lastly, as they say, a picture is worth a thousand words. The caller would take a picture or video to showcase the situation, and our computer vision AI would better understand and independently verify the nature of the call. This solution is unique and very well received by our listeners. We are confident that after we win this opportunity, similar opportunities will present itself not only in other cities, but in any business that deals with forms and paperwork and obviously as well as anything to do with customer service like airports and restaurants. Another breakthrough in the U.S. that we look forward to revealing more details is our expansion in the U.S. retail market using our visual checkout AI platform. Soon, we plan to announce our partnership with one of the largest retailing and technology companies to bring our AI technology to their customers, which mainly consists of convenience stores, chains and pharmacies with well over 2,500 locations. The technology addresses the current problems for self-service stores like Amazon Go, which are unable to accurately track the products being selected and checked out as well as using facial recognition as a form of payment. We are excited about this new venture as recent companies in this specific field achieved valuations well over $1 billion. We also recently announced a partnership with one of the best companies in the people counting space called WaitTime. We expect to share sales resources with them as they have very established sales channels with Cisco and Intel and have made a strong entry here in the U.S. selling their people counting technology. Our strategy is to piggyback their sales team and relationships to help expand their offerings to their customers with our Remark AI platform. On our last call, I mentioned our expansion into Latin America and the Middle East. We will be unveiling more in the next several months regarding our opportunities in the Middle East. However, I’m excited to talk about our current expansion efforts in one of the largest cities in South America. We are in the final stages of winning with the respective city’s police forces to utilize our license plate recognition and mobile facial recognition on their entire police car force in the city which amounts to thousands of vehicles. As you know, once we win this many similar opportunities will present themselves after we win in South America. As a point of reference, these deals are all seven-figure opportunities with a combination of both hardware and software, which ultimately means high-margin businesses for Remark AI. Finally, to fully utilize the power of Remark AI’s platform, we look forward to officially announcing our SaaS initiative with one of the world’s top three cloud providers. Currently, the majority of our training of our AIOps models happen on-premise. We will now add our cloud component imminently as it allows us to an additional track for expansion to customers around the world. In short, we are offering our secret sauce of our AI-powered analytics solution, which are trained 3x faster than our competitors despite the constraints of a limited data set to everyone on a SaaS model basis. More to come. Todd? Todd Brown: Thank you, Shing, and thank you to everybody for joining us on today’s call. As we have discussed with you previously, COVID-19 and China’s former zero-COVID policy had been adversely affecting our business in China. Although we were certainly pleased to see China and its zero-COVID policy at the end of 2022, the policy’s lingering effects as well as COVID infections continued during the first quarter of 2023. Business and economic recovery efforts have been slow and methodical as our clients and other Chinese companies learn that they likely do not have to fear the immediate reimposition of lockdowns or other severe restrictions on their ability to do business. Even in the face of the COVID-related restrictions and their lingering impacts, we were still able to complete several projects in China primarily related to our smart community installations on behalf of China Mobile, which led to revenue for the first quarter of 2023 totaling $0.8 million, which represented an 82% decrease from the $4.7 million that we earned during the same quarter of 2022. We obviously would have preferred to achieve more of the project completions that we had planned for this first quarter of 2023, but we believe our project completions in China will begin to accelerate late in the second quarter and into the third quarter of 2023 as our customers begin to restart projects put on hold during the zero-COVID period and initiate new projects that had been on the drawing board when the strict preventative measures were ongoing in 2022. Gross profit remained essentially unchanged at approximately $0.4 million as our cost of revenue decreased roughly commensurate with the decrease in revenue. In addition to the changes in revenue and cost of revenue, we experienced a significant decline in operating expense that reduced our operating loss to $3.0 million in the first quarter of 2023, a 27% improvement from the operating loss of $4.2 million we reported in the same period of 2022. The improvement in our operating expense mainly resulted from a $0.7 million decrease in certain expenses related to our development of our business. And we were also positively affected by decreases of $0.3 million in stock compensation expense, which is reported in general and administrative expense; and our receipt of a refundable tax credit of approximately $0.5 million from the government of the United Kingdom, which we recorded as a decrease in our technology and development expense. A large batch of stock options granted prior to 2022 became fully expensed in January of 2023, which led to the decrease in stock compensation expense, while the tax credit we received in March of ‘23 resulted from our research and development activities in the UK’s tax jurisdiction during the 2022 tax year. Net loss totaled $8.2 million or $0.63 per basic and diluted share in the first quarter of 2023 compared to a net loss of $25.4 million or $2.42 per basic and diluted share in the same quarter of 2022. In addition to the impacts of items affecting operating loss, our net loss decreased primarily because the first quarter of 2022 included a $19 million loss on marketable securities, and that loss – or that type of loss was not repeated in 2023. The decrease in loss on marketable securities, plus roughly a $0.6 million decrease in interest expense, was partially offset by an increase in finance costs of $3.6 million. On March 14, 2023, we consummated transactions with Ionic Ventures, LLC with our senior lenders. First, we entered into another debenture purchase agreement with Ionic Ventures, pursuant to which we authorize the issuance of two convertible subordinated debentures in the aggregate principal amount of $2.8 million for an aggregate purchase price of $2.5 million. We issued the first of the convertible debentures during the first quarter of 2023 and received $1.5 million pursuant to such debenture. We also received a total advance of $1 million in January of 2023 pursuant to the equity line of credit we have with Ionic Ventures that was established in October of 2022. The convertible debentures were issued in October of 2022 – or that were issued in October of 2022 and March 2023, plus the advance pursuant to the equity line of credit gave rise to obligations to issue our common stock and in turn caused the increase in finance costs. Also on March 14, 2023, we entered into new notes payable agreements with our existing senior lenders, which will result in our repaying an aggregate of $16.3 million to the lenders by October 31, 2023. At March 31, 2023, we had a cash balance of $0.4 million compared to a cash balance of $0.1 million at December 31, 2022. Net cash used in operating activities during the first quarter of 2023 was $2.1 million. With that, I will turn the call back over to Fay. Fay Tian: Thank you, Shing. Thank you, Todd. Gary, could you please give the instruction to the audience on how to queue in for the Q&A? Thank you. Fay Tian: Thank you, Gary, and thank you, everyone, for participating in Remark Holdings fiscal first quarter 2023 financial results conference call. A replay will be available in approximately 4 hours through the same link issued in our May 17 press release. Have a good evening. Thank you. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Follow Remark Holdings Inc. Follow Remark Holdings Inc. We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»