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Ethiopian Airlines sees crash settlement with Boeing by end-June

Ethiopian Airlines expects a settlement with planemaker Boeing by end of June over the crash of an 737 MAX plane in March 2019, CEO Tewolde Gebremariam told Reuters on Friday......»»

Category: topSource: reutersMay 15th, 2020

11 Best Airline Stocks to Buy According to Analysts

In this article, we will take a look at 11 best airline stocks to buy according to analysts. To skip our analysis of the recent market activity, you can go directly to see the 5 Best Airline Stocks to Buy According to Analysts. The U.S. Global Jets ETF (JETS) provides investors access to the global […] In this article, we will take a look at 11 best airline stocks to buy according to analysts. To skip our analysis of the recent market activity, you can go directly to see the 5 Best Airline Stocks to Buy According to Analysts. The U.S. Global Jets ETF (JETS) provides investors access to the global airline industry, including airline operators and manufacturers from all over the world. The ETF generated a performance of 11.51% in 2023, compared to 24.23% for the broader S&P 500 Index. The ETF has continued to post gains in 2024 as well and has posted a gain of nearly 7.5% year-to-date as of February 23. Our list of 11 best airline stocks to buy according to analysts includes the top 4 holdings of the ETF which account for nearly 43.7% weightage of the ETF. The global airline industry faced one of its worst periods during the COVID-19 pandemic with travel restrictions leading to significant demand destruction. Treading through choppy waters, the industry has finally recovered from the demand destruction caused by the pandemic and is estimated to have recovered to around 107% of the pre-COVID level, according to latest IATA figures. The global industry posted cumulative losses of nearly $180 billion over the 2020-2022 period and is on track to post a net profit of $23.3 billion in 2023 with revenues of $896 billion. You can read more about this in our recently published article: 10 Airline Stocks Billionaires Are Piling Into In the face of rising competition and lowering margins, companies in the airline industry in the United States are seeking mergers and acquisitions to increase their market share. A prime example is the planned acquisition of low-cost carrier Spirit Airlines Incorporated (NASDAQ:SAVE) by JetBlue Airways Corporation (NASDAQ:JBLU) in a $3.8 billion deal announced in July 2022. The transaction has faced significant scrutiny from regulatory authorities and was blocked in January by a United States court. The companies have filed an appeal. Dick Forsberg, Senior Consultant to PwC’s Aviation Finance Advisory Services, made the following comments about the airline industry in a report published last month: “Although airline profitability turned a corner in 2023, moving solidly back into the black, IATA expects only modest financial improvement in 2024, with $49bn in operating profit and a net profit of $25.75bn, held back by low yield growth, a higher cost base, especially labour costs and, at the net level, a higher debt service burden. However, the return on invested capital for airlines is still expected to come close to 5% this year and there is scope for the airlines to do better than forecast. Passenger traffic will reach or surpass 2019 levels in all regions in 2024, but recovering the four years of lost growth will take a good deal longer. Air freight markets will remain relatively weak, with a recovery in volume growth, assisted by the disruption of seaborne cargo through the canals, partially offset by soft rates. With the return of more widebody belly capacity, the dedicated freighter operators will continue to face challenges.” Our list of 11 best airline stocks to buy according to analysts includes multibillion dollar worth bigwigs of the airline industry such as Delta Air Lines, Inc. (NYSE:DAL), Ryanair Holdings plc (NASDAQ:RYAAY), and United Airlines Holdings, Inc. (NYSE:UAL), as well as smaller airline industry players such as Brazil-base Azul S.A. (NYSE:AZUL) and ultra-low cost airline, Spirit Airlines Incorporated (NASDAQ:SAVE), among others. A modern commercial jet airliner decorated with the company logo in flight against a clear blue sky. Methodology We used stock screeners to identify airline stocks with positive upside potential based on average share price targets. We then sorted the resultant dataset in ascending order of the upside potential based on average price target, as of February 20, to finalize our list of 11 best airline stocks to buy according to analysts. A database of around 933 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2023 was used to quantify the popularity of each stock in the hedge fund universe. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). 11. Spirit Airlines Incorporated (NASDAQ:SAVE) Average Analyst Price Target as of February 20: $7.14 Upside Potential as of February 20: 8.18% Number of Hedge Fund Holders: 27 Miramar, Florida-based Spirit Airlines Incorporated (NASDAQ:SAVE) is a major United States ultra-low cost airline with an all-Airbus fleet operating across the U.S., Latin America, and the Caribbean. In July 2022, JetBlue Airways Corporation (NASDAQ:JBLU) announced a definitive agreement to acquire Spirit Airlines, Inc. (NYSE:SAVE) for a cash consideration of $33.50 per share, for an aggregate equity value of $3.8 billion. Since then, the company has been jumping through hoops to satisfy the regulatory authorities. It has agreed to divest all of the target company holdings at New York’s LaGuardia Airport to Frontier Group Holdings, Inc. (NASDAQ:ULCC), and Boston Logan International Airport and Newark Liberty International Airport holdings to Allegiant (NASDAQ:ALGT). On January 16, the U.S. District Court for the District of Massachusetts blocked the merger after the Justice Department sued to stop the merger. The companies have filed an appeal with arguments slated to be heard by the Court of Appeals in June 2024. As of Q4 2023, 27 hedge funds out of the 933 hedge funds tracked by Insider Monkey were bullish on Spirit Airlines Incorporated (NASDAQ:SAVE) and held its shares valued at $140 million. 10. American Airlines Group Inc. (NASDAQ:AAL) Average Analyst Price Target as of February 20: $17.57 Upside Potential as of February 20: 19.52% Number of Hedge Fund Holders: 31 Fort Worth, Texas-based American Airlines Group Inc. (NASDAQ:AAL) is a holding company operating a major network air carrier, providing scheduled air transportation for passengers and cargo through its hubs. As of December 31, 2023, it operated 965 mainline aircraft supported by its regional airline subsidiaries and third-party regional carriers, which together operated an additional 556 regional aircraft. On January 25, American Airlines Group Inc. (NASDAQ:AAL) released its financial results for Q4 2023. It generated operating revenues of $13.1 billion and a net income of $19 million. American Airlines Group Inc. (NASDAQ:AAL) has been on a mission to strengthen its balance sheet. As part of this plan, the company has reduced its debt level by nearly $11.4 billion from the peak levels in mid-2021. This includes debt reduction of more than $500 million in Q4 2023. Like other stocks such as Ryanair Holdings plc (NASDAQ:RYAAY), United Airlines Holdings, Inc. (NYSE:UAL), and Delta Air Lines, Inc. (NYSE:DAL), American Airlines Group Inc. (NASDAQ:AAL) is among the 11 best airline stocks to buy according to analysts. 9. Ryanair Holdings plc (NASDAQ:RYAAY) Average Analyst Price Target as of February 20: $166.51 Upside Potential as of February 20: 20.35% Number of Hedge Fund Holders: 26 Ireland-based Ryanair Holdings plc (NASDAQ:RYAAY) operates a low fare, low cost scheduled airline group serving short-haul, point-to-point routes from 94 bases to airports across Europe and North Africa. It comprises several separate airlines: Ryanair DAC, Lauda, Malta Air, Buzz and Ryanair UK. As of Q4 2023, Ryanair Holdings plc (NASDAQ:RYAAY) shares were held by 26 hedge funds. Harris Associates was the leading hedge fund investor with ownership of 5.2 million shares valued at $688 million. The company ranks highest on our list of 11 best airline stocks to buy according to analysts based on its market capitalization. Oakmark Funds, advised by Harris Associates, made the following comments about Ryanair Holdings plc (NASDAQ:RYAAY) in its Q4 2023 “Oakmark International Fund” investor letter: “Ryanair released strong results for the first half of fiscal-year 2024 and was accompanied by an even stronger outlook, in our view. The company’s revenue grew 30% year over year, and average fares increased by 24% to EUR 58, driven by record demand and constrained capacity at European peers. Total passengers flown expanded 11% year over year to 105.4 million, and management is on track to maintain its target of 183.5 million passengers for 2024, depending on Boeing’s ability to meet its delivery commitments. Management is expecting full-year 2024 net income to be between EUR 1.85-2.05 billion ahead of the EUR 1.82 billion consensus estimate. The company’s strong free cash flow levels and balance sheet allowed Ryanair to reinstate a EUR 400 million dividend (35 cents per share). We spoke with CEO Michael O’Leary about additional uses for its excess capital and were happy to hear about an incremental EUR 1.5 billion return to shareholders starting in 2025. We continue to be optimistic about Ryanair’s future.” 8. Alaska Air Group, Inc. (NYSE:ALK) Average Analyst Price Target as of February 20: $50.36 Upside Potential as of February 20: 29.39% Number of Hedge Fund Holders: 34 Seattle, Washington-based Alaska Air Group, Inc. (NYSE:ALK) is an airline holding company that operates two airlines, Alaska, and Horizon, and McGee Air Services, an aviation services provider. Alaska operates a fleet of narrowbody passenger jets on primarily longer stage-length routes. It contracts with Horizon and SkyWest for shorter-haul capacity and receives all passenger revenue from those flights. On December 3, Alaska Air Group, Inc. (NYSE:ALK) and Hawaiian Holdings, Inc. (NASDAQ:HA) announced an agreement under which Alaska Air Group, Inc. (NYSE:ALK) will acquire all outstanding shares of Hawaiian Holdings, Inc. (NASDAQ:HA) for a cash consideration of $18.00 per share which implies a transaction equity value of nearly $1.0 billion. Alaska Air Group, Inc. (NYSE:ALK) expects to finance the acquisition through cash on hand and new debt with the transaction expected to close in 12-18 months, subject to regulatory clearance and approval from target company shareholders. The company expects $235 million of run-rate synergies and expects “high single digits accretion to earnings within first two years.” As of Q4 2023, according to the Insider Monkey data on 933 leading hedge funds, 34 hedge funds were long Alaska Air Group, Inc. (NYSE:ALK), the third highest on our list of 11 best airline stocks to buy according to analysts. Ric Dillon’s Diamond Hill Capital was the largest hedge fund shareholder with ownership of 1.2 million shares valued at $46 million. 7. Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) Average Analyst Price Target as of February 20: $20.14 Upside Potential as of February 20: 30.78% Number of Hedge Fund Holders: 15 Minneapolis, Minnesota-based Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) is a hybrid low-cost air carrier focused on serving leisure and visiting friends and relatives passengers and charter customers and providing cargo service to Amazon. On January 31, Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY) released its financial results for Q4 2023. Its total operating revenue increased by 8% y-o-y to $245 million while net income decreased by 22% y-o-y to $6 million. According to Insider Monkey data on 933 hedge funds, 15 hedge funds held shares of Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY), valued at $112 million, as of Q4 2023. Its lead hedge fund shareholder was PAR Capital Management with ownership of 2.8 million shares valued at $44 million. 6. Delta Air Lines, Inc. (NYSE:DAL) Average Analyst Price Target as of February 20: $53.89 Upside Potential as of February 20: 32.73% Number of Hedge Fund Holders: 53 Delta Air Lines, Inc. (NYSE:DAL) is a leading global airline serving more than 200 million passengers on an annual basis across its global network of more than 280 destinations across six continents. The company employs more than 100,000 people and operates over 4,000 daily flights. As of Q4 2023, Delta Air Lines, Inc. (NYSE:DAL) shares were owned by 53 prominent hedge funds tracked by Insider Monkey, the highest on our list of 11 best airline stocks to buy according to analysts. Thomas E. Claugus’ GMT Capital was the lead hedge fund investor with ownership of 6.8 million shares valued at $273 million. In its Q3 2023 investor letter, Patient Capital Management, a value investing firm, made the following comments about Delta Air Lines, Inc. (NYSE:DAL): “Historically, airlines have passed on higher fuel prices to customers with a lag. We see Delta as a premium global consumer brand that is materially misunderstood by the market. The market still sees airlines as a cyclical, bankruptcy prone industry. An improved supply-demand picture, management discipline and a better business mix make Delta a more resilient business. Their loyalty program with American Express is a source of stable and growing revenues with $6.5B in remunerations this year with a goal of reaching $10B by the end of the contract in 2028. Premium and ancillary service revenue should generate 65-70% of the total in the next year or two. The company should continue to generate consistent midteens returns on capital. As the market begins to understand, we believe the company will continue to be rewarded. On top of this, free cash flow is expected to expand generating a cumulative ~$11B from ’23-’25, or one-half of its current market cap. As the company pays down debt while growing the dividend and eventually resuming share repurchases, we think the stock will continue to trend higher.”   Click to continue reading and see 5 Best Airline Stocks to Buy According to Analysts.   Suggested Articles: 11 Best RV and Camping Stocks To Invest In 15 Most Affordable California Cities for Retirees 15 Highest Quality Pizza Chains in America Disclosure: None. 11 Best Airline Stocks to Buy According to Analysts is originally published on Insider Monkey......»»

Category: topSource: insidermonkeyFeb 24th, 2024

TechnipFMC plc (NYSE:FTI) Q4 2023 Earnings Call Transcript

TechnipFMC plc (NYSE:FTI) Q4 2023 Earnings Call Transcript February 22, 2024 TechnipFMC plc beats earnings expectations. Reported EPS is $0.14, expectations were $0.12. FTI isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello, and welcome everyone to the TechnipFMC Fourth […] TechnipFMC plc (NYSE:FTI) Q4 2023 Earnings Call Transcript February 22, 2024 TechnipFMC plc beats earnings expectations. Reported EPS is $0.14, expectations were $0.12. FTI isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Hello, and welcome everyone to the TechnipFMC Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. [Operator Instructions] I will now turn the call over to Matt Seinsheimer, please go ahead. Matt Seinsheimer: Thank you, Sarah. Good morning, and good afternoon, and welcome to TechnipFMC’s fourth quarter 2023 earnings conference call. Our news release and financial statements issued earlier today can be found on our website. I’d like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs and assumptions regarding future developments and business conditions, they are subject to certain risk and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Non-material factors that could cause our actual results to differ from our projected results are described in our most recent 10-K, most recent 10-Q, and other periodic filings with the U.S. Securities and Exchange Commission. We wish to caution you not to place undue reliance on any forward-looking statements which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. I will now turn the call over to Doug Pferdehirt, TechnipFMC’s Chair and Chief Executive Officer. Doug Pferdehirt: Thank you, Matt. Good morning, and good afternoon. Thank you for participating in our fourth quarter earnings call. I am proud to report our strong quarterly and full year results which really speak to the growth and operational momentum we are achieving. Total company inbound for the year grew to $11 billion. This included subsea orders of $9.7 billion, which was an increase of 45% versus the prior year and a book-to-bill of 1.5. These strong results benefited from a record level of iEPCI awards in the period. Total company revenue for the year grew 17% to $7.8 billion. Adjusted EBITDA improved to $939 million when excluding the impact of foreign exchange. This was an increase of 30% percent when compared to the prior year. We generated free cash flow of $468 million for the year and we returned nearly $250 million to shareholders through share repurchases and dividends. While these are solid improvements, I am particularly pleased with the quality of the inbound received in 2023 with direct awards iEPCI and subsea services together exceeding 70% of subsea inbound. We’re also seeing tangible improvements in Surface Technologies. This has resulted in improved financial performance, higher cash generation and greater consistency in delivering on our annual commitments. Anyway, you look at it 2023 was a period of strong growth for our company and we see continued strength ahead, driven by the resiliency and durability of this cycle. The demand for energy will continue to grow. A more than a decade unconventional resources in North America have provided a significant portion of the world’s hydrocarbon globe. The growth from the region will be more limited in the years ahead driven by Capital Frameworks that reward higher economic returns and increased shareholder distributions. This means that the incremental production needed to support global growth will come primarily from international markets driven by the Middle East and offshore. Looking ahead, the market for conventional energy resources will evolve differently than what we have experienced in the past, driven by three major trends, a shift in capital flows, an increased role for new technologies and an expanded role for subsea services, all of which will allow TechnipFMC to leverage the full capabilities of our integrated solutions, differentiated technologies, and the industry’s most comprehensive subsea service capabilities. Looking more closely at these major trends, let’s start with the shift in capital flows. We expect to see continued strength in spending both in land and offshore markets. However, the dynamics will differ across the major markets as capital flows are typically a function of returns and access. In North America, the industry has access to resources, but economic returns will continue to be challenged outside the most prolific basins. We believe this will result in more modest growth in the region. Opportunities in the Middle East benefit from strong economic returns that will drive continued growth. That said, the number of operators that have access to these attractive resources is far more limited, which brings us to the offshore markets. Here we believe much improved economic returns and broad operator access to deep water resources will attract a growing share of global capital flows. And with more than 90% of our total revenue generated outside the North America land market, FTI stands out as the pure-play equity to address this opportunity. While the strength of these trends is partly reflected in our current backlog and revenue guidance, we have high confidence in the durability of the market over the intermediate term. In 2024, we remain on track to meet our prior guidance for subsea inbound, with current year order expectations approaching $10 billion. Today, we are also increasing our expectations for subsea inbound over the three-year period ending 2025 to reach $30 billion, a 20% increase versus our prior view. Looking beyond capital flows, we expected technology will also play a bigger role in spending behavior. Here TechnipFMC is focused on developing technologies for both conventional and new energies to drive market expansion. More specifically, we are using technology to drive further innovation in the offshore market creating new growth opportunities. A clear example of innovation is the Mero 3 HISEP contract, which we were awarded just last month. The significance of this project for the subsea industry cannot be overstated. It would be the first to use subsea processing to capture CO2 directly from the well stream for injection back into the reservoir. Importantly, this will all take place on the sea floor. In addition to reducing greenhouse gas emission intensity, HISEP technologies will increase production capacity by debottlenecking the gas processing plant that currently resides on the FPSO. By moving the gas processing entirely to the seafloor, future FPSO topside designs can be further simplified driving significant improvement in project economics. HISEP is a major milestone for the subsea industry and for TechnipFMC. This project plays to our strengths. HISEP will allow us to demonstrate how technology innovation, project integration and partner collaboration enable our meaningful participation in the energy transition, while remaining aligned with our strategic priorities. It is the first iEPCI project ever awarded by Petrobras. And it builds upon Our strong order momentum starting the year with an iEPCI award that exceeded $1 billion. And finally, the third major trend driving subsea market growth opportunities can be found in services. Today, subsea fields hosts more than 7,000 subsea trees and associated infrastructure, including manifolds, control systems, umbilicals and flexible pipe. This list is certainly not inclusive of all major components of a subsea production system. However, it does highlight the size and scale of the industry’s large and more importantly growing installed base. TechnipFMC’s global services organization plays a critical role throughout the entire life of the field, from system installation to maintenance intervention and production optimization and all the way through life of field. Our 2023 results clearly demonstrate that our strategy to enhance this resilient, growing, and high-return business is delivering real value with our services revenue having achieved over $1.5 billion for the year. In summary, we close out a solid year having delivered many notable achievements. Subsea inbound orders increased 45% versus the prior year and included a new record for iEPCI awards. This growth in orders also drove a 50% increase in subsea backlog to over $12 billion with high-quality inbound supported with further improvement in our financial returns. And our growth in full-year operational results reflect strong momentum that continues into 2024. We have entered an unprecedented time for the development of conventional energy resources, driven by three major trends, a shift in capital flows, which we believe will largely be directed to the offshore and Middle East markets, an increased role for new technologies as shown by the MERO 3 HISEP award, and an expanded role for subsea services driven by the needs of growing and aging infrastructure. Importantly, these trends underpin the 20% increase in our expectation for subsea inbound over the three-year period ending 2025, which had $30 billion will provide additional growth in backlog and further expand the execution of our project portfolio through the end of the decade. I will now turn the call over to Alf. Alf Melin: Thanks, Doug. Inbound in the quarter was $1.5 billion, driven by $1.3 billion of subsea orders. Revenue in the quarter totaled $2.1 billion. EBITDA was $245 million, when excluding foreign exchange loss of $26 million and restructuring impairment and other charges totaling $10 million. Turning to segment results, Subsea revenue of $1.7 billion increased modestly versus the third quarter. The increase in revenue was due to higher productivity in the Gulf of Mexico, Asia Pacific and Africa, driven in part by accelerated conversion of several projects from backlog. The increased activity was largely offset by seasonal factors that impacted vessel utilization. Revenue for Subsea Services modestly increased due to strength in asset maintenance and ROE services in Norway, in the Gulf of Mexico. Services revenue was also less impacted in the quarter by typical offshore seasonality, particularly in the North Sea. Adjusted EBITDA was $225 million, with a margin of 13.1%, down 200 basis points from the third quarter due to lower vessel-based activity and a mix of projects executed from backlog in the period. For the full year, subsea revenue grew 18% percent versus the prior year with adjusted EBITDA margin up 180 basis points to 13.3%. In Surface Technologies revenue was $357 million in the quarter, an increase of 2% sequentially. The increase in revenue was driven by higher activity in international and North America markets, both benefiting from higher wellhead equipment sales. Adjusted EBITDA was $52 million, a 5% sequential increase benefiting from increased contribution from international services and higher wellhead sales. Adjusted EBITDA margin was 14.7%, up 30 basis points versus the third quarter. For the full year, Surface Technologies revenue was up 12% versus the prior year with adjusted EBITDA margin up 230 basis points to 13.6%. Turning to corporate and other items in the quarter. Corporate expense was $33 million, when excluding $5 million of charges. Net interest expense was $13 million and benefited from increased interest income in the period, driven in part by strong cash generation. Tax expense was $54 million. And lastly, foreign exchange loss was $26 million, the majority of which was related to the significant devaluation of the Argentine peso. Cash flow from operating activities was $701 million. Capital expenditures were $72 million. This resulted in free cash flow of $630 million in the quarter. Free cash flow for the full year was $468 million, above the high end of our guidance range. When excluding impact of foreign exchange, we converted 50% of adjusted EBITDA to free cash flow, achieving the cash conversion rates we had previously targeted for 2025. Total shareholder distributions where $77 million in the quarter and $249 million for the full year. We ended the period with cash and cash equivalents on $952 million. Net debt declined more than $500 million to $116 million. In November, we announced an agreement to sell our Measurement Solutions business for $205 million in cash. We now expect to conclude the transaction by the end of the first quarter subject to customary closing conditions. Moving to our financial outlook, we have provided detailed guidance for the current fiscal year in our earnings release. I won’t speak to all the details, but will provide some context for certain items for the full year and first quarter. I will begin with Subsea. At the midpoint of our full-year guidance range, we anticipate revenue of $7.4 billion with an EBITDA margin of 16%. This represents a 270 basis point margin improvement from the prior year. Our outlook also anticipates contingent growth in Subsea Services revenue to approximately $1.65 billion, achieving this level, one year ahead of our previous target. For the first quarter, we anticipate Subsea revenue to decline low-to-mid single-digits due to more typical seasonal activity patterns, and EBITDA margin to be in line with fourth quarter results. Turning to Surface Technologies, at the midpoint of our full-year guidance range, we anticipate revenue of approximately $1.275 billion with an EBITDA margin of 14%. This guidance assumes we complete the sale of our Measurement Solutions business by the end of the first quarter. When excluding the impact of this sale, as well as the exit of certain geographies and portfolio rationalization in the Americas, our Surface Technologies revenue is anticipated to grow approximately 5% year-over-year. For the first quarter, we anticipate revenue to decline approximately 10%, when compared to fourth quarter results with an EBITDA margin of approximately 13%. We anticipate full year corporate expense of $115 million to $125 million. In 2023, the company initiated an ERP system upgrade. Our corporate expense now includes approximately $10 million in annual costs related to the implementation of the upgraded system. We expect to incur a similar cost each year until completion of the project in 2027. We anticipate capital expenditures of $275 million, which is just over 3% of revenue at the midpoint of our guidance range. Finally, we are guiding free cash flow for the full year to a range of $350 million to 500 million. This includes approximately $170 million for the remaining payments related to the resolution of all outstanding matters with the PNF. Excluding these payments the midpoint of our free cash flow guidance would approximate $600 million. In closing when our guidance items are taken at the midpoint of the range, we anticipate total company EBITDA of $1.25 billion for the full year. This represents EBITDA growth of 33% percent versus the prior year, when excluding foreign exchange. I also want to stress that we expect to achieve this significant growth, despite the impact of the strategic actions taken in Surface Technologies and the incremental spend related to the ERP system upgrade. This is also first second consecutive year for free cash flow conversion of nearly 50% when excluding the settlement payments. And we expect this to drive growth in shareholder distribution of at least 35% and a further reduction in net debt. Operator, you may now open the line for questions. See also 13 Best Energy Stocks To Invest In According to Hedge Funds and 11 Stocks That May Be Splitting Soon. Q&A Session Follow Fmc Technologies Inc (NYSE:FTI) Follow Fmc Technologies Inc (NYSE:FTI) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Your first question comes from the line of Arun Jayaram of JPMorgan Securities LLC. Your line is open. Arun Jayaram: Yeah, good morning, Doug. I wanted to first start with the increase in your long-term or three-year order guide, you raised that from $25 billion to $30 billion. I was wondering if you can comment on what drove the increase and perhaps give us a sense of how much of this was your expectation for more market share versus just the growing TAM in terms of Subsea and offshore FIDs? Doug Pferdehirt: Sure, good morning, Arun. It’s really a combination of both. Clearly, both the total market size is increasing and as you know our – the share of the market, we continue to enjoy an increasing share due to the unique offering that we provide. Look, we are seeing, is just giving us much greater visibility into the durability of the cycle and much greater confidence when we kind of risk weight opportunities when you’re in a direct negotiation, there is no competitive tender as stated in my prepared remarks, which represents over 70% of our Subsea business. You just obviously have a much higher ability to be able to properly risk weight for those opportunities. You see the outlook slides that we provide and that the markets there, the size of the markets there, it’s solid. It’s growing. It’s just really we’re in a privileged position which we are humble about it. We are honored to have this position and we offer our customers a clear line of sight to improve Subsea project economics that these are unique to our offering both in terms of our Subsea 2.0 architecture. And our and iEPCI offering that reduces their cycle time by 12 to 14 months on a deepwater project, thus vastly improving their economics. So it’s a privileged position to be in one we don’t take lightly and we continue to work really, really hard to deliver for our customers every day. Arun Jayaram: Great. My follow-up, Doug, we’re intrigued by the MERO 3 project award I know you announced just a bit earlier in the quarter. But I was wondering if you could just talk a little bit about some of the unique technology that you’re bringing to table for this and it seems like a an application that could open up a world of new opportunities despite taking some of the processing and separation to the sea floor as you mentioned it would perhaps reduce some of the needs at the surface in terms of the design of the facility subsides. So I was wondering if you can maybe comment on the technology and perhaps the scope here of future opportunities and what this could open up for FTI? Doug Pferdehirt: Sure, and thank you for the question because the award was announced earlier. We haven’t had a chance to talk about it here in this forum. This was the first opportunity. So very excited as I pointed out. I think it – we said it’s really, really unique both for the industry, as well as for our company. And I think understanding, as you said what are some of the actual award and then there’s with those what is it enabled by that? So, let’s start with just some of the highlights. Yes, one of the bottlenecks that we see in Greenfield developments as the offshore market continues to grow will be the delivery of the FPSO. The FPSOs are complicated and there are certain number of providers of those FPSOs and clearly they are becoming, if you will, the long pole in the tent in terms of the project cycle time. Our approach to ensuring that deepwater economics remain privileged, i.e. drove our customers global capital spend. It is by really doing everything we can to in every way address the cycle time, as well as reducing the risk of delivering the projects and ensuring that they’re delivered on time. So an example of that would be, the FPSO itself is an intriguing unit. But let’s see, the complexity is really in the top sides configuration that you put on top. And you do that because, you either have to separate water from oil or you have to treat the gas or you have two separate, in this case high CO2 rich dense gas from the flow stream. If you can do that on the seabed, it has many advantages, one, simplifying the FPSO, therefore reducing that risk of that becoming a bottleneck in terms of driving even further improvements in cycle time. Secondly, there’s obviously more real estate on the sea floor. We could do things, if you will horizontally, whereas if you’re on a ship you are pretty much constrained to doing things vertically Any sort of vertical construction costs more than horizontal construction. So in the simplest terms, we just have more real estate and to play with. And more and just as importantly than the economics is this is ACC has project. This is about reducing greenhouse gas intensity. This is about separating the CO2 on the sea floor and reinjecting it into the subsurface. It never sees the atmosphere. It is at the bottom of the ocean, on the sea floor in a closed loop system where we can separate out the CO2 and again re-inject CO2, hence the delivering a much lower greenhouse gas intensity for the project......»»

Category: topSource: insidermonkeyFeb 23rd, 2024

A recession in 2024 would burst the biggest stock bubble since the dot-com craze, sending the market down 40%, veteran strategist says

A slew of economic indicators are still in "deep recession territory," one market vet warned, and stocks are at risk of a big correction. Yichiro Chino/Getty Images A recession will hit in 2024, according to Paul Dietrich, chief investment strategist of B. Riley. Even a mild recession could spark as much as a 40% stock crash, Dietrich told Business Insider. That's because the market is looking the most overvalued since the dot-com craze of 2001, he said. A recession will likely strike in 2024, and even a mild economic slowdown could send stocks plunging, as investors are playing in one of the most overvalued markets in over twenty years.That's according to Paul Dietrich, the chief investment strategist of B. Riley Wealth. US stocks have hit fresh records again this week following a wildly upbeat earnings report from chip maker Nvidia. But the higher stocks go, the higher they have to fall in a potential recession. Dietrich is forecasting a mild recession to strike, but even a low-grade slowdown could spark as much as a 40% stock crash, which would take the S&P 500 to around 3,000."We're still on the path to recession," Dietrich told Business Insider in an interview, adding that even a strong GDP print for the quarter wouldn't dent his confidence in a coming downturn. "We're so overvalued now in the market."The optimism is high across Wall Street as investors price in hefty interest rate cuts this year and AI mania shows no sign of ebbing. Investors are expecting around 100 basis-points of rate cuts from the Fed, according to the CME FedWatch tool. Meanwhile, the economy has shown surprising resilience over the past year, with growth estimated to fall around 2.9% for the current quarter, per Atlanta Fed economists.But a closer look at the numbers paints a less rosy picture of the economy. A slew of economic indicators have fallen into "deep recession territory," Dietrich warned, pointing to signs of weakness flashing in the job market and consumer spending.   The unemployment rate remains near an all-time low, but workers without a job are having trouble regaining employment. Continuing unemployment claims have hovered close to 1.9 million since the start of 2024, a level Dietrich described as "recessionary" in a previous note.Consumers also look like they're having trouble keeping up with the pace of inflation and elevated borrowing costs. Credit card debt notched a record $1.13 trillion over the fourth quarter, Fed data shows, and it's likely that consumers will soon run into their credit limits, Dietrich warned, pumping the brakes on what's been an important engine of the economy in the last year. Meanwhile, inflation likely isn't getting back to the Fed's 2% price target anytime soon, he predicted. While prices have cooled dramatically from their highs in 2022, the government printed a huge amount of money during the pandemic — around $2 trillion since Biden's presidency — and the inflationary effects of that likely haven't fully worked their way through the economy. "Once the money is appropriated and spent, it takes about two years for the inflation to actually catch up. And that's why I believe the last mile of inflation going down to 2% is going to be very, very difficult and very slow … It could, and probably will, cause stagflation we saw in the 70s," Dietrich added, pointing to the stagflationary crisis of the decade, where prices soared while economic growth was slugged.A recession, even a mild one, is never a smooth ride for stock investors, Dietrich warned. GDP didn't even dip 1% at the trough of 2001 recession, though stocks plummeted 49% peak-to-trough. The overvalued Nasdaq Composite, meanwhile, plunged 78% peak-to-trough as investors got burned for their craze for internet stocks.Though stocks fall an average 36% at the onset of a recession, Dietrich thinks the market today could fall even more, given that he sees stocks as the most overvalued they've been since 2001. Many tech stocks today — especially those that haven't been able to back up their valuations with earnings — may crater as the economy enters a recession, he said."This current run-up in the stock market is based on the strength of 7 mega-cap tech stocks and the excited betting on when the Fed will lower rates. No one seems to notice that the economy is cooling and there are risks to the economy everywhere," Dietrich said in a previous note.New York Fed economists are pricing in a 61% chance the economy could tip into recession by January of next year. One under-the-radar economic indicator is pricing the odds of recession around 85%, the highest recession risk recorded since the Great Financial Crisis.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderFeb 23rd, 2024

Futures Flat After Nvidia Sparks Biggest Rally In Over A Year

Futures Flat After Nvidia Sparks Biggest Rally In Over A Year US equity futures were poised for a muted end to the week after Thursday's blowout rally which sent the S&P over 2.1% higher, its biggest one-day gain since Jan 2023, after Nvidia’s blowout earnings rekindled global euphoria about artificial intelligence (even as Google demonstrated just how racist and useless it actually is) and pushed the S&P to its highest close on record, while also sending European and Japanese markets to all time highs. At 8:00am, S&P 500 futures were unchanged while Nasdaq 100 contracts slipped 0.2% - even as NVDA rose above $800 to sport a $2 trillion market cap - after soaring 3% yesterday. Treasury yields dropped with the 10Y sliding 3bps to 4.30% and the dollar extending its losses, as oil and bitcoin also reversed recent gains. The US economic data calendar is empty for the session, while no Federal Reserve members are scheduled to speak In premarket trading, Nvidia rose 2.1% extending Thursday’s 16% jump, and set to surpass a $2 trillion market cap when it opens. Block was quoted 13% higher as the payments technology company’s results and outlook beat estimates. Intuitive Machines was set for a 45% surge after the startup’s spacecraft landed on the Moon. By contrast, Booking Holdings gave a disappointing forecast and reported headwinds from the war in Israel, sending its shares down 8.5%. Here are some other notable permarket movers: Applied Optoelectronics sinks 37% after the maker of fiber-optic networking products posted a surprise drop in revenue in the fourth quarter. Block Inc. rallies 16% after the payments technology company raised its forecast for adjusted Ebitda for 2024. Booking Holdings slips 8.1% after giving a disappointing forecast for travel reservations and gross bookings, with the war in Israel and currency fluctuations weighing on results. Carvana soars 30% after the used-car retailer topped Wall Street’s profit expectations in the final months of 2023 and said it expects improved earnings this quarter. Fluence Energy advances 7.6% as JPMorgan raises its recommendation on the energy-storage company to overweight, saying Thursday’s selloff triggered by a short report was overdone. Maravai LifeSciences climbs 30% after its revenue outlook for the year topped the average analyst estimate. MercadoLibre falls 6.7% after recording earnings per share for the fourth quarter that fell short of Wall Street’s estimates for the e-commerce company. With S&P futures trading around 5,100 Investors are taking a breather after two rampy weeks as they weigh optimism about corporate earnings and US economic resilience against elevated valuations and hawkish signals from the Federal Reserve. “We continue to remain of the view that the secular bull market remains firmly intact,” said strategist Mathieu Racheter at Julius Baer. “While the risk of a short-term market pullback has increased, as several sentiment and positioning indicators have shot up above the historical normal levels again, we would use any weakness as opportunity to increase the exposure to equities.” “The speed of the tech rally has left investors wondering whether to take profits,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “While we see merit in re-balancing portfolios, we believe that retaining strategic exposure to US large-cap technology is important, and the rise in tech stocks could go further still.” The Stoxx Europe 600 index rose 0.1% and was headed for a fifth weekly gain, amid mixed earnings after also closing at a record on Thursday. The automotive and chemicals sectors the biggest outperformers, the latter on German chemicals giant BASF’s latest results. The telecommunications subindex is the worst performer after Deutsche Telekom reported disappointing earnings. UK-based lender Standard Chartered Plc climbed more than 8% after unveiling a profit beat and share buyback. German insurer Allianz SE declined after non-life insurance earnings missed analysts’ expectations. Deutsche Telekom AG, Europe’s largest telecommunications operator, slipped after a miss in non-US earnings.Here are the most notable European movers: Standard Chartered rises as much as 8.4% following the bank’s fourth-quarter adjusted pretax profit beat, with analysts highlighting lower loan losses as well as a $1 billion buyback BASF climbs as much as 4.0% after announcing deepened cost cuts and releasing results that pointed to a future rebound in earnings, with som analysts reckoning the weakness in volumes has bottomed out Italian banking stocks climb in Milan trading on renewed speculation of possible consolidation in the industry, after newspaper Il Foglio reported that unnamed investment banks are studying the sector Magyar Telekom jumps as much as 4.4% to highest since 2009 after Hungary’s largest telecommunications company issued strong guidance especially for Ebitda AL, a key metric in the sector, Erste says Mercedes-Benz shares rise as much as 2.3%, building on Thursday’s gains, after Barclays upgraded the German carmaker to overweight in light of the “compelling” increase in shareholder returns Deutsche Lufthansa shares fall as much as 4.8%, the biggest intraday drop since December, after the group reshuffled its executive board, with the exit of its CFO seen as a negative Allianz falls as much as 3.8%, the most since May, as underlying weaknesses in the German insurance group’s fourth-quarter result overshadowed a profit jump and higher dividends Hensoldt falls as much as 8.7% after releasing results that failed to inspire enthusiasm. Oddo analysts say the company’s unchanged guidance could have disappointed investors Deutsche Telekom shares fall as much as 2.6% after the telecom operator reported Ebitda slightly below estimates, a result of lower rental sales registered in the group headquarters segment, according to analysts Trainline shares fall as much as 2.7% after the train ticketing platform was downgraded to neutral by UBS, citing a lack of near-term catalysts, even as the long-term prospects for the firm look solid The Bloomberg Dollar Spot Index extended declines into a fifth day, on course for the first weekly drop in 2024. Almost all developed-nation peers advanced on Friday, with the exception of Norwegian krone, which is the most volatile G-10 currency this week and under-performs peers. The Australian and New Zealand dollars briefly gave up gains following Waller’s comments before bouncing back after China reported slower declines in home prices in January.  Fed Governor Christopher Waller said January’s jump in consumer prices warrants caution in deciding when to start cutting interest rates. That’s after Fed Vice Chair Philip Jefferson and Governor Lisa Cook made clear they want more evidence that inflation is headed back to their 2% target before lowering borrowing costs. Earlier in the session, Asian stocks were on track for a fifth straight week of gains as investors took heart from Beijing’s recent market rescue efforts, which have spurred a strong rebound in Chinese shares. The MSCI Asia Pacific Index was set for a 1.3% increase this week and headed for its longest winning streak in a year. Trading on Friday was largely range bound as Japan was shut for a holiday after surpassing a historical high reached more than three decades ago. The upbeat sentiment in Asia comes as Chinese authorities took further steps to restore investor confidence, including restrictions on equity net sales, stock purchases by state funds and a clampdown on quant trading. Chinese stocks as a result posted their longest run of gains since July 2020 in the mainland, while a measure in Hong Kong edged closer to erasing losses this year. In rates, treasuries are slightly cheaper across the curve with losses led by the front and belly, adding to recent flattening pressure seen on 2s10s and 5s30s spreads. Treasuries are cheaper by up to 2bp across the 2-year out to the 7-year sector with 2s10s, 5s30s spreads flatter by 0.3bp and 1.2bp on the day; 10-year yields drop by 2bps to 4.305%, with bunds and gilts slightly outperforming in the sector. Friday’s US session is set to be quiet for scheduled events, with the focus on potential deal hedging by corporates and supply pressure ahead of Monday’s Treasury auction. According to Bloomberg, the dollar issuance slate is empty and follows Thursday’s five-deal $19.7b calendar led by AbbVie pricing $15b across seven tranches. Issuers paid less than 1 basis point in new issue concessions, with deals nearly five times oversubscribed on average. Monday’s session is expected to be active, which could warrant some deal-related hedging flows for Friday’s session. Solventum is a candidate for either Friday or Monday, contemplating a deal in the context of $7bn with proceeds earmarked to fund a payment to 3M. Monday also sees a US double auction of 2- and 5-year notes for combined $127b In commodities, oil prices decline, with WTI falling 1.3% to trade near $77.60. Spot gold falls 0.3%. Looking to the day ahead, we have UK February GfK consumer confidence, Germany Q4 private consumption, government spending and capital investment, and the February ifo survey, as well as the ECB’s Consumer Expectations Survey. The US economic data calendar is empty for the session; we also hear from the Fed’s Waller, the ECB’s Schnabel, and the BoE’s Greene. Market Snapshot S&P 500 futures little changed at 5,092.75 STOXX Europe 600 little changed at 495.25 MXAP little changed at 172.84 MXAPJ little changed at 528.43 Nikkei up 2.2% to 39,098.68 Topix up 1.3% to 2,660.71 Hang Seng Index down 0.1% to 16,725.86 Shanghai Composite up 0.6% to 3,004.88 Sensex little changed at 73,119.16 Australia S&P/ASX 200 up 0.4% to 7,643.59 Kospi up 0.1% to 2,667.70 German 10Y yield little changed at 2.48% Euro little changed at $1.0820 Brent Futures down 1.2% to $82.67/bbl Gold spot down 0.3% to $2,018.05 US Dollar Index little changed at 104.02 Top Overnight News China’s housing crisis is getting worse, w/Dec new home prices in 70 major cities falling 1.24% Y/Y in Jan (vs. -0.89% in Dec) while secondhand prices sank even more. WSJ Constrained on all sides, China’s central bank is aiming to squeeze more value out of its policy actions by catching markets unaware with surprise easing aimed at putting a floor under the struggling economy. A record cut to a key lending rate earlier this week announced by the People’s Bank of China was just the latest unexpected move since Governor Pan Gongsheng took office last summer. At a press briefing last month, he shocked with an outsized cut to banks’ reserve requirement ratio. BBG A bill in the U.S. Congress targeting Chinese biotech companies may end up being more "narrowly tailored", the U.S. lawmaker who proposed it said on Friday, adding that he was cautiously optimistic something could be passed this year. RTRS The US and China are discussing new debt plans to prevent a wave of EM sovereign defaults, in potentially their biggest joint economic cooperation in years, people familiar said. Any plan — which may include extending loan periods before defaults — may require buy-in from private creditors. BBG ECB Governing Council member Robert Holzmann said he doesn’t see reductions in interest rates coming before the US — suggesting he reckons any move by policymakers in Frankfurt may still be some way off. BBG Fed officials (Waller, Jefferson, Cook) signal rate cuts will arrive eventually (and likely this year), but additional disinflationary evidence will be required first. BBG Prime Minister Benjamin Netanyahu has finally unveiled Israel’s plans for Gaza after hostilities end in the enclave, submitting to his war cabinet a formal proposal that directly contradicts the objectives of the US. FT Comments this week from Fed officials and the minutes to the January FOMC meeting suggest that the first rate cut is unlikely to come as early as our previous forecast of the May meeting. We have therefore dropped our forecast of a May cut and now expect 4 cuts total in 2024 (vs. 5 previously) in June, July, September, and December, followed by 4 more cuts in 2025 (vs. 3 cuts previously), to the same terminal rate of 3.25-3.5%. GIR Intuitive Machines leapt premarket after becoming the first private firm to land a robotic spacecraft intact on the moon. NASA paid almost $118 million for the mission that ended a string of failures. BBG Mutual fund cash allocations are nearing record lows. Mutual fund PMs can express directional views on the forward path of equities through the share of their assets they choose to hold in cash. Mutual funds continued to deploy cash reserves into the equity market in 4Q23, cutting their allocation to cash from 1.9% to 1.7% of assets. Fund cash allocations now stand just 20 bp above their all-time low of 1.5% reached in December 2021. GIR Earnings Standard Chartered (2888 HK / STAN LN) - FY23 (USD): adj. Pretax 5.7bln (exp. 5.89bln, prev. 4.76bln Y/Y), adj. Op Revenue 17.4bln (exp. 18.6bln, prev. 16.3bln Y/Y). Announces USD 1bln share repurchase. Guides initial FY24-26 op. income growth at the top of the range +5-7%. Underlying profit before tax rose 27% Y/Y to 5.7bln, NII rose 23% Y/Y to 9.6bln, Q4 adj. pretax 1.08bln (exp. 989.6mln), Co. announces USD 1bln buyback. (Newswires) Index Weightings: FTSE 100 (0.8%). Shares +8.1% in European trade Allianz (ALV GY) - Q4 (EUR): Adj. EPS 6.00 (exp. 5.69, prev. 4.99 Y/Y), Op. 3.77bln Y/Y (prev. 3.96bln Y/Y). Guides initial FY24 Op. 13.8-15.8bln. Proposes to increase FY dividend to EUR 13.80 (exp. 12.08, prev. 11.40), announces buyback programme of up to EUR 1bln, to be conducted between March 2024 and year-end. Regular dividend payout ratio increased to 60% (prev. 50%). This new dividend policy shall already apply to the dividend for fiscal year 2023 (Newswires) Index Weightings: DAX (7.9% - third largest), Euro Stoxx 50 (3.0%), Stoxx 600 (1.0%) Shares -3.2% in European trade BASF (BAS GY) - Q4 (EUR): Revenue 15.9bln (exp. 16.2bln). Adj. EBIT 292mln (exp. 398mln). Sees 2024 operating profit between EUR 13.8-15.8bln (exp. 15.48bln). Guides FY24 EBITDA 8-8.6bln, FCF 0.1-0.6bln. Proposes dividend of EUR 3.40/shr for FY23. Targeting cost-saving plans of up to EUR 1bln by the end of 2026. (Newswires) Index Weightings: DAX 40 (3.6%), Euro Stoxx 50 (1.4%), Stoxx 600 (0.4%) Shares +0.5% in European trade Deutsche Telekom (DTE GY) - Q4 (EUR): Adj. Net 1.83bln (exp. 1.63bln), Adj. EBITDA 10.06bln (exp. 10.1bln), Revenue 29.4bln (exp. 28.5bln). Guides initial FY24 EPS > 1.75 (exp. 1.84), Adj. EBITDA 42.9bln. (Newswires) Index Weightings: DAX 40 (6.2%), Euro Stoxx 50 (2.3%), Stoxx 600 (0.8%) Shares -2.7% in European trade A more detailed look at global markets courtesy of Newsquawk APAC stocks mostly benefitted amid tailwinds from the tech-led surge in the US on the NVIDIA wave as its shares surged over 16% and its market cap increased by a record USD 277bln. ASX 200 finished higher with gains led by outperformance in tech, consumer stocks and financials. KOSPI kept afloat with South Korea to execute a record KRW 398tln budget in H1 to prop up domestic demand. Hang Seng and Shanghai Comp. were mixed with the tech sector facing headwinds from ongoing trade-related frictions, while the mainland was indecisive as participants digested the PBoC's liquidity injection, CSRC's denial of regulatory measures, and the latest Home Price data which showed a steeper Y/Y fall in property prices. Top Asian News US and China are in talks over innovative emerging market debt plans to prevent a surge in defaults. China has reportedly turned to private firms to hack an array of foreign governments and organisations, while files indicate China infiltrated the cyberinfrastructure and collected data of government departments in Malaysia, Thailand and Mongolia, according to FT citing a large data leak from Shanghai Anxun Information Technology. China's Embassy in the UK commented regarding UK sanctions on Chinese companies in which it stated that sanctions against relevant companies are 'unilateral actions that have no basis in international law' and it is firmly opposed to them, while it would like to inform the British side that any act that undermines China's interests will be resolutely countered by the Chinese side, according to Reuters. US export curbs on China won't extend to legacy chips which generally refers to 28-nanometer and older-generation semiconductors, according to US official cited by Nikkei. US lawmakers urged Volkswagen (VOW3 GY) to halt operations in Xinjiang after vehicles with Chinese components were held at US customs. Chinese commercial banks sold a net USD 9.8bln of FX in Jan (vs net sale of USD 4.3bln in Dec), according to FX regulator. China's CSRC vows to crack down on market manipulation and insider trading, will step up onsite inspection of listing candidates. Fitch on China says it believes rate cuts will deliver only a minor boost to economic activity. Chinese Cabinet meeting says they are to study measures to attract and utilise foreign investment on a larger scale; to study measures to prevent and resolve local debt risks European bourses, Stoxx600 (+0.1%), have not deviated much from levels seen at the open, with trade fairly tentative after the prior day’s strength. The FTSE MIB (+0.6%) is the exception, lifted by continued strength in the Italian banking sector. Sectors are mixed; Chemicals take the top spot, lifted by post-earning strength in BASF (+0.5%). Autos build on the prior day’s gains after Barclays upgraded Mercedes Benz (+1.5%). Telecoms is the clear laggard, hampered by Deutsche Telekom's (-1.7%) results. US Equity Futures (ES -0.1%, NQ -0.2%, RTY -0.6%) are subdued, paring back some of the pronounced strength in the prior session. Nvidia soared as much as 16% in the prior session and is higher by 1.8% in the pre-market. Top European News ECB's Holzmann says the main risk to rake cuts is Red Sea tensions, via Bloomberg TV; Some wage increases have been quite high. Better to cut later and faster than too early. ECB hopes for cuts but have been wrong before. Does not see circumstances for the ECB to cut before the Fed. ECB's Schnabel says monetary policy has had a weaker impact on dampening demand for services ECB's Nagel says it is too early to cut rates even if a move appears tempting; will only get a key price pressure in Q2, then "we can contemplate cut in interest rates"; price outlook is not yet clear enough. Period of rapid inflation is over, and some setbacks ahead are possible. Inflation, including "hard core" will remain markedly higher than 2% in coming months. ECB Consumer Inflation Expectations Survey (Jan) - 12-months ahead 3.3% (prev. 3.2%); 3-year ahead 2.5% (prev. 2.5%) UK Ofgem Energy Price Cap (GBP): 1,690 (exp. 1,656; prev. 1,928), -12.3% (exp. -14%) for dual-fuel households. FX DXY is pivoting around the 104.00 mark within a 103.85-104.01 range and contained within yesterday's 103.43-104.12 parameters. Uneventful trade for EUR/USD with the pair sandwiched between its 100DMA at 1.0811 and 200DMA at 1.0826. IFO did little to move the dial, whilst ECB inflation expectations posted a modest uptick for the 1yr reading. Hawkish Fed rhetoric has seen the JPY lose further ground to the dollar with focus on a potential test of the recent YTD peak at 150.88. Such a move could prompt verbal jawboning from Japanese officials. NZD is the marginal laggard across the majors following soft retail sales overnight. AUD is trivially firmer vs. the USD with the pair supported via favourable risk dynamics. PBoC set USD/CNY mid-point at 7.1064 vs exp. 7.2008 (prev. 7.1018). Fixed Income Once again, initial leads were bearish with EGBs veering lower throughout the morning. The German Ifo release which printed alongside the latest ECB Consumer Inflation survey, saw a slight increase in the 12-month view. Reaction to the data was hawkish, but not sufficient to trigger a test of 132.00. USTs are following their European peers with the pressure resulting in a slight uptick in pricing for the Fed, but very close to the Fed's own view; currently near lows at 109-10. Gilt price action is in-fitting with Bunds with specifics light so far. Overall bearish action has pressured Gilts to a 97.10 trough. Italy sells EUR 4bln vs exp. EUR 3.5-4bln 3.20% 2026 BTP Short Term and EUR 0.5-1.0bln 1.50% 2029 & EUR 2.55% 0.25-0.5bln 2041 BTPei. Commodities A weak session for crude prices this morning despite a lack of fresh or clear fundamental drivers, although sentiment has been gradually coming off best levels this morning; Brent Apr dipped back under USD 83/bbl. Precious metals also see broad weakness, despite a relatively contained Dollar and quiet news flow, whilst risk appetite has been waning from best levels in recent trade; XAU holds around USD 2020/oz; base metals are lower across the board. QatarEnergy is due to make an announcement on Sunday that will have "a significant impact" on the industry, according to Reuters sources; details light Geopolitics: Middle East US charged four mariners from an Arabian sea vessel transporting suspected Iranian-made advanced conventional weapons. "Israeli Foreign Minister: We will not be patient for a longer period in order to reach a diplomatic solution on the Lebanese front", according to Sky News Arabia Geopolitics: Other China's envoy for Korean Peninsula affairs told US's North Korea affairs official that China will continue to play a constructive role in promoting the political settlement of issues concerning the Korean Peninsula and said all parties concerned should acknowledge the core of the Korean Peninsula issue, as well as address their concerns through balanced and meaningful dialogue, according to Reuters. US event calendar Nothing major scheduled Central Bank speakers Nothing major scheduled DB's Jim Reid concludes the overnight wrap We've been discussing in recent days how Nvidia earnings was the main macro event of the week and how options were pricing in a 10.5% move in either direction in the 24-hours post earnings. This made me a bit nervous we were overselling the event but the reality is we undersold it as post earnings the company surged +16.40% yesterday, a phenomenal performance for one of the biggest companies in the world. There is no doubt it transformed the mood of the whole global risk market as well. Pretty much every global asset class is influenced by these seven stocks, something we tried to get across in our chart book. To frame the scale of its move yesterday, Nvidia added $277bn to its market capitalisation, making this the biggest single session gain in value of all time, surpassing the $197bn gain by Meta earlier this month. This saw Nvidia shoot back up to fourth place in the ranking of the world’s largest companies by market capitalisation, and the third largest in the S&P 500. Total year-to-date returns for the company now amount to +58.59%, the best out of the entire S&P 500. Nvidia’s year-to-date gains alone are equivalent to nearly 80% of the combined market capitalisation of the two largest listed companies in Europe (Novo Nordisk at $561bn and ASML at $380bn). The Philadelphia Semiconductor Index also partook in the rally closing +4.97%. For more on Nvidia, and the 2024 outlook on semiconductors, see my team’s chartbook from last week here. The Nvidia-led optimism saw the S&P 500, Nasdaq 100 and Dow Jones indices all hit new all-time highs. The S&P 500 leaped up by +2.11%, its largest gain in over a year, primarily driven by the information technology sector (+4.35%). The gains were clearly concentrated, but the equal weighted S&P 500 still posted a solid +1.03% gain, and the Russell 2000 index of small-cap stocks increased by +0.96%. Within tech, the Mag-7 gained +4.87%, while the broader NASDAQ rose +2.96%, ending the day only a tenth of a percent below its November 2021 highs. Talking of all time highs (ATHs) I did one of my favourite CoTDs yesterday where I looked at 85 countries' stock markets and showed how far away they were from their ATH in terms of percentage and years. Japan before yesterday was the furthest away at 34 plus years but that record has now been put to one side. For interest the furthest away from ATHs now are Italy, Finland, Portugal, Greece and Cryprus who all last hit their ATH around the 2000 bubble. Then there are 25 countries who last had their ATH around the GFC. You can see more on this in my CoTD here from yesterday. Please email jim-reid.thematicresearch@db.com if you want to be added to the daily chart list. All global equities benefited yesterday. Indeed European equities enjoyed the risk-on sentiment, as the STOXX 600 rose +0.82%. The German DAX strongly outperformed, jumping +1.47% to another new record, propelled forward by the information technology (+2.83%) and consumer discretionary (+2.82%) sectors. The MSCI EM index increased +0.86%. It wasn't just Nvidia that helped the mood yesterday, with data largely supportive on both sides of the Atlantic. In the US, weekly jobless claims at 201k (vs 216k expected) were a boost even if it helped keep yields elevated (see below). Continuing claims also fell more than expected to 1862k (vs 1884k). This reverses the gentle increases from previous weeks, adding to the picture of US economic resilience. Taking the edge off the day's overarching trends, the US composite PMI modestly fell 0.6 points to 51.4 (vs 51.8 expected), driven by a fall in the services component to 51.3 (vs 52.3 expected). The manufacturing component rose to 51.5 (vs 50.7 expected). With this overall supportive backdrop, Fed speakers continued to urge caution regarding Fed cuts with Vice Chair Jefferson warning of the risk of “easing too much on improving inflation” after the January “CPI highlight[ed] disinflation is likely to be bumpy.” He still said that it is “likely appropriate to cut later this year” but it was a slightly hawkish message from someone around the center of the FOMC. Philadelphia Fed president Harker made some mixed comments, saying he “would caution anyone from looking for [rates easing] right now and right away” but later suggesting that cuts could come within “a couple of meetings”. Later on, we heard a patient tone from Governor Waller, who noted that there was “no great urgency” to ease policy, as well as from Minneapolis Fed President Kashkari, who said “we still have some work to do” on inflation. Fed funds futures saw expectations of 2024 rate cuts sink to a new 3-month low of 81.5bps (-5.2bps), which is less than half what priced at the peak on January 12. As a result, 2yr Treasury yields rose +4.6bps to 4.71%, their highest since the December Fed meeting. The softer PMI data saw 10yr Treasuries waver between gains and losses, ultimately finishing the day +0.3bps at 4.32%. Yields saw a bit of volatility, but little lasting impact, around a soft 30yr TIPS auction. This saw bonds issued at a 2.20% real yield, 2.5bps above the pre-sale yield and the highest since 2010 (the last 30yr TIPS auction was back in August). In Europe, the main release was the preliminary February PMIs, which saw the composite rise 1pt to 48.9 (vs 48.4 expected). This puts the index at an 8-month high, with the overall Euro Area growth outweighing a slump in German manufacturing. This was led by the services PMI, which rose to 50.0 (vs 48.8 expected), its first time out of contractionary territory since July. Adding to this, the publication of the ECB’s January meeting accounts showed officials were of the view that the risk of cutting rates too early was the greater danger relative to holding them steady, particularly with the limited indications of a wage turnaround. This signal of patience came even as there was “increased confidence” that inflation would come back to target and with the accounts flagging the likely lowering of the ECB’s inflation forecast at the March meeting. See our economists’ full take on the accounts here . Against this backdrop, traders trimmed bets of an ECB cut. The amount of rate cuts expected by the June meeting fell -4.2bps to 25.3bps, so only just pricing in a full rate cut by June. As many as 75bps of cuts had been priced by June back in late December. Off the back of this, the 2yr bund yields rose +5.4bps, even as 10yr bund yields saw a marginal decline (-0.7bps). In the energy space, strong risk sentiment and lingering supply fears saw Brent crude prices post their highest close since early November (+0.77% to $83.67). In more encouraging news for inflation, month-ahead TTF natural gas prices fell to their lowest since May 2021 (-4.59% to EUR 22.85/MWh) as mild weather and curtailed industrial demand have left Europe with historically high gas storage as it nears the end of winter. Asian equity markets are relatively quiet after a big week. As I check my screens, the KOSPI (+0.26%) and the S&P/ASX 200 (+0.34%) are trading in the green while Chinese equities alongside the Hang Seng keep on fluctuating in and out of positive territory. Markets in Japan are closed for a public holiday which means no cash Treasury trading. US equity futures are fairly flat. Now to the day ahead. In terms of data releases, we will have UK February GfK consumer confidence, Germany Q4 private consumption, government spending and capital investment, and the February ifo survey, as well as the ECB’s Consumer Expectations Survey. We will also hear from the Fed’s Waller, the ECB’s Schnabel, and the BoE’s Greene. Tyler Durden Fri, 02/23/2024 - 08:34.....»»

Category: worldSource: nytFeb 23rd, 2024

AerCap Holdings N.V. Reports Record $3.1 Billion 2023 Net Income and Announces New $500 Million Share Repurchase Authorization

Record net income for the full year 2023 of $3.1 billion, or $13.78 per share, and $1.1 billion, or $5.37 per share, for the fourth quarter of 2023. Record adjusted net income for the full year 2023 of $2.4 billion, or $10.73 per share, and $641 million, or $3.11 per share, for the fourth quarter of 2023. Returned $2.6 billion to shareholders in 2023. New $500 million share repurchase authorization announced today. DUBLIN, Feb. 23, 2024 /PRNewswire/ -- AerCap Holdings N.V. (NYSE:AER), the industry leader across all areas of aviation leasing, today reported record financial results for the fourth quarter and full year of 2023 ended December 31, 2023. Aengus Kelly, Chief Executive Officer of AerCap, said: "We are pleased to announce another record quarter for AerCap, completing a record year for our company across many fronts. These results reflect the continued strong operating environment across our businesses and the positive momentum for leasing and sales of aircraft, engines and helicopters. In addition, this quarter we collected over $600 million of insurance settlements, for a total of $1.3 billion collected during 2023. This strong performance is a testament to the talent, dedication and commitment of the entire AerCap team and our industry leadership. Given the strong tailwinds that we see for demand for aircraft, engines and helicopters, we are confident about the outlook for AerCap in 2024 and beyond." Highlights: Return on equity of 27% and adjusted return on equity of 16% for the fourth quarter of 2023. Book value per share of $83.81 as of December 31, 2023, an increase of approximately 25% from December 31, 2022. Unlevered gain on sale margin of 18% for assets sold in the fourth quarter of 2023, or 1.62x book value on an equity basis. Cash flow from operating activities of $1.4 billion for the fourth quarter of 2023, bringing the total for the full year 2023 to $5.3 billion. Recovered $1.3 billion in cash insurance settlement proceeds to date, including $609 million in the fourth quarter of 2023. Returned $2.6 billion to shareholders through the repurchase of 44.3 million shares during 2023, at an average price of $59.09 per share. Following a successful secondary offering of 30.7 million shares in the fourth quarter of 2023, GE has now sold all of its AerCap shares. Adjusted debt/equity ratio of 2.47 to 1 as of December 31, 2023. Revenue and Net Spread Three months ended December 31, Year ended December 31, 2023 2022 % increase/(decrease) 2023 2022 % increase/(decrease) (U.S. Dollars in millions) (U.S. Dollars in millions) Lease revenue:    Basic lease rents $1,576 $1,494 6 % $6,249 $5,982 4 %    Maintenance rents and other receipts 142 140 1 % 611 549 11 % Total lease revenue 1,718 1,634 5 % 6,860 6,531 5 % Net gain on sale of assets 94 121 (22 %) 490 229 114 % Other income 86 74 17 % 231 254 (9 %) Total Revenues and other income $1,899 $1,829 4 % $7,580 $7,014 8 % Basic lease rents were $1,576 million for the fourth quarter of 2023, compared with $1,494 million for the same period in 2022. Basic lease rents for the fourth quarter of 2023 were impacted by $40 million of lease premium amortization. Maintenance rents and other receipts were $142 million for the fourth quarter of 2023, compared with $140 million for the same period in 2022. Maintenance rents for the fourth quarter of 2023 were impacted by $25 million as a result of maintenance right assets that were amortized to revenue. Net gain on sale of assets for the fourth quarter of 2023 was $94 million, relating to 35 assets sold for $625 million, compared with $121 million for the same period in 2022, relating to 83 assets sold for $1 billion. The decrease was primarily due to the volume and composition of asset sales. Other income for the fourth quarter of 2023 was $86 million, compared with $74 million for the same period in 2022. The increase was primarily driven by higher interest income. Three months ended December 31, Year ended December 31, 2023 2022 % increase/(decrease) 2023 2022 % increase/(decrease) (U.S. Dollars in millions) (U.S. Dollars in millions) Basic lease rents $1,576 $1,494 6 % $6,249 $5,982 4 % Adjusted for: Amortization of lease premium/deficiency 40 47 (14 %) 166 206 (19 %) Basic lease rents excluding amortization of lease premium/deficiency $1,617 $1,541 5 % $6,415 $6,188 4 % Interest expense 496 420 18 % 1,806 1,592 13 % Adjusted for:    Mark-to-market of interest rate caps and swaps (19) 2 NA (37) 69 NA Interest expense excluding mark-to-market of interest rate caps and swaps 477 423 13 % 1,770 1,661 7 % Adjusted net interest margin (*) $1,140 $1,118 2 % $4,645 $4,527 3 % Depreciation and amortization (631) (594) 6 % (2,481) (2,390) 4 % Adjusted net interest margin, less depreciation and amortization $509 $524 (3 %) $2,164 $2,137 1 % Average lease assets (*) $60,283 $59,009 2 % $59,775 $59,745 — Annualized net spread (*) 7.6 % 7.6 % 7.8 % 7.6 % Annualized net spread less depreciation and amortization (*) 3.4 % 3.6 % 3.6 % 3.6 % (*) Refer to "Notes Regarding Financial Information Presented in This Press Release" for details relating to these non-GAAP measures and metrics Interest expense excluding mark-to-market of interest rate caps and swaps was $477 million for the fourth quarter of 2023, compared with $423 million for the same period in 2022. AerCap's average cost of debt was 3.7% for the fourth quarter of 2023 and 3.3% for the same period in 2022, excluding debt issuance costs, upfront fees and other impacts. Recoveries Related to Ukraine Conflict During the fourth quarter of 2023, we recognized recoveries related to the Ukraine Conflict of $614 million, primarily consisting of cash insurance settlement proceeds received from four Russian airlines and their Russian insurers in settlement of our insurance claims in respect of 50 aircraft and five spare engines on lease to these airlines at the time of Russia's invasion of Ukraine in February 2022. Selling, General and Administrative Expenses Three months ended December 31, Year ended December 31, 2023 2022 % increase/(decrease) 2023 2022 % increase/(decrease) (U.S. Dollars in millions) (U.S. Dollars in millions) Selling, general and administrative expenses (excluding share-    based compensation expenses) $95 $68 38 % $367 $297 24 % Share-based compensation expenses 27 24 14 % 97 103 (6 %) Selling, general and administrative expenses $122 $92 32 % $464 $400 16 % Selling, general and administrative expenses were $122 million for the fourth quarter of 2023, compared with $92 million for the same period in 2022. The increase was primarily driven by higher compensation-related expenses and higher travel, IT and other expenses. Other Expenses Leasing expenses were $135 million for the fourth quarter of 2023, compared with $261 million for the same period in 2022. The decrease in leasing expenses was primarily due to lower amortization of maintenance rights and lease premium assets and lower other leasing expenses recognized during the fourth quarter of 2023, compared with the same period in 2022. Asset impairment charges were $50 million for the fourth quarter of 2023, compared with $53 million recorded for the same period in 2022. Asset impairment charges recorded in the fourth quarter of 2023 related to sales transactions and leasing transactions and were partially offset by related maintenance revenue. Effective Tax Rate AerCap's effective tax rate for the full year 2023 was 8.9%, compared with an effective tax rate of 16.4% for the full year 2022. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions as well as the amount of permanent tax differences relative to pre-tax income or loss, and certain other discrete items. Book Value Per Share December 31, 2023 December 31, 2022 (U.S. Dollars in millions, except share and per share data) Total AerCap Holdings N.V. shareholders' equity $16,589 $16,118 Ordinary shares outstanding 202,493,168 245,931,275 Unvested restricted stock (4,561,249) (4,837,602) Ordinary shares outstanding (excl. unvested restricted stock) 197,931,919 241,093,673 Book value per ordinary share outstanding (excl. unvested restricted stock) $83.81 $66.85 Financial Position December 31,2023 December 31,2022 % increase/ (decrease) over December 31, 2022 (U.S. Dollars in millions) Total cash, cash equivalents and restricted cash $1,825 $1,757 4 % Total assets 71,275 69,727 2 % Debt 46,484 46,533 — Total liabilities 54,686 53,532 2 % Total AerCap Holdings N.V. shareholders' equity 16,589 16,118 3 % Total equity 16,589 16,195 2 % Flight Equipment As of December 31, 2023, AerCap's portfolio consisted of 3,452 aircraft, engines and helicopters that were owned, on order or managed. The average age of the company's owned aircraft fleet as of December 31, 2023 was 7.3 years (4.5 years for new technology aircraft, 14.2 years for current technology aircraft) and the average remaining contracted lease term was 7.3 years. Share Repurchase Program In February 2024, ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaFeb 23rd, 2024

Air Lease Corporation (NYSE:AL) Q4 2023 Earnings Call Transcript

Air Lease Corporation (NYSE:AL) Q4 2023 Earnings Call Transcript February 15, 2024 Air Lease Corporation beats earnings expectations. Reported EPS is $1.89, expectations were $1.1. AL isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, my name is Greg, […] Air Lease Corporation (NYSE:AL) Q4 2023 Earnings Call Transcript February 15, 2024 Air Lease Corporation beats earnings expectations. Reported EPS is $1.89, expectations were $1.1. AL isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good afternoon, my name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to the Air Lease Corporation Q4 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. Jason Arnold, Head of Investor Relations. Mr. Arnold, you may begin your conference. Jason Arnold: Thanks Greg and good afternoon everyone and welcome to Air Lease Corporation’s fourth quarter and full year 2023 earnings call. I’m joined today by Steve Hazy, our Executive Chairman, John Pluger, our Chief Executive Officer and President, and Greg Willis, our Executive Vice President and Chief Financial Officer. Earlier today we published our fourth quarter and full year 2023 results. A copy of our earnings release is available on the investor section of our website at www.airleascorp.com. This conference call is being webcast and recorded today, Thursday, February 15th, 2024. And the webcast will be available for replay on our website. At this time all participants to this call are in listen-only mode. Before we begin please note that certain statements in this conference call including certain answers to your questions are forward-looking statements within the meeting of the Private Securities Litigation Reform Act. This includes without limitation statements regarding the state of the airline industry, the impact of aircraft and engine delivery delays and manufacturing defects, our aircraft sales pipeline and our future operations and performance. These statements and any projections as to our future performance represent management’s current estimates and speak only as of today’s date. These estimates involve risks and uncertainties that could cause actual results to differ materially from expectations. Please refer to our filings with the Securities and Exchange Commission for a more detailed description of risk factors that may affect our results. Air Lease Corporation assumes no obligation to update any forward looking statements or information in light of new information or future events. In addition, we may discuss certain financial measures such as adjusted net income before income taxes, adjusted diluted earnings per share before income taxes, and adjusted pre-tax return on equity, which are non-GAAP measures. A description of our reasons for utilizing these non-GAAP measures as well as our definition of them and the reconciliation to corresponding GAAP measures can be found in our earnings release in 10-K that we issued today. This release can be found in the Investors section and Press section of our website at airleasecorp.com. As a reminder unauthorized recording of this conference call is not permitted. I would now like to turn the call over to our Chief Executive Officer and President, John Plueger. John Plueger: Thanks very much, Jason. Good afternoon everyone, and thank you for joining us on our call today. I’m pleased to report that during the fourth quarter, ALC generated record quarterly revenues of $717 million, up approximately 19% relative to the same quarter last year, and we achieved $1.89 in diluted earnings per share, up 56% from last year’s fourth quarter. Revenue for the full year of $2.7 billion was also an ALC record. Strong continued expansion of our fleet, increased sales activity at healthy gains, and higher end-of-lease revenue were the primary drivers of upside to revenue as compared to the prior year quarter. During the fourth quarter, we purchased 22 new aircraft from our order book, adding approximately $1.2 billion in flight equipment to our balance sheet, while we sold eight aircraft, totaling approximately $440 million in sales proceeds. The utilization rate on our fleet remains very strong at 99.9% for the full year 2023. In addition to revenue expansion during the fourth quarter, we also benefited from approximately $67 million net from the insurance settlement we received on four aircraft seized in Russia in the prior year, plus the equity interest in our managed fleet. We continue to vigorously pursue further insurance settlements as well as our insurance claims and litigation, but given these are largely legal matters, there’s not a lot of extra color we can add on this topic. I will note that we believe strongly in the validity of our claims and continue to pursue all available options for recovery. Global air traffic continues to gain altitude, and there are no signs on the horizon of volumes weakening dramatically. Steve will expand upon this in his remarks. We’re also seeing in recent months a rebound in the cargo and air freight markets, owing largely to cargo ship traffic risk, time delays, and concerns from the Middle East. We believe that this uptick in air freight trend will continue given geopolitical realities in the Middle East. This bodes well for our order of seven A350 freighter aircraft, as does further and impending additional orders for the A350 freighter from airlines such as Cathay Pacific. Demand for fuel-efficient aircraft, meanwhile, continues to be very strong across both new and used aircraft. At present, we are 100% placed in our forward orders through 2025, and we’ve placed 65% of our entire order book. Given Boeing and Airbus are practically sold out through the end of this decade and that we have $22 billion to deliveries pending through 2028, which will likely slip into 2029 as well, we are being patient with additional order book placements to further bolster the upward trend in lease rates you’ve heard us regularly highlighting. These delivery slots hold immense value, and we’re very cognizant of the position of strength we’re in. As to our current fleet, we are taking advantage of the market lease rate increases on our lease extensions, although we do not have a high number of lease expirations or extensions this year. We are still experiencing a very high rate of lease extensions as most airlines are anxious to keep their aircraft given a short supply of aircraft. Used wide body lease rates including A330-200 and 300 and Boeing 777-300ERs are accelerating from the supply-demand imbalance with single-aisle 737-800s and A320 and 321 CEOs reaping the highest premiums for prior generation aircraft in the used aircraft marketplace. During the fourth quarter, our $1.2 billion of deliveries came in higher as compared to our expectations for the quarter and for the full year deliveries came in at $4.6 billion. As you may recall, third quarter deliveries were lighter than expected, so some of the pickup in the fourth quarter came from those delivering while others that we thought might push into 2025 were brought forward into December. Looking forward, the supply of new commercial aircraft remains highly constrained both by the supply chain as well as aircraft and engine production quality issues. Delivery volumes have improved over the past couple years following the pandemic, but challenges persist around the pace of improvement and the ability of both Boeing and Airbus to ramp up and achieve production goals. The recent action by the FAA to limit Boeing’s max production rate is a main reason why we at ALC are forecasting a relatively wide range in our 2024 new aircraft investments of between $4.5 billion and $5 billion. Prior year’s history also provides some uncertainty on our total Airbus deliveries for 2024. We expect around $1 billion of those deliveries to occur in the first quarter of 2024. That said, I do think it’s important to point out that at the low end of the range, deliveries would provide significant fleet growth, representing approximately 17% of ALC’s 2023 year-end fleet, which would be even higher after aircraft sales and depreciation are taken into account. We are continuing to see lease rates catch up with interest rates in the marketplace. As to the impact on lease yields, let me remind you that the increase in lease rates we are seeing on new placements will primarily benefit our results in subsequent years as our new aircraft placements generally occur two years prior to delivery. Our aircraft sales activity remains healthy in the fourth quarter and we continue to see strong sales demand for our aircraft. Important to highlight in our business is the fact that the earning cycle on every aircraft is not complete until it’s sold. So earning a healthy gain on exit is a critical part of the investment cycle as well and bolsters our profit margins and return on equity. Healthy gains also demonstrate the value of our strategy of purchasing aircraft at the best possible prices from the OEMs. ALC sales pipeline totals $1.5 billion as of today, inclusive of roughly 600 million of aircraft classified as held for sale and 900 million subject to letters of intent. As for 2024 sales expectations, we currently anticipate approximately a billion and a half of aircraft sales. As a reminder, the sales proceeds from letter of intent to deal closure takes time and is dependent on a number of factors outside of our control. So sales volumes tend to be lumpy in any given quarter as a result. Based on sales activity so far this quarter, we would expect closing around $200 million in sales for the first quarter of 2024. Now switching gears to a different topic, there has been much publicity and commentary on the recent Alaska 737-9 MAX incident along with Boeing quality control and regulatory oversight. Let me just say that ALC is a believer and supporter of the 737-MAX and of the Boeing company. We are keenly aware of Boeing’s intense 24/7 efforts to rectify and address quality controls, enhance safety measures, and restore confidence to the flying public, their customers worldwide, and the regulators. We fully believe that Boeing will be successful in these efforts and will be a better company for it. The 737 MAX is a core component of global airline fleets and will remain so. We do not believe that the MAX residual value is diminished whatsoever. We continue to see very strong lease demand for the MAX as well as high demand from buyers for the MAX. We’re also encouraged by Airbus’s perspective on the Alaska 9-MAX matter with Guillaume Faure recently commenting that it, “makes us very humble”. It is a strong reminder to all OEMs and suppliers to always put quality and safety first, never at the expense of production rate or economic goals. We all want our aircraft on time but without compromise on quality. Quality and safety must take precedence over all other considerations. So while extremely unfortunate, we believe the Alaska-9 MAX incident serves as a reminder to all OEMs and their related supply chains as to what is most important. In closing, let me just summarize that the dynamic of strong aircraft demand, constrained supply, and ample fleet growth is a robust and prevailing tailwind for our business here at Air Lease. And we see these factors offering continued support for aircraft values and lease rates for the foreseeable future. As such, we see a strong flight path ahead for our business. Now I’ll turn the call over to Steve Hazy who will add some additional commentary. Steve? Steven Hazy: Thank you, John, and thank you to all of you listening in on the Air Lease call today. I’d like to begin by congratulating, from deep in my heart, the Air Lease team on achieving several key records, including the highest revenue and sales proceeds as well as exceeding $30 billion in assets for the first time in our history. We’ve certainly come a long way from our start in 2010 when we had aspirations but no aircraft and only a handful of employees. ALC was built from our collective vision that airlines will require the newest technology, fuel efficient commercial aircraft release, and that these aircraft would be needed well ahead of any availability from the OEMs. Right now, we’re observing both of these trends in a position that has rarely been so positively skewed in our favor. Airlines are in immense need for the highest demand new aircraft, and both Boeing and Airbus are practically sold out through the end of this decade. Our volume discount pricing on our fleet and order book was achieved well before the recent spike in industry orders and pricing, and gives us a tremendous advantage that few others possess. These factors also continue to support positive upside to lease rates and aircraft values in our fleet. Global airline traffic volumes remain very robust. Full year 2023, IATA traffic figures released earlier this month continue to show very strong expansion with total volumes rising 37% year-over-year. Domestic traffic was up 30%, and for example, domestic China in particular up a significant 147% versus the prior year. And most markets rose at very healthy pace. In fact, global domestic traffic hit all new highs in December with several markets like the U.S., India, Australia, and Brazil achieving mid-to-high single digit year-over-year growth rates in the month. Total international volume meanwhile rose a substantial 42% for the year with all major markets rising at double digit growth rates relative to 2022. Similar to domestic traffic, the biggest gainers were in the Asia Pacific region again, which rose more than 100% year-over-year in international travel in that region. And there’s a continuation of resumption of normalized international traffic patterns in Asia. Wide body aircraft demand has really picked up pace as a result of economic strength in Asia as well as growing international demand globally. We continue to foresee strong growth in the Asian market ahead, particularly opportunities in the Asia to North America and Asia to Europe routes, but we also see strong continued expansion in a number of other markets as well. Major traffic flows such as North America to Europe and North America to South America, for example, continue to expand significantly. Many domestic markets worldwide also illustrate strength and further growth momentum. Passenger load factors also continue to climb, coming in at 82% in the latest month as reported by IATA. And in a number of markets, it’s already exceeding these levels. This is putting pressure on the airlines to find additional aircraft capacity to satisfy robust air travel demand. And we would anticipate load factors to go up even higher in the year ahead, given the limited supply of commercial aircraft and OEM delivery constraints. IATA is expecting industry load factors to reach 83% in 2024, which is in line with record highs, but a number of markets are either already well above their highs or are expected to meaningfully exceed these industry average levels, and these could certainly go higher. Continuation of this trend would further increase the need for more new commercial aircraft. Airline health, meanwhile, continues to improve overall, with airline industry revenues expected for the first time to hit a record of $1 trillion in 2024. Strong traffic volumes and yields have also been a key to this expansion over the last few years. Profitability of the industry is expected to achieve $25 billion or so in 2024. We recently had extensive conversations with many of our airline customers while in Europe over the past few weeks. Each of them have echoed the view that operating conditions are attractive overall, and all of these airlines were asking us for more aircraft. On the credit front, we selectively avoided doing business with some of the larger airlines that went bankrupt over the last year, including Gol of Brazil, Go First in India, and Viva Air in Colombia. In addition to being selective with our customers, I would like to remind you that our fleet is very geographically diverse, with 119 customers in 62 countries at the end of 2023, with about 1% average exposure position per customer. So our conservative portfolio management strategy further reduces risk to any individual airline. We also maintained significant cash security deposits and maintenance reserves as added installation from customers that could run into challenges. You can see this in our balance sheet at around $1.5 billion at year-end. This is a meaningfully large number almost 6% of the net carrying value of our fleet. These funds are paid into Air Lease by our airline customers for our benefit and effectively reduce our net interest expense and provide us meaningful credit protection. Returning to ALC’s fourth quarter results, we delivered 22 new aircraft from our order book period, consisting primarily of narrow-body aircraft along with 2 Airbus wide bodies. We delivered 6, A220 aircraft in the quarter, 5 were delivered to ITA Airways in Italy. And one A220-300 was delivered to a growing airline in Southeastern Europe. We continue to see the A220 gaining traction globally with both new and existing customers given its attractive economics and fuel efficiency. We delivered one A320-200neo aircraft to SATA based in Azores as well as 8, A321-200neos, 2 going to ITA, joining the 5, A220 deliveries I just mentioned; 2, to LATAM Airlines, the largest airline in Latin America, and the first 2 deliveries of total A321s will be delivering to that airline. In addition, we also delivered one A321-200neo to each Air Astana based in Central Asia, SKY airline based in Chile and Sunclass Airlines in Denmark as well as the first Airbus A321neo to Transavia in the Netherlands. On the Boeing side, we delivered 5 new 737s during the quarter, including 2 737-8 to Malaysia airline and one 737-9 each to Aeromexico, Alaska Airlines and Corendon in Netherlands. Lastly, we delivered 2 new A330-900neo widebodies, one to ITA and one to Sunclass Airlines in Scandinavia, joining their narrow-body sister ships, which were delivered in the quarter that I just highlighted. Lastly, I would like to emphasize a point from John’s section on the value of our fleet and forward order book. Simply looking at our consistent gains on aircraft sales. It is clear that there is significant value embedded in the aircraft in our fleet as compared to the depreciated cost basis held on our books. With all that said, I’ll now turn the call over to our CFO, Greg Willis, for his more detailed comments on our financial performance in 2023. Gregory Willis: Thank you, Steve, and good afternoon, everyone. During the fourth quarter of 2023, Air Lease generated revenues $717 million, which comprised of approximately $644 million of rental revenues and $73 million from aircraft sales, trading and other activities. The increase in our total revenues was driven by the growth of our fleet $59 million in gains recognized from our sales activities and $60 million in end of lease revenue stemming from the return of 7 aircraft. Let me remind you that the earnings model in aircraft leasing includes not only the base rental payments that we recognized on a straight-line basis over the life of the lease, but also includes the earnings that we generate from Interlease payments and maintenance reserves as well as the gains that we record from the ultimate sale of the aircraft. These additional income streams serve to enhance the overall earnings profile of the business. Sales proceeds for the fourth quarter totaled approximately $440 million from the sale of 8 aircraft. As I just mentioned, these sales generated $59 million in gains, representing a 14% premium to our carrying value, which was higher than our long-term average of 8% to 10%, further demonstrating the strength of the market and the underlying value of the aircraft that we have in our fleet. I do want to point out that our gain on sale margins will vary somewhat quarter-to-quarter based on aircraft sold and market conditions. But it’s also worth highlighting that we have a robust aircraft sales pipeline aggregating $1.5 billion for future aircraft sales at accretive valuations. This pipeline not only further reinforces the underlying value of our existing fleet, but also provides a meaningful addition to our liquidity position and is a catalyst to help us reduce our financial leverage, which I will discuss later in my remarks. Moving on to expenses. Interest expense increased by $35 million and was driven by 70 basis point increase in our composite cost of funds to 3.77%, along with an increase in our debt balance. We have significantly benefited from our largely fixed rate capital structure, which has helped to moderate the effects of the current interest rate environment. You should note that we ended the year with 85% of our debt — debt at fixed rates. Depreciation expense continues to track the growth of our fleet. With regards to SG&A, our ratio of expenses to revenue remained in line with the prior year and on an absolute basis, they increased along with the expansion of our leasing activities. It is also important to note that we disclosed in our 8-K filing in December, we recorded $67 million from a Russian insurance recovery as a benefit against our Russian write-off line item in our income statement. This recovery was helpful along with our aircraft sales activities to help us reduce our financial leverage. All of these activities, along with the quality of our fleet, helped us to generate strong financial results in the fourth quarter and for the year ended 2023, which ultimately has resulted in the continued expansion of our adjusted pretax return on equity since 2021. Our cash flow from operations for the full year 2023 rose 26% relative to 2022, benefiting from our continued strong airline customer cash collections. These healthy cash collections further our ability to reduce our debt balance and fund aircraft deliveries. Transitioning to our financing activities. We raised $3.6 billion in committed debt financings during 2023. Much of this financing was completed in the bank market, which provides us with a substantial amount of flexibility as compared to the bond market. We did return to the bond market in the fourth quarter when we raised CAD 500 million maturing in 2028 at a rate of 5.9%, inclusive of the effect of our currency swaps. Then in early January, we returned to the U.S. bond market and raised an additional USD 500 million maturing in 2029 at 5.1%, marking our lowest coupon in approximately 2 years. We are highly focused on maintaining our strong investment-grade balance sheet, utilizing unsecured debt as our primary source of financing, maintaining a high ratio of fixed rate funding and utilizing a conservative amount of leverage and targeting a debt-to-equity ratio of 2.5 times. Our liquidity position remains strong at $6.8 billion at the end of the fourth quarter, and our unencumbered asset base of $29 billion is a source of strength on our balance sheet. Our debt-to-equity ratio at the end of the third quarter was roughly 2.68 times on a GAAP basis, which net of cash on the balance sheet is approximately 2.61 times. As I mentioned previously, we continue to utilize the proceeds from aircraft sales and Russian recoveries to pay down debt and to help us reach our long-term target debt to equity of 2.5 times over the medium term. Echoing the key observations made by Steve and John, we feel very positive about the positioning of our business in the current environment, and we believe our fleet and order book of the newest and highest in-demand commercial aircraft remain a key strategic advantage. We continue to foresee these high-demand assets and the market supply-demand imbalances as enhancing our performance in the years ahead. With that, I’ll turn the call back over to Jason for the question-and-answer session of the call. Jason Arnold: Thanks very much, Greg. This concludes our commentary and remarks. [Operator Instructions] Operator, please open the lines for the Q&A session. See also 20 Richest Countries During the Great Depression and 30 Most Valuable Drug Companies in 2024. Q&A Session Follow Air Lease Corp (NYSE:AL) Follow Air Lease Corp (NYSE:AL) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thanks Jason.[Operator Instructions] It looks like our first question today comes from the line of Catherine O’Brien with Goldman Sachs. Catherine, please go ahead. Catherine O’Brien: Hey good afternoon, everyone. Thanks for the time. Totally understand that quarter-to-quarter, we should expect that gain on sale to bounce around, of course, but had a solid gain this quarter, up from last quarter. With everything that’s going on with the MAX and GTF, should we expect supply to remain tight or maybe even get tighter as we move to this year? And should that translate to potentially keeping that gain on sale higher than the historical average. Just any color there on both the supply and demand side and thoughts on the gain that Air Lease could enjoy in that environment would be super helpful. Thanks. John Plueger: Thanks, Catie. The answer is yes. We do believe that the supply will remain constrained. As to the impact on forward sales gain, I really can’t comment too much. We’ve got a robust pipeline of $1.5 billion. All these things are taken into consideration. But I think there’s no question in our mind that the supply will remain constrained. Steven Hazy: For every airplane that we have for sale, we have multiple buyers. So it’s been a very dynamic market. And it’s led to a high level of liquidity in the secondhand market for aircraft and Air Lease is having a high-quality fleet will continue to enjoy significant gains when we dispose of these assets. Catherine O’Brien: Okay. That’s great. And then I was just hoping to get some more color on the returned aircraft and the end of lease revenue. I’m not sure if you can share this, but obviously, which airline and what type of aircraft would be helpful. And then just how should we think about the turnaround of getting those aircraft back out the door as you just spoke to, I’m sure there’s plenty of interest and taking those aircraft off your hands. But what’s MRO capacity like? Is that still pretty tight just in terms of the time line to get reconfiguration work done to get the back out of the quarter. Steven Hazy: Your question is really two parts. Let me explain the first part. We have two types of leases. Many of our leases, the airline pays a monthly overhaul maintenance reserve for the usage of engines, airframe components, landing year and so forth. So there’s a monthly cash inflow over and above the rental. And then we have some leases where that compensation comes at the end of the lease. So it’s kind of a catch up. And so some of these transactions that you referred to was simply where the leases had come to an end or where we agreed by mutual agreement with the airline to recover the aircraft. And then we were able to obtain additional funds, keep all the security deposits and in effect, get the present benefit of the maintenance reserves that accrued during the life of the lease. And then the second question, MRO capacity is very tight. So we try to keep those transitions to an absolute minimum, and we try to lay off those expenses on the next airline rather than having to use ALC’s resources. John Plueger: Let me just add, Catie, that where we do have an expiration in my prepared remarks, I highlighted the fact that we have a very high rate of lease extension and that continues to be the case. There’s not a lot many this year, but we have — our historical average is 75% of our leases — first run leases get extended. I don’t know what the current percentage is today, but I would strongly imagine it’s well north of 90% to 95%. Steven Hazy: And just by way of example, one of the aircraft that was in this category was an A321 and the new lease that we signed with another airline as a follow-on, is paying us a higher rental rate than the original lease and the other aircraft being a 737-800, we had the same phenomenon with a new lease, had higher lease rates than at least that just expired. Catherine O’Brien: That’s great. Yes, I guess I was assuming those maybe were early returns, but wasn’t factoring and maybe some of that was just coming to their natural end. That’s all super helpful. Thanks for the time. Steven Hazy: Thank you Catie. Operator: And our next question comes from the line of Jamie Baker with JPMorgan. Jamie, please go ahead. Jamie Baker: Good afternoon everybody. First one, probably for Greg on Russia. If you look at what you initially wrote off, not what the insurance claim was, but what you wrote off, where are we in terms of aggregate recovery inclusive of the $67 million disclosed in the fourth quarter? I mean if you were to express recovery as a percentage of book, we’re hearing around $0.65, $0.70 on the dollar elsewhere. Just wondering if the Air Lease metric is consistent with that. Gregory Willis: I think to date, we recovered about 10% to 12% of our $800 million charge that we took last year. I can’t really comment about what the market is for claims in the marketplace. And ultimately, we’re kind of limited about how much we can actually talk about our recovery efforts on the call. Jamie Baker: Okay. Well, that’s helpful. And then second, if I back out sale proceeds in the end of life revenue, it looks like lease yields are uninspiring. So at or near the lowest level since 2021, which seems, I don’t know, a little inconsistent with how bold up everybody is on aircraft leasing. So what Mark and I were wondering, are lease extensions to blame for this? Is that what’s potentially leading upside on the table relative to how strong market rates reportedly are? Gregory Willis: No, I think it’s really being driven by, as you sell off older airplanes. They typically are at the highest point of their yield in our life cycle. And as you layer on younger airplanes, they start off at their lowest and then as they age, the yield goes up. I think that is putting probably the main driver where it is because you’re right, as John mentioned in his prepared remarks, we are seeing lease rates really start to get going......»»

Category: topSource: insidermonkeyFeb 16th, 2024

Iridium Communications Inc. (NASDAQ:IRDM) Q4 2023 Earnings Call Transcript

Iridium Communications Inc. (NASDAQ:IRDM) Q4 2023 Earnings Call Transcript February 15, 2024 Iridium Communications Inc. beats earnings expectations. Reported EPS is $0.29, expectations were $0.03. IRDM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning and welcome to the […] Iridium Communications Inc. (NASDAQ:IRDM) Q4 2023 Earnings Call Transcript February 15, 2024 Iridium Communications Inc. beats earnings expectations. Reported EPS is $0.29, expectations were $0.03. IRDM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here). Operator: Good morning and welcome to the Iridium Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Ken Levy, Vice President of Investor Relations. Please go ahead. Ken Levy: Thanks, Megan. Good morning and welcome to Iridium’s Fourth Quarter 2023 Earnings Call. Joining me on this morning’s call are CEO, Matt Desch; and our CFO, Tom Fitzpatrick. Today’s call will begin with a discussion of our fourth quarter results followed by Q&A. I trust you’ve had the opportunity to review this morning’s earnings release, which is available on the Investor Relations section of Iridium’s website. Before I turn things over to Matt, I’d like to caution all participants that our call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts and include statements about our future expectations, plans, and prospects. Such forward-looking statements are based upon our current beliefs and expectations and are subject to risks, which could cause actual results to differ from forward-looking statements. Such risks are more fully discussed in our filings with the Securities and Exchange Commission. Our remarks today should be considered in light of such risks. Any forward-looking statements represent our views only as of today and while we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views or expectations change. During the call, we’ll also be referring to certain non-GAAP financial measures, including operational EBITDA, pro forma free cash flow, free cash flow yield, and free cash flow conversion. These non-GAAP financial measures are not prepared in accordance with Generally Accepted Accounting Principles. Please refer to today’s earnings release and the Investor Relations section of our website for further explanation of these non-GAAP financial measures as well as a reconciliation to the most directly comparable GAAP measures. With that, let me turn things over to Matt. Matt Desch: Thanks, Ken. Good morning, everyone. As you saw from our release this morning, we finished out 2023 very well. Service revenue and operational EBITDA both were strong, and we generated more than $300 million in pro forma free cash flow for the full year. That last point growing cash flow is the real storyline for Iridium. It supports our growth in investment and allows us to return capital to shareholders through dividends and share buybacks. Since turning cash flow positive in late 2019 after completing our second-generation constellation, Iridium has generated approximately $1 billion in free cash flow and as we discussed with you at our Investor Day in September, we expect to have the capacity for approximately $3 billion in shareholder returns between 2023 and 2030. In fact, Iridium returned more than $310 million to shareholders last year. As part of this program, we initiated a quarterly dividend, which paid $65 million to shareholders in 2023. And as we announced in our 8-K today, our Board plans to increase the quarterly dividend to $0.14 per share starting in June. This will result in a full year increase of approximately 6% to Iridium’s dividend in 2024. Our Board has also authorized $1 billion in share repurchases since February 2021. Of this amount, about two-thirds have been utilized and a-third, a bit more than $330 million remained available at year-end 2023. Iridium’s ability to generate and grow free cash flow has been fueled by robust commercial service revenue. While equipment and engineering revenues can vary year-to-year, which they’ve been doing the last few years around the pandemic, commercial service revenue growth has proven quite resilient. If you look at our commercial service revenue since the completion of our second-generation network in 2019, it has grown at an 8% CAGR. Subscriber growth has also been robust, growing at a compounded annual rate of about 15% over the same four-year period. 2023 marked our network’s 25th year of operational service, which means we’ve had a lot of experience successfully navigating changing business environments and the evolving needs for satellite connectivity. The key reasons for our success have been Iridium’s extremely reliable and truly global network, our globally allocated and coordinated L-Band spectrum position, and probably most important, our laser light focus on personal communications and doing what others can’t do as well as we can. Our network has become the cornerstone of communications for safety services and mission critical applications. This reliability is what truly differentiates Iridium from other service providers. In recent months, investors have asked us about the impact that Starlink is making on the satellite industry and if we are being affected, whether from the existing broadband service or from the direct-to-cell phone service that we’re — that they’re in the early stages of developing. Starlink has been very disruptive to the satellite industry, but we’re fortunate that Iridium has carved our own unique path, which has allowed us to continue our growth even with their entry, and we are confident that we will continue going forward. With regard to high speed broadband, we’ve never really competed with the KU and KA Band satellite operators on this front, and that remains the case with the entry of Starlink. We positioned Iridium Certus as a reliable companion to all of the VSAT offerings in maritime, and we’re often a companion to Starlink installations as well. We also continue to be differentiated by our L-Band spectrum’s ability to support safety services in both maritime and aviation. That remains an important focus for us. It’s a long-term niche where we’ll continue to see growth that other broadband LEO services, including Starlink can’t address. On the direct-to-device front, we’re also following a unique path and expect to coexist with Starlink and others who are each delivering a very different service propositions to the market. Starlink is planning to offer a more regional solution using terrestrial cellular frequencies, which will need approval on a market-by-market basis. Iridium, on the other hand is planning to offer a standards based solution that will leverage our existing global MSS L-Band frequencies. There’s a lot of varying opinions about the potential size of the D2D market, but I think most would agree it could eventually be a sizable opportunity, though I think everyone is beginning to understand it will take a long time to really mature. We’re now just in the very early stages of development, and we expect Iridium to be a core long-term player with a very strong offering. Being standards based, we don’t have to be first to market, we just have to be one of the best, and we’ve had success doing that in the mobile satellite industry since our founding. In the case of direct-to-device, we believe our plan, which we’re calling Project Stardust will be one of the most practical solutions because it’s an incremental development on our very flexible and robust network. It won’t require launching new satellites every few years and will be global from day one. It will use our existing spectrum position rather than relying on regulatory bodies for approval market-by-market. We’re also focused on a very specific set of use cases for complementing terrestrial narrowband IoT and smartphone messaging, both of which will attract new partners like the mobile network operators to sell our services. You probably know I’m a bit skeptical about the business case for D2D broadband from space, not because I don’t think there will be some user demand and interest, but because our experience at Iridium shows that a 2G or 3G like service offering that only work outside or inconsistently inside buildings will not translate well into the mass market experience that customers now expect from a 5G, 6G world. We believe that the foundational capabilities and capacity of these D2D broadband networks will not attract the customer use or price premiums necessary to sustain the high ongoing capital costs for continued satellite replacement and network operations to deliver them, certainly not for many years and without massive continued investment, if at all. We believe that Iridium’s Project Stardust strikes the right balance for a high quality user experience and will be the kind of service that smartphone makers and MNOs will be proud to offer to their roaming customers at an affordable price. Iridium’s strong position in IoT and use in small form factors in mobile device also positions us well. We have an extensive partner ecosystem and are familiar with operating through this wholesale model and most importantly believe that Project Stardust will expand and extend our existing leadership in IoT to lots of new use cases and applications. So 2024 will be a year of investment for Iridium. We are increasing our spending on R&D a bit and moving forward in a few product areas that position us to capitalize on longer-term growth opportunities. We want to maintain our lead in traditional areas of growth like IoT, mid-band data, and U.S. government services, and we also plan to undertake initiatives that augment future business growth. Together, we believe these efforts will allow us to reach our long-term service revenue guidance of about $1 billion in 2030. We highlighted our financial outlook and growth drivers during last call’s Investor Day, including how we expect incremental growth from voice, IoT and broadband, which will complement our expanding relationship with the U.S. government. Initiatives like many of our partners’ mid-band service expansions this year will drive new IoT and data applications in emerging industries like uncrewed aerial and maritime vehicles, and support higher speed consumer products that can send pictures and other important information for users on the move. Our partners are really excited about our new IoT transceiver that we’ll finalize this year. It’s natively IP and cloud-based and will enable even more compact designs for their applications. We’re also excited to expand our safety service offerings in maritime and aviation in 2024. This is the year aviation will complete certification of the Iridium’s end-to-end safety offering using Iridium Certus technology. Iridium Certus will become the most cost effective solution for cockpit, voice and data solutions, delivering increased value through safety and analytics to airlines, business jet and general aviation operators for the next-generation of airspace. On top of these items, we’re investing in incremental R&D with Project Stardust because we believe it will position us well for standards based narrowband IoT growth, by which I mean expanding the opportunities we are already addressing with our proprietary offering today, and also help to expand our business to MNOs and others delivering service to smartphones, laptops, watches, and tablets. Together, these investments give us great confidence in Iridium’s cash flow and growth plans through 2030, all themes we highlighted to you last September. Shifting gears a bit, I want to share an update on Iridium’s constellation health. When we launched the Iridium next constellation between 2017 and 2019, we were required to make an initial estimate of the network’s life. As a starting point, we pegged it to the manufacturer’s assessed design life. However, we were, and are hopeful to eventually get the same life from the Iridium next constellation that our first network achieved. It ended up lasting over 20 years by the time it was retired, but we had no practical information at the time of launch to make our own assessment. Based on the manufacturer’s assessment, we’ve been using a 12.5-year useful life for accounting purposes since 2019. We reevaluate that assessment periodically, and our most recent review in the fourth quarter prompted us to update the constellation’s estimated life, which we now believe will perform well through at least 2035. That’s great news and continues to support our expectations of a CapEx holiday through the rest of this decade. The updated assessment also reflects the successful launch of five additional spares in 2023 and the overall performance of the constellation since its initial launch. These incremental data points led us to formally change our forecast for satellite life from 12.5 years to 17.5 years. While this change doesn’t impact cash flow, it does have some accounting implications that Tom will discuss in detail, including impacts of how we recognize hosted payload service revenue and depreciation expense, and the resulting effect on our operational EBITDA guidance. Overall, there are a lot of moving parts in our 2024 guidance. While we are still forecasting strong subscriber and service revenue growth with our increased investments, our equipment shipments normalizing, and some challenges to comps from 2023, on the surface 2024 doesn’t look like a normal year of operational EBITDA growth. If you look deeper though, our growth profile and overall outlook really hasn’t changed much. Tom will go through that analysis along with a peek into 2025 where most of those one-time effects normalize. To me, the bottom line for Iridium continues to be free cash flow growth, which will continue in 2024, to support our ongoing investor friendly activities. We expect share repurchases and dividends to continue, and we’re as excited as we’ve ever been about business opportunities, growth and cash flow we will generate. I look forward to another exciting year for Iridium. So with that, let me turn it over to Tom. Tom? Tom Fitzpatrick: Thanks, Matt, and good morning, everyone. With my remarks today, I’d like to recap Iridium’s full year results for 2023 and provide some perspective on our fourth quarter performance and our change in accounting estimate to reflect the extended book life of our satellite constellation. This morning, we also released our outlook for 2024 now provide some color here, especially in context of Iridium’s longer-term growth expectations. As Matt noted, we increased the estimated useful life of our satellite constellation by an additional five years during the fourth quarter, which extends the life of our satellites to 17.5 years for accounting purposes. The updated useful life affirms our confidence in the health of our constellation and the duration of our CapEx holiday through 2030. However, the accounting change which has been reflected in our fourth quarter financial statements has a couple of implications. First, extending the time over which we depreciate the book value of our satellites reduces Iridium’s depreciation expense by over $100 million per year. This will have the impact of both increasing our net income and earnings per share. Second, the accounting update reduces the annual revenue we recognize from our hosted payload contracts by spreading those fixed revenues over the satellites longer expected useful life. This extension of estimated useful life had the impact of reducing hosted payload revenue by $2.3 million in the fourth quarter of 2023 as compared to prior quarters. Going forward, the change will cause annual service revenue to be approximately $9.1 million lower each year through 2029 than had we not updated the estimated useful life of our constellation. Hosted payload revenues will now be recognized through 2035 versus the previous schedule, which concluded in 2030. As you can see, this creates a comparability issue when considering our growth projection between 2023 and 2024 that we introduced today. To assist investors with these changes and facilitate an apples-to-apples discussion, I will identify the effects of this accounting treatment on Iridium’s expected growth when I get to our guidance. As for our full year results, Iridium performed well in 2023. New contract wins, strong equipment sales, and favorable pricing all supported top-line growth. We delivered strong commercial service revenue growth and had another good year of subscriber additions. Pro forma free cash flow was $303 million in 2023. Iridium shareholders were the direct beneficiaries of this performance. Dividends and share repurchases totaled $311.8 million during the year. In the fourth quarter, operational EBITDA rose 7% from the prior year’s quarter to $114 million, and total revenue grew to $195 million. Strength across all commercial service lines and continued growth in engineering and support offset reduced equipment sales. Within the commercial business, we reported service revenue of $121.5 million in the fourth quarter, which was up 10% from a year ago. Revenue from commercial voice and data rose 12% from the prior year period and continued to reflect the benefits of the price increase we enacted earlier the year. This discrete price action supported ARPU growth of 10% during the quarter and has been easily digested by our channel partners, evidenced by continued subscriber growth in our voice business. In commercial IoT, personal satellite communications continued to fuel double-digit revenue and subscriber growth. Subscribers were up 18% from the year ago period, and we ended 2023 with more than 900,000 personal satellite communications devices on our network. We believe that more retail customers are just now becoming aware of satellite connectivity and that these low cost consumer devices will fuel demand for satellite messaging and SOS services for years to come. As awareness of these consumer friendly products grows, so too do new applications using Iridium’s global network. As Matt noted, our IoT partners continue to invest in new retail focused products. With new functionality supporting higher ARPUs, we believe this market segment will serve as a catalyst for IoT revenue growth moving forward. In broadband, we reported revenue of $114.6 million in the fourth quarter, up 5% from the year ago period. Iridium service continues to be adopted as a companion to VSAT services in maritime. We are, however, also seeing some competition from low cost VSAT alternatives impacting certain vessels where Iridium service serves as a primary satellite connection. We expect lower billable usage on some vessels to pressure ARPU and in turn revenue growth rates in our broadband business for a few more quarters. Once the lower usage rates normalize into our ARPU base, we expect revenue growth to accelerate on the back of subscriber gains. The vast majority of Iridium’s broadband customers are already using Iridium service as a companion service. So this usage impact is limited and should normalize relatively quickly. In all, commercial subscribers grew 15% year-over-year with IoT now representing 80% of the total at year-end, up from 78% in the year ago period. Revenue from hosted payload and other data service revenue rose to $15.2 million in the fourth quarter, principally due to higher precision location service revenues, of which $2 million was non-recurring and resulted from an updated estimate on a customer contract. This increase was largely offset by the $2.3 million impact on revenue recognition resulting from the change in useful life of our satellites. Government service revenue was stable in the fourth quarter at $26.5 million, reflecting the terms of our EMSS contract with the U.S. government. Subscriber equipment, which reached record sales in 2022 and for much of 2023, decreased materially in the fourth quarter to $15.7 million. While full year 2023 finished as the second highest equipment sales in company history, we expect demand for satellite handsets and other Iridium hardware to decrease materially in 2024, and normalize to be more in line with periods prior to 2022, before we and our competitors began to experience the effects of supply chain disruptions due to the pandemic. Engineering and support revenue grew 74% from the prior year period to $31.1 million in the fourth quarter as Iridium ramped up work with the Space Development Agency. While this work has lower margins than our commercial business lines, the SDA contract remains highly strategic and aligns Iridium closely with the U.S. government’s long-term space priorities. Moving on to our 2024 outlook, we anticipate service revenue growth of between 4% and 6% in 2024 and are forecasting operational EBITDA of between $460 million and $470 million. In order to appropriately evaluate our 2024 guidance, I want to highlight several factors that are relevant. As I noted previously, we increased the useful life estimate for our satellite constellation as of October 1 of 2023. Since we recognized the fixed portion of our hosted payload revenues over the life of the constellation, this had the effect of reducing hosted payload revenue by $2.3 million in 2023. It will also reduce 2024 revenues by $9.1 million, resulting in $6.8 million less of service revenue and EBITDA in 2024 compared to 2023 than if we had not updated our estimate. To reiterate, there is no operation or cash flow impact from the change in our satellite’s estimated useful life, only the length of time over which we recognize the fixed revenue. For illustrative purposes, at the mid-point of our 2024 guidance, EBITDA would be $465 million. This would represent about $2 million in growth from the $463.1 million in EBITDA we posted for 2023. If we had used comparable useful life assumptions in both periods, projected EBITDA growth in 2024 at the mid-point would have been $8.7 million, which we believe to be more representative of Iridium’s projected growth in 2024. This rate of growth is still lower than we have been experiencing in recent years, owing to a few headwinds we will experience in 2024 that we do not expect to recur in 2025. First, as we have previously noted, we expect equipment revenue and margins to revert to pre-pandemic levels, which means we’re forecasting a material decline in 2024 from 2023. We think the sales level we’re forecasting this year will be the baseline level we’ll see going forward. Second, we recognize a $3.5 million gain on a contract settlement in 2023, which will not recur in 2024. And finally, as Matt discussed, we are ramping up R&D spending in 2024 in support of our NBIoT initiative Project Stardust. This will add approximately $5 million to R&D compared to 2023, and we expect to maintain R&D spending on this initiative in 2025, though it should not represent a headwind in 2025. Taken together, we estimate that these discrete items represent a headwind of about $20 million to our 2024 EBITDA forecast. When considering Iridium’s prospects for EBITDA in 2025, if we take the $8.7 million in apples-to-apples projected growth for 2024 over 2023 and then remove the estimated $20 million in non-recurring headwinds were experienced in 2024, we believe our prospects are good for generating close to $500 million in EBITDA in 2025. Other operational assumptions supporting our 2024 outlook, which I’ve not yet touched upon are as follows. We expect lower growth in our commercial, voice and data business than in 2023, as 2023 benefited from a price increase. We expect our IoT business will remain strong. Demand for personal satellite communications as well as commercial applications remain the drivers here. This gives us confidence that 2024 will be another year of double-digit revenue and subscriber growth. We should also begin to see wider adoption of Iridium mid-band and benefit from the introduction of our new IoT transceiver late in the year. I would be remiss not to touch on engineering and support, which continues to benefit from contract work with the Space Development Agency. Government engineering and support revenue will grow again in 2024 as we continue to build out the ground infrastructure and operation centers and start to man their operations for Space Force’s new constellation, though this contract revenue can fluctuate from quarter-to-quarter. Our 2024 outlook also incorporates a number of expense assumptions that may be helpful when updating your models. First, we expect SG&A to remain relatively stable this year even as we continue to add headcounts to support the SDA contract. As Matt noted, we also anticipate higher research and development costs this year, up as much as 30% as we begin our work on standards based solutions and continue to invest in product development initiatives. As it relates to depreciation and amortization, we anticipate a decrease of over $100 million in 2024 due to the longer estimated useful life of our satellites. You will note that 2023 was impacted by this change for one quarter, equivalent to about $25 million in benefit compared to 2022. But you’ll also recall that in the second quarter of 2023, we completed successful on-orbit testing of five of our six ground spare satellites, as we believed the construction and progress associated with the remaining ground spare satellite would no longer be used. We wrote off the $37.5 million remaining in construction progress for that satellite by recording accelerated depreciation expense, which more than offset the accounting change in the fourth quarter. As I mentioned earlier, the prospective reduction in depreciation expense is entirely due to an accounting update and will have a positive impact on Iridium’s GAAP earnings, pushing both net income and earnings per share firmly positive into positive territory. Lastly, Iridium now expects minimal cash taxes of less than $10 million per year from 2024 through 2026. This is new guidance for 2025 and 2026 and incorporates additional R&D credits and other attributes we expect to realize. Pro forma free cash flow is expected to rise to about $309 million in 2024 at the mid-point of our EBITDA guidance, reflecting our continued growth and recurring revenue model. We believe that pro forma free cash flow is a good measure of our business strength and investors should continue to track closely. Moving on to our balance sheet. As of December 31, 2023, Iridium had a cash and cash equivalents balance of approximately $72 million. Our cash balance is ample to fund our operations and continues to anticipate the payment of quarterly dividends and expectations of share repurchases. In the fourth quarter of 2023, Iridium retired approximately 1.3 million shares of common stock at an average price of $38.71. For the full year 2023, Iridium purchased 4.8 million shares at an average price of $51.40 for a total of $244.6 million. This left us with an outstanding balance of $334 million at year-end under our Board approved authorization through December 31, 2025. We will continue to execute on our buyback program, balancing our objective for deleveraging with the desire to maximize return on investment. In 2023, Iridium initiated a quarterly dividend and paid a total of $64.8 million to shareholders for the full year. As Matt noted, Iridium’s Board expects to increase the dividend beginning in the second quarter of 2024. The approximate 6% annual increase to Iridium’s dividend in 2024 reflects our confidence in the company’s business opportunities and prospects for continued strong free cash flow generation. Turning to CapEx. CapEx holiday period between 2020 and 2030 is an average of between $50 million and $60 million per year. This remains our best estimate, but spending will not be uniform over the holiday period. Our CapEx from 2020 through 2023 average just under $50 million exclusive of launch, which is not maintenance CapEx, but rather a part of the construction cost of Iridium NEXT. We expect CapEx to average closer to $60 million for the balance of the holiday period between 2024 and 2030. We expect CapEx to be over $60 million in the next couple of years as we invest in new product development initiatives like Project Stardust and network efficiency programs. We expect CapEx to trend below $60 million in the latter part of the decade as we decrease maintenance spending in anticipation of our third-generation constellations. We close 2023 with net leverage of 3.1x our EBITDA. This was down from 3.2x a year earlier and includes the impact of our buyback activity and dividend. We think Iridium naturally delevers over time and expect to exit 2030 below 2x leverage, even after giving effect to our dividend program and all share buybacks authorized by our Board. I also want to highlight Iridium’s term loan, which will now mature in 2030. You’ll recall that we extended the term by about four years and in September and lowered the interest rate on the facility. Iridium also enjoys a favorable position on its interest rate cap, which hedges about two-thirds of the term loan. We believe these instruments allow us to weather the current interest rate environment and would look to extend our hedge as market opportunities present themselves. Turning to our pro forma free cash flow, if we use the mid-point of our 2024 EBITDA guidance and back off $76 million in net interest, pro forma for our current debt structure, approximately $69 million in CapEx for this year, $5 million in cash taxes, and $6 million in working capital inclusive of the appropriate hosted payload adjustment, we’re projecting pro forma free cash flow of approximately $309 million for 2024. These metrics would represent a conversion rate of EBITDA to free cash flow of 66% in 2024 and a yield of approximately 7.3%. A more detailed description of each element of these calculations, along with a reconciliation to GAAP measures is available in a supplemental presentation under Events on our Investor Relations website. In closing, Iridium continues to execute well and deliver strong free cash flow growth. We feel good about our competitive position. And as Matt noted, we’ll make some investments in 2024 to augment our opportunity set and drive new revenue growth through 2030. With that, I’d like to turn the call over to the operator for the Q&A. See also Top 20 Biggest Mortgage Companies in the US and 12 Younger Woman Older Man Dating Sites in the US. Q&A Session Follow Iridium Communications Inc. (NASDAQ:IRDM) Follow Iridium Communications Inc. (NASDAQ:IRDM) or Subscribe with Google We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Ric Prentiss with Raymond James. Please go ahead. Ric Prentiss: Hey, thanks for all that. Wow, that’s a lot of moving pieces and stuff to digest, but I appreciate all the details. First question I’ve got is obviously the extension of the useful life was a $2.3 million non-cash hit within 4Q. I thought I also heard there was a $2 million non-recurring benefit from a contract in fourth quarter. Was that a cash payment or was that also a non-cash item? Tom Fitzpatrick: It was the recognition of deferred revenue just due to a change in circumstances, Ric. So think of it as cash. Ric Prentiss: All right. The dividend — appreciate the increase, the dividend expected and planned by the Board for 2Q. Is that when we should think of kind of the annual review of the dividend policy will be on like a 2Q basis. And why do it in 2Q versus, like, off of year-end results? Tom Fitzpatrick: We were focused on the full year increase, so we like the 6% increase. And so the easiest way to accomplish that was just to hit the second quarter with $0.01. Ric Prentiss: Got you. Got you. Okay. Makes sense. And then on the Project Stardust, I guess David Bowie is coming in here. The — what is the kind of expense and CapEx efforts that you’re doing that will kind of lead to that investment? What efforts are you trying to pull off with that? And is there a need to select partners, or does the standard base mean you just move that way? So just trying to understand what the Stardust project entails OpEx and CapEx over the next couple of years. Matt Desch: Yes. I mean, it’s an incremental investment on our existing network. It requires updating satellite software, some new ground infrastructure in our gateway — gateways, and the standard space activity is really in the chipsets. We’ve already are pursuing that activity as well in discussions with chip manufacturers to include our band and into the standard, which isn’t a real big lift, given that it’s pretty close to others as well. So all that activity, I think we’ve said at the announcement of Stardust a couple of weeks ago, we mentioned it was tens of millions of dollars kind of level of effort over a couple of years. That’s in incremental R&D and probably more so an incremental capital, which has all been sort of described today in our guidance. Tom went through kind of most of that in terms of what we expected that to mean between now and 2030. But in the big scheme of things, not a real big increase in what we’re doing on our — because we have such a flexible network today, and we also think it’s well covered by sort of the market potential growth that it leads us. I would say, particularly in narrowband IoT and all the use cases that it could expand in that sort of general area. And as well, obviously, it puts us in a good position to provide D2D kind of services as well. And there will be other — there are — we’re deep into partnership negotiations with a number. We’ve gotten a lot of encouragement and support because we’re one of the only real LEOs doing this right now. And so a lot of people really want to encourage and support us in that regard. So we’re talking to everything from MNOs to chipset manufacturers to smartphone manufacturers. And obviously our partner base is quite interested in as well as we evolve to providing not just proprietary IoT technologies, but standard based IoT technologies long-term. So picked a couple of years, but it’s well underway. Ric Prentiss: Okay. And appreciate the thought of $500 million in EBITDA in 2025 given puts and takes in what might be a more normal one. But the $1 billion service revenue target by 2030, how much does that assume and when would it assume, kind of this Project Stardust spending, moving into being actually producing revenues. Matt Desch: We’re not providing specific piece of that. It will not really affect that amount much until later in this decade. We’re really not expecting it to ramp up until the latter two or three years. So it won’t be that significant a portion of it, but it is part of it. Ric Prentiss: Great. Appreciate all the color and information today. Thanks, guys. Stay well. Tom Fitzpatrick: Thanks, Ric. Operator: Our next question comes from Simon Flannery with Morgan Stanley. Please go ahead. Simon Flannery: Great. Thank you very much. Good morning. Matt, just to come back to the extension of the useful life of the constellation, is this purely an accounting exercise or have you reassessed from an operational standpoint? I think a couple of times you referenced a CapEx holiday through 2030, but there is — is there any thought of potentially extending that CapEx holiday as a result of this, or is it just an accounting exercise? Matt Desch: We’re not extending it today. I mean, our guidance is really the guidance through 2030, and that’s what I still expect, obviously, if our satellite constellation continues to perform well and we don’t need to build a new network, it could be extended again beyond that, as I said, we got over 20 years out of our last constellation. So 17.5 I hope is still lower end of what we’ll ultimately end up getting. But no, right now, we’re not providing guidance to extend the CapEx holiday beyond that. It certainly gives confidence that we’ll achieve that, and — but it’s definitely possible that we could extend it again. Simon Flannery: Okay. And I guess you have to make that decision, I don’t know, two years out, three years out, is that right?.....»»

Category: topSource: insidermonkeyFeb 16th, 2024

The man who was almost NASA"s first Black astronaut in the 1960s explains why he never made it to space

Ed Dwight trained to be the first Black astronaut years before NASA sent an African American into space in 1983. "The Space Race" tells his story. Ed Dwight in the cockpit of an F-104 circa the 1960s.Bettmann Archive/Getty Images "The Space Race" is a new documentary about some of the first Black astronauts. NASA trained Ed Dwight and Robert Lawrence to become astronauts in the 1960s. But NASA didn't send an African-American astronaut to space until 1983. On August 30, 1983, NASA sent Guion Bluford, the first African-American astronaut, to space. Two decades before Bluford's flight, Ed Dwight was an Air Force pilot who trained to be the first Black astronaut. A new documentary explores why he never made it into orbit. When Bluford went to space, a few reporters sought out Dwight for his reaction. "I'm happy for him, but it's overdue. Way overdue," Dwight told The Atlanta Constitution at the time. "Space and astronauts are part of our popular mythology," Lisa Cortés, who co-directed the documentary "The Space Race," told Business Insider. "These are people who do the impossible. They are our pioneers, but the story of the African-American astronauts was one that hadn't been told." "They will make hamburger out of you, Dwight."In 1961, Dwight received a letter inviting him to become an astronaut trainee. "I don't think America — or anybody — knows how complex the situation was," Dwight said in the film. John F. Kennedy met with leaders in the African-American community, trying to win their support for his presidential run. Whitney Young of the National Urban League urged Kennedy to push the Air Force to find and train the first Black astronaut. "Whitney Young implicitly understood the necessity that, as we are struggling for civil rights, we have to change stereotypes associated with African Americans," Cortés said. "And how do we do that? We have astronauts." Dwight was initially unsure if he wanted to train to be an astronaut.Bettmann Archive/Getty ImagesDespite meeting the near-impossible standards the military leaders set down for a candidate, Dwight wasn't sure he wanted to take on the role.He asked his superior officers for advice on whether he should join the program. "They told me, 'They will make hamburger out of you, Dwight,'" he said. In the end, his mother encouraged him, telling him how inspirational it would be. Chuck Yeager was head of the test pilot school where Dwight would learn what he needed to know to go into space. Dwight said the famed pilot felt slighted and not being included in the decision to train a Black astronaut. As a result, Yeager actively worked to get Dwight to quit. "It was like walking into a deep freeze," Dwight said. None of his classmates would speak to him, and he routinely sparred with Yeager."You're 20 years too soon, buddy."In 1963, NASA announced 14 new astronauts. Dwight wasn't among them. They were all white men. That same year, Kennedy was assassinated. "Within a few years, that entire support system that Ed Dwight had disappeared," Frederick Gregory, a retired astronaut, said in the film.That same year, Dwight resigned from the military. "All through my training, I was told by friends and enemies alike, 'You're 20 years too soon, buddy,'" he said. Soon, Dwight found another career as a sculptor, creating bronze works of Frederick Douglass, Rosa Parks, Ella Fitzgerald, and many others. Ed Dwight and a scale model of the Martin Luther King memorial he designed for Denver's City Park.Craig F. Walker/The Denver Post via Getty ImagesDecades later, it seemed Dwight's story had been completely forgotten. "When Ed came to my retirement party, he had to give his own prelude to why he was even there because no one in the room knew who he was, except for me and maybe one or two other people," retired astronaut Leland Melvin told Business Insider.The classic NASA astronautSix years after Dwight resigned, NASA sent three men to the moon. Two of the astronauts, Buzz Aldrin and Michael Collins, were part of the group of 14 NASA selected in 1963. Nearly 650 million people watched the moon landing. "To see a Black man in space during that period of time, it would have changed things," former astronaut Bernard Harris, Jr. said in the film. Many of the former astronauts featured in the documentary were surprised to learn about Arnaldo Tamayo Méndez, the first person of African descent in space. The Soviet Union sent the Cuban cosmonaut on a space flight in 1980.Astronaut Ron McNair onboard the Space Shuttle Challenger in February 1984.NASA"We started exploring the juxtaposition between both sides, what was happening in Cuba, and what was happening in the US," said Diego Hurtado de Mendoza, who co-directed the film with Cortés. "The Soviets were very conscious of the racial disparity we have here in the United States," Charles Bolden, Jr., former NASA administrator, said. He noted that while officials selected both Tamayo Méndez and Dwight for propaganda purposes, it was the Soviet Union that made history — even if that history was little-known outside of Cuba for decades.In 1978, NASA chose 35 people as part of its new crop of astronauts who would head to space in the 1980s. The group included Gregory, Bluford, and Ron McNair, three African-American men. Bolden credited the invention of the space shuttle for helping transform NASA. The vehicle could typically carry seven, only two of whom needed to be pilots. The other five could be engineers and other scientists. "All of a sudden we were able to hire astronauts who didn't look like the classic NASA astronaut," Bolden said. "Firsts are not important if there are no seconds and thirds and fourths." Bluford wanted to make sure he wasn't the only African American NASA sent to space. "He still cares," Cortés said. He pushed for Gregory, McNair, and Bolden to fly, she said, but he continues to ask about the current class of Black astronauts and when they'll get their chance to go to space. "He is so cognizant that it can't just be this one group of people, but it has to be a living legacy that continues," Cortés said. The importance of legacy was shared by many of the astronauts, including Bolden, who said, "Firsts are not important if there are no seconds and thirds and fourths." NASA astronaut Charles Bolden at the pilot's station of the Space Shuttle Columbia in 1986.Space Frontiers/Archive Photos/Hulton Archive/Getty ImagesSeveral people in the documentary discussed how others told them to apply to become astronauts, including McNair who pushed Bolden, who in turn encouraged Melvin. McNair was aboard The Challenger when it broke apart in 1986.Cortés and de Mendoza found a similar sentiment when they interviewed the film's subjects. "Every astronaut sort of led us to the next, and we started discovering that the thread was really this connection, this community," said de Mendoza. Gregory, for example, wanted the filmmakers to talk about Robert Lawrence, who tragically died in a jet crash in 1967 but who may have otherwise gone to space. Ed Dwight was the first Black astronaut trainee and is profiled in the documentary "The Space Race."Matthew Staver/The Washington Post via Getty ImagesBut before anyone else, there was Dwight. "This community so reveres Ed and sees their success so intertwined with standing upon his shoulders," Cortés said. Melvin noted the parallels with the NASA mathematician profiled in "Hidden Figures." "What Katherine Johnson had done for NASA, for humanity," Melvin said, "Ed's done the same thing, in his way, to help kickstart getting me to be part of this journey."  "It could've been any of us." "In astronaut lingo, they say when they go in space, it's mission first," de Mendoza said. "So whatever personal issues you have, you got to put them aside." When Victor Glover spent six months on the International Space Station in 2021, he had a painting of George Floyd with him. Melvin, who's discussed in the past how he was nearly arrested on false charges, talked about Floyd's death in the documentary. "It could have been any of us," he said.Leland D. Melvin served as Associate Administrator for NASA’s Office of Education for four years.NASA"Victor, as an incredible humanitarian, brilliant person, could not separate and forget about this incredibly tumultuous time of political action in response to great tragedy that was going on," Cortés said. During his flight, Glover had a group call with Dwight, Bluford, Bolden, and other Black astronauts. Melvin, who was on the call, described watching Dwight see Glover live on the ISS as a priceless moment. "I think that's something that's going to help us continue to carry on these kinds of conversations with future astronauts," he said. "To let them know that we got you back, we're there for you, we're there with you." "The Space Race" is streaming on Hulu and Disney+. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderFeb 14th, 2024

Kremlin supporters are fuming after footage appears to show Ukrainian drones blowing up a Russian armored column

Video appears to show Ukrainian FPV drones destroying Russian armored vehicles, and Russian military bloggers and pro-Putin channels are frustrated. The FPV unit pilots of the Ukrainian army prepare to launch exploding drones at Russian positions on January 26, in Kupiansk, Ukraine.LibkosUkrainian forces appeared to blow up a Russian column of 11 tanks and armored vehicles.Ukraine used FPV attack drones to apparently destroy the Russian vehicles.Russian military bloggers are increasingly frustrated by Russia's perceived tactical blunders.Ukrainian forces deployed FPV, or first-person-view, attack drones to blow up a column of Russian armored vehicles, said the Ministry of Defense of Ukraine.A video shared by the Ministry of Defense on X, formerly Twitter, appears to show Ukrainian exploding drones hitting 11 tanks and armored vehicles. The Russian armored column included three T-72 tanks, seven tracked armored-fighting vehicles, and an infantry fighting vehicle.Russian military bloggers expressed dismay at the tactics of the Russian forces, said the Institute for the Study of War (ISW), a US think tank.Business Insider could not independently verify the video.Are FPV drones effective on a battlefield?The warriors from the 72nd Mechanized Brigade, with the help of drones, turned a convoy of russian tanks and IFVs into a scrap metal army. pic.twitter.com/z62aeqJA4f— Defense of Ukraine (@DefenceU) February 1, 2024The battle involved Ukraine's 72nd Mechanized Brigade, said the Ukraine ministry. It took place near the settlement of Novomykhailivka, in the Donetsk region of Ukraine, which Russia has been attempting to capture since October.Cameras mounted on the attacking drones and those flying overhead captured the assault.The convoy was maneuvering near the front lines along the east of Ukraine and became vulnerable to fire from artillery and swift and targeted drone strikes.Leveling Russia's battlefield advantageFootage shows the FPV exploding drones accelerating toward the Russian tanks and armored vehicles, with the feed abruptly cutting off just before impact.Other footage gives a panoramic view, showing the dark shapes of tanks in motion, some bursting into flames as the exploding drones hit, followed by an aftermath of smoking, twisted wrecks abandoned in winter fields pockmarked with shell holes.The video was dated January 30. The battle lasted nearly 2 ½ hours, said the Beluga Telegram channel in Ukraine, per the Mail Online.The apparent victory against the armored column matters because Ukraine increasingly sees relatively inexpensive drone technology as a way of leveling Russia's battlefield advantage.Valerii Zaluzhnyi, the commander in chief of Ukraine's armed forces, wrote on Thursday for CNN News that the nature of war had changed thanks to advances in technical innovations.He highlighted the key role that unmanned weapons systems, such as drones, play in helping Ukraine against Putin's forces despite Russia's significant manpower and weapon superiority.FPV drones are an effective and low-cost weapon that Russia and Ukraine have used since the start of the full-scale invasion."Perhaps the number one priority here is mastery of an entire arsenal of (relatively) cheap, modern and highly effective unmanned vehicles and other technological means.Already such assets allow commanders to monitor the situation on the battlefield in real time, day and night, and in all weather conditions," Zaluzhnyi wrote on CNN.'Complete stupidity and incompetence'Drone-mounted cameras show an FPV drone hitting a Russian tank in a video showing a battle in the Novomykhailivka area of the Donetsk region.Screengrab.While the number of casualties from the wrecked armored column remains unknown, the strikes triggered a backlash among pro-war "Z" channels associated with Putin, expressing frustration over perceived military incompetence.Russian military bloggers have become increasingly frustrated with the army's military tactics. Russian forces continue to self-sabotage by gathering in large groups to attack Ukrainian positions, making them an easy target for Ukrainian drones.The ISW said one Russian military blogger described the events at Novomykhailivka as "complete stupidity and incompetence."Another Kremlin-affiliated milblogger argued that Russian military command needs to stop attacking in mechanized columns because it had repeatedly led to the loss of equipment.The milblogger also criticized military leadership for not accounting for Ukrainian drone operations and not equipping Russian armored vehicles with electronic-warfare systems, ISW said.Ukraine, after nearly two years of war, has called on the West to bolster its defenses. The increased use of drone attacks, which have reached targets as far afield as Moscow and St. Petersburg, has become a strategic focus for Ukraine."It's a war of armor against projectiles. At the moment, projectiles are winning," Gleb Molchanov, a Ukrainian drone operator, told The Guardian.February 7, 2024: This story has been updated to clarify that the Ministry of Defense of Ukraine was the source of the video showing Ukrainian drones blowing up Russian armor.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderFeb 7th, 2024

Pro-Kremlin supporters are fuming after footage appears to show Ukrainian drones decimating an entire Russian armored column

Ukrainian FPV drones filmed destroying Russian tanks and armored vehicles, and Russian military bloggers and pro-Putin channels are frustrated. The FPV unit of the pilots of the Ukrainian army prepare to launch kamikaze drones at the positions of the Russians on January 26, 2024 in Kupiansk Frontline, Ukraine.LibkosUkrainian forces decimated a Russian column of 11 tanks and armored vehicles.Ukraine heavily relied on FPV attack drones to obliterate the Russian armor.Russian military bloggers are increasingly frustrated by Russia's perceived tactical blunders.Ukrainian forces deployed FPV attack drones to help obliterate an entire column of Russian armored vehicles, Metro reports.Video appears to show Ukraine exploding drones, finishing off 11 tanks and armored vehicles. It included three T-72 tanks, five tracked amphibious [MTLBS] armored fighting vehicles, and an infantry fighting vehicle, reduced to burning hulks scattered across the battlefield.Two tracked armored fighting vehicles were also destroyed, one by an anti-tank guided missile, Metro reported.The battle raged near the settlement of Novomykhailivka, in the Donetsk region of Ukraine, which Russia has been attempting to capture since October.The assault was captured by cameras mounted on the attacking drones and those flying overhead, showing the devastation caused to the Russian column. The convoy was maneuvering near the front lines along the east of Ukraine and became vulnerable to fire from artillery and swift and targeted strikes from the air by drones.Leveling Russia's battlefield advantageFootage shows the FPV exploding drones accelerating toward the Russian tanks and armored vehicles, with the feed abruptly cutting off just before impact.Other footage gives a panoramic view, showing the dark shapes of tanks in motion, some bursting into flames as the exploding drones hit, followed by an aftermath of smoking, twisted wrecks abandoned in winter fields pockmarked with shell holes.The video was dated January 30. According to reports, the battle lasted nearly two and a half hours.Business Insider could not independently verify the video.The apparent victory against the armored column matters because Ukraine increasingly sees relatively inexpensive drone technology as a way of leveling Russia's battlefield advantage. Commander-in-Chief of Ukraine's armed forces, Valerii Zaluzhnyi, wrote on Thursday for CNN News that with accelerated technical innovations, the nature of war had changed.He highlighted the key role played by unmanned weapons systems, such as drones, which help Ukraine against Putin's forces despite Russia's significant superiority of manpower and weapons.FPV drones are an effective and low-cost weapon employed by both Russia and Ukraine since the start of the full-scale invasion."Perhaps the number one priority here is mastery of an entire arsenal of (relatively) cheap, modern, and highly effective unmanned vehicles and other technological means.Already such assets allow commanders to monitor the situation on the battlefield in real time, day and night, and in all weather conditions," wrote Ukraine's top military leader.'Complete stupidity and incompetence'Drone-mounted cameras show a UAV hitting a Russian tank, in a video showing a battle in in the Novomykhailivka area of the Donetsk region.Screengrab.While the number of casualties from the wrecked armored column remains unknown, the strikes triggered a backlash among pro-war 'Z' channels associated with Putin, expressing frustration over perceived military incompetence, Metro reports.Russian military bloggers have become increasingly frustrated by the Russian military's tactics. Russian forces continue self-sabotage by gathering in large groups to attack Ukrainian positions, making them an easy target for Ukrainian drones.The Institute for the Study of War (ISW), a US think tank, said one Russian military blogger expressed dismay at Russian forces' tactics at "complete stupidity and incompetence."Another Kremlin-affiliated milblogger argued that the Russian military command needs to stop attacking in mechanized columns due to repeated high equipment losses. The milblogger also criticized the military leadership for failing to account for Ukrainian drone operations and to equip Russian armored vehicles with electronic warfare systems, reported the ISW.Ukraine, after nearly two years of war, has called on the West to bolster its defenses. The increased use of drone attacks, that have reached targets as far afield as Moscow and Saint Petersburg, has become a strategic focus for Ukraine."It's a war of armor against projectiles. At the moment, projectiles are winning," Gleb Molchanov, a Ukrainian drone operator, told The Guardian.Read the original article on Business Insider.....»»

Category: worldSource: nytFeb 3rd, 2024

A Rivian R1T blew through steel guardrails, reflecting safety experts" warnings about heavy vehicles and even heavier EVs

During a crash test, a Rivian R1T tore through a steel guardrail at 60 mph. Safety experts have raised concerns about heavier and faster EVs. One Rivian owner said he got a repair bill for $42,000 after a fender bender, according to a report from The New York Times.Brian Cassella/Chicago Tribune/Tribune News Service via Getty ImagesA Rivian R1T, with a curb weight of over 7,100 pounds, tore through a steel guardrail at 60 mph.The crash test highlights safety experts' concerns about faster and heavier EVs.The average new car is getting heavier and that may pose some risks to surrounding environments.A new video of a Rivian truck bursting through steel guardrails during a crash test highlights some of the safety concerns experts have raised about heavy electric vehicles.Last year, researchers at the University of Nebraska-Lincoln's Midwest Roadside Safety Facility wanted to see how guardrails that could be used on US roads would perform against a Rivian R1T electric truck, which has a curb weight of over 7,100 pounds.The results aren't pretty.At 60 mph, the Rivian truck blew right through the steel guardrails with little reduction in speed, according to the university's newsroom, Nebraska Today.The publication reported that the guardrail was made of 12-gauge corrugated steel attached to 6-inch deep steel posts. The top of the rail is more than two and a half feet above the ground.Spokespersons for the Midwest Roadside Safety Facility and Rivian did not respond to a request for comment.Bigger the car, deadlier the crashSafety experts have previously raised concerns about the risks heavy vehicles and heavier EVs could bring to the roads.Last January, Ann Carlson, the acting administrator of the National Highway Traffic Safety Administration, told reporters that the agency was "very concerned" about the "degree to which heavier vehicles contribute to greater fatality rates," Reuters reported."Bigger is safer if you don't look at the communities surrounding you and you don't look at the other vehicles on the road," she said. "It actually turns out to be a very complex interaction."An analysis of 18,000 pedestrian crashes published in November by the Insurance Institute for Highway Safety found that pickups, SUVs, and vans with a hood height greater than 40 inches are 45% more likely to cause fatalities than cars with a hood height of 30 inches or less.In the UK, safety experts say the heavier weight could cause older parking garages across the country to collapse.A row of black Ford F-150 Lightning pickup trucks seen at a dealership in Manchester, New Hampshire.Charles Krupa/APThe concerns around heavier cars come as the world sees an inflection point between two trends: an increasing appetite for larger cars and the adoption — albeit a slower one — of EVs.Electric vehicles, small and large, are heavier than their gasoline-powered counterparts due to their batteries.Kevin Heaslip, a professor and director of the Center for Transportation Research at the University of Tennessee, told Politifact that EVs often weigh 30% more than gas-powered vehicles.At the same time, car makers are seeing more demand for larger vehicles.In recent years, automakers have slowly phased out small car segments, such as the sedan and hatchback, for SUVs and pickups. The US's top-selling vehicle for more than four decades has been Ford's F-Series trucks, according to an analysis by S&P Global Mobility.As such, EV automakers have little choice but to respond and fill the gap with electric SUVs and trucks."It's no surprise and no coincidence that most of the new models being introduced or planned to be introduced over the coming months are around that segment because that's what we as US consumers want to purchase," Steve Patton, EY America's mobility sector leader, previously told Business Insider's Alexa St. John.Heavy trucks with Ferrari speedA GMC Hummer electric vehicle can weigh up to 9,000 pounds.Zhe Ji/Getty ImagesLarger electric vehicles, such as the GMC Hummer EV and the Ford F-150 Lightning, have shown that the batteries can add anywhere from two to three tons more weight.The curb weight of the Tesla's Cybertruck is nearly 7,000 pounds. The weight, speed, and autopilot capabilities are why one safety expert described the truck as a "fucking deathtrap" and "death machine.""Something like the Cybertruck and the F-150 electric, these things are different," Myles Russell, a Canadian civil engineering technologist, told BI's Madison Hall. "Now you're packing in Ferrari and McLaren-level powers, and even arguably Tesla high-energy vehicles, into the size of a truck."The Cybertruck launched last year but is currently only available in North America.Anadolu/Getty ImagesResearch by the University of Nebraska-Lincoln's Midwest Roadside Safety Facility found that EVs could crash into roadside barriers with 20% to 50% more impact energy because they're involved in run-off-road crashes at about the same rate and speeds as gasoline vehicles, the university newsroom reported."There is some urgency to address this issue," Cody Stolle, Midwest Roadside Safety Facility's assistant director, told the publication. "As the percentage of EVs on the road increases, the proportion of run-off-road crashes involving EVs will increase, as well."Spokespersons for GMC, Tesla, and Ford did not respond to a request for comment sent outside regular working hours.Read the original article on Business Insider.....»»

Category: worldSource: nytFeb 2nd, 2024

The Fed risks making a big policy mistake this year that could spark a 30% drop in the stock market, portfolio manager says

The stock market risks following a playbook from the 1970s. One portfolio manager says there's a 50%-plus a crash occurs. Getty Images Stocks could drop 30% over the next few years, according to Smead Capital portfolio manager Cole Smead. That's because the Fed risks cutting rates too early, causing inflation to spike and investors to flee the market. Smead said that he saw a double-digit drop as the most likely scenario for stocks. The Fed could end up making another big policy mistake this year — one that could end up sparking a double-digit plunge in the stock market.That's according to Cole Smead, the CEO and portfolio manager of Smead Capital Management. While other Wall Street strategists have raised their hopes for a soft-landing and immaculate disinflation, Smead thinks the Fed is on the cusp of making the same error it did in the 70s, when the central bank saw cooling inflation and prematurely began to slash interest rates.That ended up being disastrous for the economy, plunging the US into a stagflationary spiral and, eventually, a recession. Stocks, meanwhile, were obliterated, with the Dow Jones Industrial Average seeing 45% of its value wiped out over the course of two years.Today's Fed looks poised to make that very same mistake — so much so that the current investing environment resembles 1972, Smead said. That was right before the stock market saw one of its worst crashes in history.The most likely outcome? Inflation will roar back up and stocks drop 30% from their current levels over the next few years, Smead warned."It's the worst-case scenario. I would also argue, I think it's the most likely scenario," he told Business Insider.Fed rate cuts galoreThat spells big trouble for the rest of Wall Street, where most strategists are expecting some, if not small upside for the S&P 500. Investors have been waiting for the Fed to lower interest rates in the economy and are ambitiously pricing in rate cuts. Six by the end of 2024, to be exact, according to the CME FedWatch tool.That market-wide forecast could be tempered a bit after Fed Chair Jerome Powell was more hawkish than expected during remarks on Wednesday, after the Federal Open Market Committee held rates unchanged. He expressed caution around the central bank's willingness to rush ahead with a rate cut at a time when inflation is "still too high" and the path forward is "uncertain." Stocks tanked as a result.But if the Fed does forge ahead with cuts as early as March, there's a very real possibility it will do so at a time when inflation still hasn't been fully tamed, Smead said, given that multiple price pressures still linger in the economy. The US debt, which is inherently inflationary, keeps climbing higher, with the total federal debt balance notching $34 trillion this year. Meanwhile, the labor market is still suffering from a shortage of workers, which has helped push wages higher and risks stoking inflation."Structurally, nothing has changed other than the supply chain has obviously got tighter and oil prices have come down," Smead said, referring to supply disruptions from the pandemic, which temporarily stoked inflation and oil prices. "The other structural problems have not changed." That suggests the Fed runs a serious risk of cutting interest rates too early. And if inflation ends up coming back to life, that could spark a disaster in markets, causing investors to get spooked and rush to take their cash out of overpriced stocks.Most at risk are the "Magnificent 7" stocks, Smead said, which have dominated most of the market's gains last year.Taking the 1970s parallel further, he points out that the "Nifty Fifty" — a group of large companies that dominated in the market during the first half of that decade — ended up crashing in 1973 and 1974, with stocks like Disney and Coca-Cola wiping out more than 50% peak-to-trough.Smead sees a 50-50 chance that stocks will follow that same playbook, with the overall market losing around 30% of its value over the next two years as inflation spikes. In another scenario, he sees a 25% chance that stocks will do poorly without a spike in inflation.That leaves just a 1-in-4 chance stocks will continue to do well in the next few years, Smead warned. In that scenario, inflation will remain low, though the US economy will be in a full-fledged recession."That part of the rhyme I think looks very miserable," Smead said of the parallels to the 70s. "Our next trouble [could be] waking up in a world where inflation picks up and stock returns are nose diving," he added. "That's a probable path."Fears of a coming stock-market correction have grown in recent weeks as investors eye an uncertain economic backdrop and the looming risk of recession. As of December, more than 60% of investors see more than a 10% chance of a 1987-style stock market crash happening in the next six months, according to Yale's US Crash Confidence Index.Investors are particularly concerned for the Magnificent Seven, as tech giants like Tesla look overvalued. In a previous research note, Smead Capital warned investors of the risk of a stock market failure, an event that could wipe out the most expensive stocks on the market as much as 70%.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderFeb 1st, 2024

"No big drama" is coming for the US economy, but complacency is a rising risk, "Big Short" traders say

"As long as credit quality is okay, there's no, you know, big drama coming," Steve Eisman told CNBC at a financial conference. Paramount Pictures 'Big Short' traders told CNBC that investors are too complacent, although the economy is healthy. Steve Eisman sees little concern over today's economy, with consumer spending still strong. But traders should still keep their eyes on pockets of risk, such as commercial real estate, the others said. There is little reason to be nervous about the US economy, though investors should still keep an eye on pockets of risk, a group of "Big Short" investors said in a joint interview with CNBC."As long as credit quality is okay, there's no, you know, big drama coming," Neuberger Berman's Steve Eisman told the outlet at a financial conference.He was joined by traders Danny Moses, Vincent Daniel, and Porter Collins, who together were made famous by betting against the housing market ahead of the 2008 crash.As to today's economy, Eisman considers it relatively healthy, essentially dismissing Wall Street's concerns that a consumer spending drawdown guarantees a coming slowdown."Capital One said that they think delinquencies have peaked. Consumers still have money," he said, adding: "Don't worry, be happy. I mean, that's good until it changes but as of now, it's not changing."But Collins, cofounder of Seawolf Capital, countered that investors may be turning too complacent. "A lot of people are bullish, right? And so that's the one thing that concerns me like, you know, no one's really that scared," he said. Commercial real estate is a clear example, said Moses, founder of Moses Ventures. Following the rapid rise of interest rates, trillions of dollars are now due to be refinanced in the next few years, which should limit market euphoria to some degree.Some on Wall Street are nervous this could trigger a massive real estate default wave, with billions at risk.Instead, Moses noted that investors are largely leaning on expectations that the Federal Reserve will bail the sector out. Still, markets shouldn't be too complacent, as the commercial real estate industry has seen "fits and starts" crop up, Moses said.In separate comments cited by Bloomberg, Eisman also waved off rising worries about US credit conditions, noting that arguments against the government deficit have been ongoing for four decades. Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 31st, 2024

Boeing"s 737 Max 9 jet is flying again. Here"s what experts say about its safety.

The 737 Max 9 jet is flying once again after a three-week grounding. Two ex-Boeing employees say to avoid the plane, but some experts say it's 100% safe. The Federal Aviation Administration has approved an enhanced inspection for Boeing 737 Max 9 so the planes can return to service.Ingrid Barrentine/Alaska AirlinesThe Boeing 737 Max 9 aircraft has returned to service after a three-week grounding.The plane must undergo enhanced inspections of up to 12 hours before flying passengers again.Two ex-Boeing employees warned against flying on the jet, but some experts say it's 100% safe.On January 5, an Alaska Airlines 737 Max 9 door plug broke off shortly after takeoff from Portland International Airport, leaving a gaping hole in the jet's fuselage. No one was seriously injured.The Federal Aviation Administration quickly grounded 171 other Max 9 planes with the same door plug, mostly flown by United Airlines and Alaska.Four critical bolts used to secure the door plug were missing from the jet when it left Boeing's assembly line, The Wall Street Journal reported, representing a massive quality control lapse.This oversight has cast renewed scrutiny on Boeing's family of Max airplanes, which already saw 346 fatalities after two Max 8 jets crashed in 2018 and 2019.Three weeks after the blowout, however, the Max 9 is carrying people once again. Alaska's COO Constance von Muehlen was on board the carrier's first passenger flight since the grounding and took the seat by the door plug, CNN reported.The green light comes as regulators approve new inspection and maintenance processes in relation to the door plug. But questions surrounding Boeing's safety and quality control still remain on the minds of travelers.Here's what to know about the Max 9 inspections, and how aviation experts view the return to service.The Max 9's enhanced inspection process will take up to 12 hoursAlaska mechanics carrying out the enhanced inspections of the Max 9 door plugs.Ingrid Barrentine/Alaska AirlinesLast Wednesday, the FAA announced an "enhanced maintenance process" to be completed on the 171 grounded Max 9s before they could return to service.This includes visual inspections of the left and right mid-cabin door plugs, as well as inspection of specific bolts, guide tracks, and fittings to ensure all critical components are correctly installed.The agency also said it would cap production of the 737 Max, have "increased floor presence at all Boeing facilities," and ramp up oversight of the planemaker and its suppliers — particularly Spirit AeroSystems (not related to Spirit Airlines), which installed the door plug."The exhaustive, enhanced review our team completed after several weeks of information gathering gives me and the FAA confidence to proceed to the inspection and maintenance phase," FAA Administrator Mike Whitaker said in a January 24 statement. "However, let me be clear: This won't be back to business as usual for Boeing."So far, carriers including United, Alaska, and Panama's Copa Airlines have re-launched their Max 9s after the required inspections, with Copa being the first to do so on Thursday, Reuters reported.According to aviation analyst and president of Atmosphere Research Group, Henry Harteveldt, these inspections are "extremely thorough.""There were at least four revisions to the inspection process before the FAA, Boeing, and the airlines agreed on the final procedure to be done to inspect these planes," he told Business Insider on Tuesday. "The initial inspection procedures were taking two to four hours; the agreed process takes between 10 and 12 hours."Alaska noted the same 12-hour timeframe in a January 26 statement.Not all experts agree on the Max 9's safetyThe Alaska Airlines Boeing 737 MAX 9.National Transportation Safety BoardIt wasn't long after the Alaska Max 9 blowout that airline customers started voicing concerns about the safety of the plane after its return to service — with some travelers even opting to pay more to avoid flying on the jet.According to the Washington Post, the travel booking website Kayak said its filter for the 737 Max significantly increased in the days after the incident.Former Boeing senior manager-turned-whistleblower Ed Pierson told the LA Times in an interview published Tuesday that he would "absolutely not fly on a Max airplane.""I've worked in the factory where they were built, and I saw the pressure employees were under to rush the planes out the door," he said. "I tried to get them to shut down before the first crash."Joe Jacobsen, a former engineer at Boeing and the FAA, gave the paper a similar take: "I would tell my family to avoid the Max. "I would tell everyone, really."In a statement to Business Insider, Harteveldt expressed confidence in the Max 9."I understand why people may be concerned about flying on the 737 Max 9 right now, but those planes would not be back in the air if the FAA did not think they were safe," he said. "No airline is going to dispatch a plane that it does not know to be 100% safe."Harteveldt further explained that the Max 9 problem is not as complex as the fatal Max 8 crashes, which involved flawed flight-control software and a faulty sensor."The [Max 9] problem is isolated; the mechanics and engineers know exactly where to focus — and they did that — so it's a very different kind of problem for the plane," he told BI. "All of this certainly undermines the trust we place in Boeing, but, personally speaking, I would not hesitate to fly on a 737 Max 9 if the schedule and fare met my requirements."However, Harteveldt emphasized that those who are concerned about flying on a Max 9 do have options. For example, Alaska and United currently allow passengers to switch their flight from a Max flight to a non-Max flight for no extra charge — similar to what carriers like Southwest Airlines did after the Max 8 crashes.Passengers have more control over their personal safetyPart of the reason people survived the firey Japan Airlines crash is because they left behind personal items.Richard A. Brooks/AFP/Getty ImagesEmbry-Riddle Aeronautical University associate professor and air crash investigator, Anthony Brickhouse, told BI that passengers should focus less on the aircraft they are flying on and more on their personal safety.He listed things like wearing a seatbelt at all times, listening to the safety briefings, and leaving personal items behind in case of an emergency evacuation — the latter two helped save the lives of the 379 people on board a Japan Airlines Airbus A350 that caught fire in December."The federal regulators and the NTSB are going to do their job and make sure the aircraft we fly on are as safe as possible," Brickhouse told BI. "But passengers need to do more to impact their own safety at the end of the day."Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 30th, 2024

It"s a make-or-break week for the stock market. Here"s why.

In today's big story, we're looking at why this is such a big week for the stock market. A trader blows bubble gum during the opening bell at the New York Stock Exchange (NYSE) on August 1, 2019, in New York City.Johannes Eisele/AFP via Getty ImagesThis post originally appeared in the Insider Today newsletter.You can sign up for Insider's daily newsletter here.Welcome back! If you're still curious about what prompted Netflix's movie boss to depart, it seems like it was a dispute over quality versus quantity.In today's big story, we're looking at why this is such a big week for the stock market.What's on deckMarkets: JPMorgan's succession plans for Jamie Dimon sort of got an update.Tech: When the IPO window reopens, these healthcare startups will be first in line.Business: China Evergrande was ordered to liquidate, but experts say there may be little to recover.But first, it's make-or-break time. If this was forwarded to you, sign up here.The big storyA week to rememberThree trends in the stock market are bound to vault equities higher in 2024, Wall Street strategists say.Getty ImagesWe're less than a month into 2024, but this week could determine the market's trajectory for the rest of the year. Big Tech earnings, a Fed meeting, and the January jobs report are all on tap, giving investors a slew of data to chew on, Business Insider's Matthew Fox writes. Microsoft and Alphabet report on Tuesday, while Amazon and Apple check in on Thursday. The quartet represents nearly $10 trillion in market cap.At Wednesday's Fed meeting, rate cuts aren't expected, but Jerome Powell's speech will offer clues to the central bank's longer-term plans. And the week rounds out with a jobs report that'll give investors a sense of whether the economy is cooling — indicating a more urgent need for rate cuts — or strong enough to delay the Fed's plans for relief.Tim CookAppleThe information overload comes amid an uncertain time for Big Tech and the broader stock market. The S&P 500 is up roughly 3% on the year, but even market experts who predicted a banner 2024 are hesitant about its short-term future. A key part of that equation is the Magnificent Seven — Apple, Microsoft, Amazon, Alphabet, Nvidia, Meta Platforms, and Tesla — which accounted for over 60% of the S&P 500's 25% gain last year.This year has been more of a mixed bag. Nvidia is already up more than 26% this year, while Tesla is down over 26% after a brutal earnings miss last week. Other members haven't faced extreme price swings but are still dealing with drama. Apple is on the cusp of its biggest product launch in nearly a decade with the Vision Pro's release on Friday and in the midst of a massive change to its App Store. At Google, employees and management are at odds over what some say is the deterioration of the company's famous culture.Even if company executives don't answer all of the analysts' questions, we'll still get a sense of the tech giants' 2024 plans, which is crucial for the wider market. But focusing entirely on the Magnificent Seven, as tempting as it might be, might not be your best bet. Fundstrat's Tom Lee, who nailed his 2023 market outlook, sees stocks outside the elite group performing well. And Amundi, one of the largest asset managers in the world, actually expects the Magnificent Seven to underperform.Still, positivity prevails for some. The CEO of one public company I spoke to last week has bought into the chances of the Fed pulling off a soft landing despite their doubts a year ago. "I'm more of an optimist right now," the CEO said.Read more here.News briefYour Monday headline catchupA quick recap of the top news from over the weekend:Jury awards E. Jean Carroll $83 million verdict from Donald Trump defaming her.Ronald Reagan's speechwriter says Nikki Haley can get the jump on Trump.Biden promises retaliation after 3 US troops are killed in Jordan, escalating Middle East conflict.If fans expect Taylor Swift to be at the Super Bowl given her scheduled concert in Japan, there's only one way to make it happen.A convoy calling themselves 'God's army' plans to head to the Texas border to stop migrants from entering the US.3 things in marketsJPMorgan CEO Jamie DimonREUTERS/ Larry Downing1. Life after Jamie Dimon at JPMorgan. A leadership shuffle at the biggest US bank provides hints about succession plans. Here's what the new roles for Jennifer Piepszak, Marianne Lake, and Troy Rohrbaugh mean for how the bank thinks about Dimon's eventual replacement. 2. Billionaire Jeffrey Gundlach: Buckle up for a bumpy ride in the markets. The DoubleLine Capital CEO believes a recession is imminent and suggests holding onto cash. When he's ready to dive back in, he sees the most value in markets like India and Japan.3. Mohamed El-Erian isn't sold on a soft landing. The famed economist pointed to headwinds like a slowdown in consumer spending and stubborn inflation as causes for concern. "There's a real risk that growth slows to the one to one and a half percent level," El-Erian said of GDP.3 things in techiStock; BI1. Amazon is about to shake up the TV ad marketplace. Prime Video viewers will be subjected to ads on their favorite shows, effective today. That'll snap up market share from traditional players like Comcast and Warner Bros. Discovery, and could boost Amazon's revenue by billions.2. These 7 healthcare startups are primed to IPO once the market reopens. While healthcare experts are split on whether the IPO window will reopen in 2024, several startups seem to be getting ready to go public. Those include Lyra Health and Maven, VCs and bankers told us.3. Get in, we're going tech shopping. Newegg, an online retailer, is the newest place to buy refurbished iPhones, MacBooks, and other products — and could give Apple a run for its money in preowned devices.3 things in businessCostfoto/NurPhoto/Getty Images, Tyler Le/BI1. A Hong Kong court has ordered the liquidation of China Evergrande. Liquidators will now take control of the company's assets and prepare to sell them in order to repay the company's debts, which total $300 billion. However, experts say there may be little to recover.2. Americans literally only care about the price of three things. Economic data isn't significantly different from six months ago, but everyone feels much better about things. Why? Because the prices of eggs and gas are down while stocks are booming.3. Boeing's 737 Max crisis could become the US economy's problem. The knock-on effect from the Alaska Airlines incident could be a shortage of airplanes for airlines to use, according to an aviation expert. That'll impact everything from commercial flights to supply chains.In other newsTech layoffs are expected to continue as companies seek to hire more AI talent, analyst says.Elon Musk's startup is reportedly building up a war chest to take on OpenAI.Netflix co-CEO says the app isn't on Apple's Vision Pro because it isn't worth their time yet.How 'naked greed' caused best friends and Forge co-founders to go to war over control of their latest startup Destiny XYZ.What's happening todayEarnings today: Ryanair and other companies.Amazon Prime Video is launching its ad-supported tier in the US.The Internal Revenue Service opens the 2024 tax filing season.The Insider Today teamDan DeFrancesco, deputy editor and anchor, in New York. Hallam Bullock, editor, in London. Jordan Parker Erb, editor, in New York. Read the original article on Business Insider.....»»

Category: dealsSource: nytJan 29th, 2024

Inside the company that has discovered the ultimate cash cow: teenage athletes

Michael Schwimer calls his company "Shark Tank for athletes." Critics call it indentured servitude. "I'm a believer in capitalism," says Michael Schwimer, who founded Big League Advantage to cash in on the future earnings of teenage athletes. Simon Bruty/Sports Illustrated via Getty ImagesThe minor-league pitcher sits on the couch next to his wife. They're both in their early 20s, and they both look tense. They're on what could turn out to be the biggest — and most lucrative — Zoom call of their lives.The couple is joined on the call by their financial advisor and the husband's agent. For the next 45 minutes, they all listen, transfixed, as Michael Schwimer holds court from his home office in Maryland. A former pitcher with the Philadelphia Phillies (3 wins, 2 losses, 4.62 ERA), Schwimer is a 6-foot-8 Grecian bust of a man with a mop of curls. He begins his PowerPoint with an apology — he talks too much. From there, he tells the young pitcher about his life in the game, about the way players struggle financially — he once watched a teammate fish through a dumpster for food — and about the superstars he met who earned more millions than they could spend.Then Schwimer, who suddenly found his baseball career derailed by an injury, hit on an idea. What if athletes could sell a percentage of their future earnings to investors, the same way tech entrepreneurs offer a stake in their promising new ideas in return for venture capital? What is a minor-league pitcher, after all, if not a one-man startup aiming to break into the big leagues?So in 2016, Schwimer started Big League Advantage, a sort of hedge fund that invests in the future of minor-league baseball players. Following a landmark Supreme Court decision in 2021 that allowed student athletes to be paid, BLA has since expanded to invest in college football players, basketball players, hockey players, and coaches. (Schwimer explains that BLA also hopes to invest in musicians. "We haven't signed any yet, but anybody who wants a deal with us, we want to call us.") Using a proprietary algorithm monitored by some 30 analysts, the firm models a player's career earnings to decide how much to invest in them. "We look at the game very, very differently than everyone else," Schwimer tells the pitcher. "We probably spend more money on our analytics team than multiple teams combined."So far, Schwimer says, BLA has invested in the future earnings of nearly 600 players. The athlete — often a teenager — gets an up-front payment in return for up to 15% of their professional sports earnings over the next 25 years. Schwimer says the payments start around $100,000 and sometimes range into the millions. One of the fund's first deals was with the hot-shot shortstop Fernando Tatis Jr., an 18-year-old who went on to sign a 14-year deal with the San Diego Padres for $340 million. If BLA secured only 8% of his earnings, Tatis alone would pay out $27.2 million — more than the company raised in its initial round of funding.Now, 20 minutes into the Zoom call, Schwimer arrives at what the pitcher and his wife have been waiting for: an offer. BLA, he announces, will pay the pitcher $12,000 for each percent of his future earnings, up to $180,000. That's a nice chunk of change for a young couple. But if he winds up making it big, the pitcher could be selling tens of millions in earnings to BLA for pennies on the dollar."Assume you're gonna make it," Schwimer urges the player. "Assume you're gonna be great. We've only had two players regret it later. If you're not gonna be happy, please don't do this."At the end of the call, the pitcher — who agreed to let me join on the condition he remain anonymous — asks Schwimer what will happen if he says no now. Is there a chance there will be a higher offer next year if he performs well on the field?Schwimer has anticipated the question. Ninety-two percent of the time, he tells the pitcher, the offer will wind up being lower. And 80 percent of the time, there will be no offer at all. The message is clear: If the couple wants the $180,000, it's now or never.Schwimer is far from alone in treating human beings as growth investments. X10 Capital, run by one of the original general partners at Benchmark Capital, offers similar deals to athletes. Finlete is launching a fund that allows fans to buy shares in a prospect's future earnings. Spotter and Jellysmack are paying influencers for a share of their YouTube revenue, and private firms and colleges are paying undergraduate tuition for students in return for a cut of their salaries once they enter the workforce. In perhaps the most extreme example, the brothers and serial tech entrepreneurs Daniil and David Liberman are selling shares of their own future earnings and aiming to list themselves on the stock market.Such investment schemes have drawn sharp criticism. "Big League Advance Is a Major League Scam," reads a typical headline. Sports agents, players unions, and lawmakers have compared BLA's business model to predatory loans or even indentured servitude. However you slice it, the hedge-fund approach to professional sports means that more of the riches will flow to wealthy investors and less to the athletes whose talent and effort actually generate the profits. That's because BLA isn't like an agent, who takes a cut of anything they manage to negotiate for a player. If you make it big, it's more like a payday loan on steroids — it gives you cash when you're strapped but takes a huge bite out of your income for the rest of your career."Until a couple of years ago, minor-league baseball players were among the lowest-paid employees in the entire country," says Garrett Broshuis, a minor leaguer turned lawyer who recently won a major class-action lawsuit for players over wage and overtime violations. "When you're that desperate, you're willing to take more risks. We're talking about human beings here, not startups." However you slice it, the hedge-fund approach to professional sports means more of the riches will flow to wealthy investors and less to the athletes whose talent actually generates the profits. A lifelong instigator, Schwimer revels in the negativity. He frames his business as somewhere between a social safety net and trickle-down economics. "We are 'Shark Tank,'" he tells me, "but for athletes and coaches." To him, the players who make it and owe BLA its cut are like any successful founder who owes a venture-capital firm its cut; those who don't are lucky enough to grab a little financial security in one of the world's toughest and most inequitable job markets. And though he has raised nearly $250 million in funding to invest in promising young athletes, he sees himself as a misunderstood underdog fighting on behalf of other underdogs. "I didn't start this company for agents," he says. "I didn't start this company for journalists. I started this company by players, for players."Last November, I spent a day with Schwimer in Philadelphia, where he was speaking to business-school students and alumni at the Wharton Sports Business Summit. Over breakfast, he tells me he still remembers the moment he knew he'd never be an MLB star.In 2008, after four years at the University of Virginia, he was drafted in the 14th round. When Schwimer arrived at his first minor-league workout, he watched pitcher after pitcher throw fastballs that whizzed and breaking balls that snapped in ways his never had. That day, he called his dad, a lawyer."I'm in trouble here," Schwimer told him. "I got no shot."His dad was unperturbed. "We got to figure out a way to be different," he said.So Schwimer started thinking analytically. He'd spent a summer interning at the hedge fund P.A.W. Partners, where he'd worked with their trading algorithms. To better understand the tendencies of the hitters he'd be facing, he built a rudimentary model. The data, he says, revealed that hitters are shockingly predictable creatures.Schwimer had four subpar pitches. But informed by his DIY pitch-selection algorithm, he managed to confuse batters enough to move up through the Phillies organization. He claims he got the nickname Houdini because no one could understand how he was sneaking his pitches by all these batters.Schwimer's teammates dubbed his penchant for wild theories and seeking creative edges "Schwimosophy."Christian Petersen/Getty ImagesThe story is vintage Schwimer — a slightly self-promotional tale that looks shaky on closer inspection. When I asked Erik Kratz, who was Schwimer's catcher in AAA, about the Houdini moniker, he responded with a laugh. "Is that a self-proclaimed nickname?" he said. "You better go back to him and see if he's talking about himself in the third person."Schwimer insisted the story was true — mostly. "People would say all the time: 'You're like fucking Houdini. How the fuck are you getting outs?'" he clarified when I went back to him. "But, yeah, I guess it probably was a little aggressive to say it was my nickname."Kratz says Schwimer developed a contentious reputation on his team for "questioning things" and seeking creative edges. Once, he annoyed every hitter in the dugout when he shared his idea to train one of them to foul off a dozen pitches per at bat, to tire out the opposing pitcher. "We were just like, 'Schwim, are you kidding me? You're completely demeaning what we do every single day,'" Kratz recalls. Kratz tells me they dubbed Schwimer's wild theories Schwimosophy.When Schwimer was drafted, his friends from home thought he was rich. "I signed for 3.2," he'd tell them, pausing for dramatic effect. "Thousand. After tax." He saw the precarious financial conditions that up-and-coming players face firsthand. When one top prospect in the Arizona Fall League told him that the stress of supporting his wife and baby was hurting his play, Schwimer says he floated what would later become the model for BLA. What if you could sell a share of your future earnings, he asked, for $10,000? "I'd give up 50% for 10 grand!" the guy joked.In 2011, when Schwimer got the call to join the Phillies, "it was the Motel 6 to the Ritz Carlton, overnight," he says. In an anecdote he often deploys in his sales pitches, he recounts hanging out with the All-Star starter Cole Hamels. "What does it mean to have $120 million?" he asked the pitcher. "It's great," Hamels told him. "I have the freedom to do anything I want in the offseason, but it's incrementally useless. If I had made $110 million, there'd be zero difference in my life." (Hamels declined to comment for this story.)The exchange, as Schwimer tells it, got him thinking. Soon after, he tore his labrum and faced a year of rehab. He fell into a depression, spending his days on the couch reading "Game of Thrones." Finally, prodded by his wife, he started tinkering with his hitters algorithm, transforming it into a tool to rank the career prospects of every minor-league player. In a "Moneyball" moment, he discovered that his model didn't jibe with the MLB's official rankings. Today, he says, more than 80% of the players BLA has invested in are outside the league's top 300 prospects. I ask if signing lower-level candidates is a conscious choice to maximize value. "No, we just think the rankings are terrible," he says.Fernando Tatis Jr. signed with BLA when he was 18.Sean M. Haffey/Getty ImagesDuring his two years in the MLB, Schwimer had accumulated wealthy contacts. "Once you get to the major leagues," he says, "billionaires all of a sudden wanna hang out with you and play some golf." The guys he met on the links gave him the capital for his first fund. "These are some of the biggest, heaviest hitters in the United States," Schwimer told the husband and wife on the Zoom call. "We have over 200 of them with a combined net worth over $100 billion."Members of BLA's board have included Marvin Bush, the brother of President George W. Bush, and Paul DePodesta, the Cleveland Browns executive who features heavily in "Moneyball." One of the billionaire investors who helped bankroll BLA's first fund was Bill Miller, who was famously early and bullish on Amazon. The rate of return Schwimer promised was astronomical. "It's gonna be pretty hard not to make money on it," Miller told HBO's "Real Sports." The data that Michael showed us was at least 30% a year for 20 years or so."The beauty of the model, from an investor's perspective, is the way it places relatively small bets that offer the prospect of huge outcomes. "We can only lose the money we give," Schwimer tells me, "and we can make a 50 times return." As in venture capital, a single unicorn can cover the cost of many, many bad bets. The key then is to identify promising players and correctly price their future earnings. And with baseball salaries soaring, betting long on sports contracts has an obvious appeal. In 1999, baseball's top-paid player brought home just under $12 million. Today, the Dodgers will pay Shohei Ohtani $70 million a year for the next decade. Even if 70 to 80 percent of BLA's investments never bear fruit, as Schwimer estimates, owning 15% of a star player's future earnings is like holding a share in something that — if the last half century is any guide — will only go up, and up, and up.As we walk from the diner to Penn's campus, Schwimer tells me that there's no difference between a startup founder taking an investment in exchange for equity and a young athlete taking an investment from him. He mentions that Jeff Bezos gave up 20% of Amazon for $1 million back in 1995, and today, post-divorce, Bezos owns only 10% of his company. He tells me he controls only 52% of BLA."Jeff Bezos gave 80%!" he says. "I gave up 48%! Was I taken advantage of? Was Jeff Bezos taken advantage of? Would anyone possibly say that? It's crazy to me. And nobody to this day has ever shown me any possible way as to why it's different."Part of the issue, I explain, is that the public has always balked at businessmen profiting off an athlete's excellence. Agents and owners are not exactly beloved. Schwimer dismisses such concerns as reflexively anti-business. "If we're a company that makes $2 billion, we are fucking over athletes," he says. "If we're a company that loses all our money, we do great for athletes. Well, that's bullshit. That's like if you invest in the stock market and you lose, you're great for the economy. But if you win, you're taking advantage of everybody. It's insane." "Athletes are thought of as dumb," Schwimer says. "It's an ism. Not racism; it's like intelligent-ism." I admit to Schwimer that I'd been feeling a certain queasiness about his company that I'd been trying to unpack. The fact that he was often investing in teenagers, seemingly in times of need, was something I couldn't square morally. People have long circled young stars with dubious or exploitative offers, financial or otherwise, I point out."Athletes are thought of as dumb," he responds. "Oh, God, it just kills me. Like, it's an ism. Not racism; it's like intelligent-ism. Do you know how hard it was for me to start this thing? I'm going in with 10 legs down. I'm a former baseball player. They all assume I'm a moron. Like, it's hard."Schwimer is protective of BLA's algorithm, which he believes provides him with a competitive edge. He would only share certain small differentiators, like the way the model puts more weight on how a minor-league hitter performs against an elite pitcher than how he performs against guys who will never make it to the show. Steven Duncker, a former Goldman Sachs partner who sits on BLA's board, admits he doesn't fully understand how the model works, but nevertheless believes they're onto something game-changing. "This is 'Moneyball'-plus," he tells me. "People say, 'You know the advantage is going to go away?' I'm shocked it hasn't. But it really hasn't."People say rookie shortstop Elly De La Cruz is guaranteed to make $500 million. "He might," Schwimer says. "He also might not make $2 million. He could get hit by a bus."Dylan Buell/Getty ImagesThere are, of course, some obvious hazards to betting on a person instead of a company. Tatis, the shortstop whom BLA is banking on, was suspended in 2022 for 80 games without pay after testing positive for a performance-enhancing drug. Two more offenses would result in a lifetime ban. "Three of our players under the age of 25 have died," says Schwimer. "But now, at least, their families have the money." People tell Schwimer that Elly De La Cruz, the rookie shortstop phenom who signed with BLA while in the minors, is guaranteed to make $500 million. "He might," Schwimer says. "He also might not make $2 million. He could get hit by a bus."But for all his talk about how athletes are derided as unintelligent, there is one type of player whose thought process Schwimer questions: those who choose not to sign with BLA. Schwimer claims he now has enough data to prove that if two players are ranked equally by the algorithm, and one takes money from the BLA and one does not, the player who takes the money is statistically more likely to make it to the majors.I'm puzzled. Why would that be?"It's self-selection," Schwimer tells me. "The ones that do our deals really care about making it and will do whatever it takes to make it. The players that don't do it? They're probably less intelligent."Schwimer says that no player has ever signed with BLA because they were desperate for the money. "No one's forcing anybody to do anything," he tells me. "No one's doing this out of need." He says signees often use the payments to purchase everything from personal training or private chefs to a new mattress. "Our models are blind to your background," he says.But others dispute that assessment. The primary targets of BLA are "indigent and talented players from Latin America," the baseball superagent Scott Boras told reporters. "Few if any top American talents who received large signing bonuses would ever consider the usurious terms. The idea of giving millions in lump sums to players is the justification of candy used to attract and compel players to give up huge percentages of their careers. That solely benefits BLA."In response to Boras's quote, Schwimer wrote back a 700-word email that took it on with seven bullet-pointed objections, including: "4. He uses the term 'usurious' which is correlated to loans. Words have actual definitions. We do not give loans to players (no one thinks this)." The email ended: "Again, there are no two sides to BLA. Period."In 2021, HBO's "Real Sports" found that half of BLA's investments were in players from Latin America. Yermín Mercedes, a prospect highlighted in the segment, said he took $165,000 from BLA for 15% of his future earnings because his family in the Dominican Republic was relying on him for financial support. "I have a big family," he said at the time. "They need me all the time because right now I'm the head of my family. I just want to do the best I can do for them."Schwimer says he doesn't keep track of players' countries of origin, so he couldn't offer an up-to-date figure on who it's cutting deals with. "We have signed over 100 American players," he insists, "many of which have received signing bonuses in the millions of dollars." But that would mean, by Schwimer's own calculation, that the vast majority of the nearly 600 players signed by BLA are not American.In 2018, Francisco Mejía, a Cleveland Indians prospect who accepted $360,000 from BLA for 10% of his future earnings, sued the fund for "unconscionable conduct." In the complaint, he claimed that his mother was sick when BLA approached him and that the fund had him sign a draft of the contract in an airport without an interpreter present. BLA's response was to countersue Mejia, who wound up dropping his lawsuit and issuing a public apology. "To be clear," he said, "I do not believe Big League Advance has ever deceived me."Gervon Dexter is suing BLA for signing him after his sophomore year in college. He now owes the fund more than $1 million of his $6.72 million contract with the Chicago Bears. Icon SportswireBLA has more recently come under fire for cutting deals with athletes while they're still in school. In 2022, the defensive lineman Gervon Dexter signed over 15% of his pretax future earnings for $436,485 after his sophomore year at the University of Florida. A year later, Dexter signed a four-year contract for $6.72 million with the Chicago Bears — more than $1 million of which he would have to hand over to BLA. Last September, Dexter sued BLA, arguing that Florida law allows deals with athletes only while they're enrolled in college, not after, and therefore his contract is null and void. An initial hearing will be held in March.Schwimer, for his part, maintains that he has always followed the law. He tells me he tends to believe he was sued by Dexter and Mejía because advisors told them BLA would give them a settlement to avoid the expense and the reputational risk of going to court. "But we can't settle," Schwimer says. "If we settle one, the whole company's over."Before his Wharton panel begins, Schwimer finds me in the atrium of Huntsman Hall. He's been thinking about why all the media coverage of BLA has been so negative. "It always starts with a writer calling me and you can tell wanting to kill me," he says. "And then, after an hour, they're like, 'Actually, what you do is amazing. I can't write anything.'" Their publications, he suggests, refuse to run the stories because they don't want to piss off powerful sports agents.I tell him, as someone who has written many sports stories, that his theory is hard to square with my experience. But Schwimer continues with his Scwimosohpy. Sure, the lawsuits and the home-run investments like Tatis are newsworthy, he argues. But why not write about all the guys who flamed out and got to keep their payments? "I've done so many interviews just like this one where you go back to your editor and he'll be like, 'Nah, it's not a story because no one gives a crap about the people that don't make it,'" Schwimer says. "I know what it's like when the world leaves you for dead at 25, 26 years old. It's brutal. And nobody cares. The media doesn't care." He pauses. "I care." Schwimer's reasoning leads to thornier questions. Why is the system built in such a way that young strivers are so desperate for quick cash? And why is an upstart hedge fund the one to fix it? Throughout our many conversations, Schwimer is rarely combative; his presentation is that of an energetic star of a high-school debate team. He answers many of my questions with questions of his own. He thinks the moral quandary of what he's doing is a fallacy that can be disproven via hypotheticals. His argument that it's not anyone's place to make decisions on behalf of an athlete isn't especially convincing: Regulatory protections exist for a reason. But his other line of reasoning is more interesting. If giving up $10 million in earnings means little to a player who makes $100 million, and being handed $100,000 means everything to a broke minor leaguer, isn't there a justification to take money from the superstar and redistribute it to the underdog?Perhaps. But that, of course, leads to other, thornier questions. Why is the system built in such a way that young strivers are so desperate for quick cash? And why is an upstart hedge fund the one to fix it?When the Wharton panel on college sports begins, Schwimer is in his element. The other panelists — a sports agent, a college administrator, and a marketing executive — gently traipse through the intricacies of how NCAA athletes can be compensated today. Schwimer is having none of it. He rails against corruption in the college-sports system, scoffing at the half measures that keep amateur athletes from getting the money they deserve and casting himself as the trailblazing agent of disruption. So what if he's also done well for himself and his investors? He explains, again and again, that he's a free-market absolutist when it comes to getting kids paid. "I'm a believer in capitalism," he declares. "I'm a believer in America."During the Q&A session, an audience member asks about the way businesses and college boosters have begun pooling money to facilitate deals for student athletes. "That's what we want to know," the confused attendee says. "Like, what is going on?"Schwimer points to the college administrator seated beside him. "He'll give you the answer," he says. "I'll give you the truth!" The room erupts in laughter, and Schwimer smiles. For today, at least, the B-schoolers and MBAs see Schwimer just as he sees himself.Joseph Bien-Kahn is a freelance journalist based in Silverlake. He covers film, sports, true crime, and oddballs for GQ, Vulture, Sports Illustrated, and Businessweek, among other magazines.Read the original article on Business Insider.....»»

Category: personnelSource: nytJan 28th, 2024

Inside the company that calls itself "Moneyball-plus"

Michael Schwimer has discovered the ultimate cash cow for investors: teenage athletes. Just don't call it indentured servitude. "I'm a believer in capitalism," says Michael Schwimer, who founded Big League Advantage to cash in on the future earnings of teenage athletes. Simon Bruty/Sports Illustrated via Getty ImagesThe minor-league pitcher sits on the couch next to his wife. They're both in their early 20s, and they both look tense. They're on what could turn out to be the biggest — and most lucrative — Zoom call of their lives.The couple is joined on the call by their financial advisor and the husband's agent. For the next 45 minutes, they all listen, transfixed, as Michael Schwimer holds court from his home office in Maryland. A former pitcher with the Philadelphia Phillies (3 wins, 2 losses, 4.62 ERA), Schwimer is a 6-foot-8 Grecian bust of a man with a mop of curls. He begins his PowerPoint with an apology — he talks too much. From there, he tells the young pitcher about his life in the game, about the way players struggle financially — he once watched a teammate fish through a dumpster for food — and about the superstars he met who earned more millions than they could spend.Then Schwimer, who suddenly found his baseball career derailed by an injury, hit on an idea. What if athletes could sell a percentage of their future earnings to investors, the same way tech entrepreneurs offer a stake in their promising new ideas in return for venture capital? What is a minor-league pitcher, after all, if not a one-man startup aiming to break into the big leagues?So in 2016, Schwimer started Big League Advantage, a sort of hedge fund that invests in the future of minor-league baseball players. Following a landmark Supreme Court decision in 2021 that allowed student athletes to be paid, BLA has since expanded to invest in college football players, basketball players, hockey players, and coaches. (Schwimer explains that BLA also hopes to invest in musicians. "We haven't signed any yet, but anybody who wants a deal with us, we want to call us.") Using a proprietary algorithm monitored by some 30 analysts, the firm models a player's career earnings to decide how much to invest in them. "We look at the game very, very differently than everyone else," Schwimer tells the pitcher. "We probably spend more money on our analytics team than multiple teams combined."So far, Schwimer says, BLA has invested in the future earnings of nearly 600 players. The athlete — often a teenager — gets an up-front payment in return for up to 15% of their professional sports earnings over the next 25 years. Schwimer says the payments start around $100,000 and sometimes range into the millions. One of the fund's first deals was with the hot-shot shortstop Fernando Tatis Jr., an 18-year-old who went on to sign a 14-year deal with the San Diego Padres for $340 million. If BLA secured only 8% of his earnings, Tatis alone would pay out $27.2 million — more than the company raised in its initial round of funding.Now, 20 minutes into the Zoom call, Schwimer arrives at what the pitcher and his wife have been waiting for: an offer. BLA, he announces, will pay the pitcher $12,000 for each percent of his future earnings, up to $180,000. That's a nice chunk of change for a young couple. But if he winds up making it big, the pitcher could be selling tens of millions in earnings to BLA for pennies on the dollar."Assume you're gonna make it," Schwimer urges the player. "Assume you're gonna be great. We've only had two players regret it later. If you're not gonna be happy, please don't do this."At the end of the call, the pitcher — who agreed to let me join on the condition he remain anonymous — asks Schwimer what will happen if he says no now. Is there a chance there will be a higher offer next year if he performs well on the field?Schwimer has anticipated the question. Ninety-two percent of the time, he tells the pitcher, the offer will wind up being lower. And 80 percent of the time, there will be no offer at all. The message is clear: If the couple wants the $180,000, it's now or never.Schwimer is far from alone in treating human beings as growth investments. X10 Capital, run by one of the original general partners at Benchmark Capital, offers similar deals to athletes. Finlete is launching a fund that allows fans to buy shares in a prospect's future earnings. Spotter and Jellysmack are paying influencers for a share of their YouTube revenue, and private firms and colleges are paying undergraduate tuition for students in return for a cut of their salaries once they enter the workforce. In perhaps the most extreme example, the brothers and serial tech entrepreneurs Daniil and David Liberman are selling shares of their own future earnings and aiming to list themselves on the stock market.Such investment schemes have drawn sharp criticism. "Big League Advance Is a Major League Scam," reads a typical headline. Sports agents, players unions, and lawmakers have compared BLA's business model to predatory loans or even indentured servitude. However you slice it, the hedge-fund approach to professional sports means that more of the riches will flow to wealthy investors and less to the athletes whose talent and effort actually generate the profits. That's because BLA isn't like an agent, who takes a cut of anything they manage to negotiate for a player. If you make it big, it's more like a payday loan on steroids — it gives you cash when you're strapped but takes a huge bite out of your income for the rest of your career."Until a couple of years ago, minor-league baseball players were among the lowest-paid employees in the entire country," says Garrett Broshuis, a minor leaguer turned lawyer who recently won a major class-action lawsuit for players over wage and overtime violations. "When you're that desperate, you're willing to take more risks. We're talking about human beings here, not startups." However you slice it, the hedge-fund approach to professional sports means more of the riches will flow to wealthy investors and less to the athletes whose talent actually generates the profits. A lifelong instigator, Schwimer revels in the negativity. He frames his business as somewhere between a social safety net and trickle-down economics. "We are 'Shark Tank,'" he tells me, "but for athletes and coaches." To him, the players who make it and owe BLA its cut are like any successful founder who owes a venture-capital firm its cut; those who don't are lucky enough to grab a little financial security in one of the world's toughest and most inequitable job markets. And though he has raised nearly $250 million in funding to invest in promising young athletes, he sees himself as a misunderstood underdog fighting on behalf of other underdogs. "I didn't start this company for agents," he says. "I didn't start this company for journalists. I started this company by players, for players."Last November, I spent a day with Schwimer in Philadelphia, where he was speaking to business-school students and alumni at the Wharton Sports Business Summit. Over breakfast, he tells me he still remembers the moment he knew he'd never be an MLB star.In 2008, after four years at the University of Virginia, he was drafted in the 14th round. When Schwimer arrived at his first minor-league workout, he watched pitcher after pitcher throw fastballs that whizzed and breaking balls that snapped in ways his never had. That day, he called his dad, a lawyer."I'm in trouble here," Schwimer told him. "I got no shot."His dad was unperturbed. "We got to figure out a way to be different," he said.So Schwimer started thinking analytically. He'd spent a summer interning at the hedge fund P.A.W. Partners, where he'd worked with their trading algorithms. To better understand the tendencies of the hitters he'd be facing, he built a rudimentary model. The data, he says, revealed that hitters are shockingly predictable creatures.Schwimer had four subpar pitches. But informed by his DIY pitch-selection algorithm, he managed to confuse batters enough to move up through the Phillies organization. He claims he got the nickname Houdini because no one could understand how he was sneaking his pitches by all these batters.Schwimer's teammates dubbed his penchant for wild theories and seeking creative edges "Schwimosophy."Christian Petersen/Getty ImagesThe story is vintage Schwimer — a slightly self-promotional tale that looks shaky on closer inspection. When I asked Erik Kratz, who was Schwimer's catcher in AAA, about the Houdini moniker, he responded with a laugh. "Is that a self-proclaimed nickname?" he said. "You better go back to him and see if he's talking about himself in the third person."Schwimer insisted the story was true — mostly. "People would say all the time: 'You're like fucking Houdini. How the fuck are you getting outs?'" he clarified when I went back to him. "But, yeah, I guess it probably was a little aggressive to say it was my nickname."Kratz says Schwimer developed a contentious reputation on his team for "questioning things" and seeking creative edges. Once, he annoyed every hitter in the dugout when he shared his idea to train one of them to foul off a dozen pitches per at bat, to tire out the opposing pitcher. "We were just like, 'Schwim, are you kidding me? You're completely demeaning what we do every single day,'" Kratz recalls. Kratz tells me they dubbed Schwimer's wild theories Schwimosophy.When Schwimer was drafted, his friends from home thought he was rich. "I signed for 3.2," he'd tell them, pausing for dramatic effect. "Thousand. After tax." He saw the precarious financial conditions that up-and-coming players face firsthand. When one top prospect in the Arizona Fall League told him that the stress of supporting his wife and baby was hurting his play, Schwimer says he floated what would later become the model for BLA. What if you could sell a share of your future earnings, he asked, for $10,000? "I'd give up 50% for 10 grand!" the guy joked.In 2011, when Schwimer got the call to join the Phillies, "it was the Motel 6 to the Ritz Carlton, overnight," he says. In an anecdote he often deploys in his sales pitches, he recounts hanging out with the All-Star starter Cole Hamels. "What does it mean to have $120 million?" he asked the pitcher. "It's great," Hamels told him. "I have the freedom to do anything I want in the offseason, but it's incrementally useless. If I had made $110 million, there'd be zero difference in my life." (Hamels declined to comment for this story.)The exchange, as Schwimer tells it, got him thinking. Soon after, he tore his labrum and faced a year of rehab. He fell into a depression, spending his days on the couch reading "Game of Thrones." Finally, prodded by his wife, he started tinkering with his hitters algorithm, transforming it into a tool to rank the career prospects of every minor-league player. In a "Moneyball" moment, he discovered that his model didn't jibe with the MLB's official rankings. Today, he says, more than 80% of the players BLA has invested in are outside the league's top 300 prospects. I ask if signing lower-level candidates is a conscious choice to maximize value. "No, we just think the rankings are terrible," he says.Fernando Tatis Jr. signed with BLA when he was 18.Sean M. Haffey/Getty ImagesDuring his two years in the MLB, Schwimer had accumulated wealthy contacts. "Once you get to the major leagues," he says, "billionaires all of a sudden wanna hang out with you and play some golf." The guys he met on the links gave him the capital for his first fund. "These are some of the biggest, heaviest hitters in the United States," Schwimer told the husband and wife on the Zoom call. "We have over 200 of them with a combined net worth over $100 billion."Members of BLA's board have included Marvin Bush, the brother of President George W. Bush, and Paul DePodesta, the Cleveland Browns executive who features heavily in "Moneyball." One of the billionaire investors who helped bankroll BLA's first fund was Bill Miller, who was famously early and bullish on Amazon. The rate of return Schwimer promised was astronomical. "It's gonna be pretty hard not to make money on it," Miller told HBO's "Real Sports." The data that Michael showed us was at least 30% a year for 20 years or so."The beauty of the model, from an investor's perspective, is the way it places relatively small bets that offer the prospect of huge outcomes. "We can only lose the money we give," Schwimer tells me, "and we can make a 50 times return." As in venture capital, a single unicorn can cover the cost of many, many bad bets. The key then is to identify promising players and correctly price their future earnings. And with baseball salaries soaring, betting long on sports contracts has an obvious appeal. In 1999, baseball's top-paid player brought home just under $12 million. Today, the Dodgers will pay Shohei Ohtani $70 million a year for the next decade. Even if 70 to 80 percent of BLA's investments never bear fruit, as Schwimer estimates, owning 15% of a star player's future earnings is like holding a share in something that — if the last half century is any guide — will only go up, and up, and up.As we walk from the diner to Penn's campus, Schwimer tells me that there's no difference between a startup founder taking an investment in exchange for equity and a young athlete taking an investment from him. He mentions that Jeff Bezos gave up 20% of Amazon for $1 million back in 1995, and today, post-divorce, Bezos owns only 10% of his company. He tells me he controls only 52% of BLA."Jeff Bezos gave 80%!" he says. "I gave up 48%! Was I taken advantage of? Was Jeff Bezos taken advantage of? Would anyone possibly say that? It's crazy to me. And nobody to this day has ever shown me any possible way as to why it's different."Part of the issue, I explain, is that the public has always balked at businessmen profiting off an athlete's excellence. Agents and owners are not exactly beloved. Schwimer dismisses such concerns as reflexively anti-business. "If we're a company that makes $2 billion, we are fucking over athletes," he says. "If we're a company that loses all our money, we do great for athletes. Well, that's bullshit. That's like if you invest in the stock market and you lose, you're great for the economy. But if you win, you're taking advantage of everybody. It's insane." "Athletes are thought of as dumb," Schwimer says. "It's an ism. Not racism; it's like intelligent-ism." I admit to Schwimer that I'd been feeling a certain queasiness about his company that I'd been trying to unpack. The fact that he was often investing in teenagers, seemingly in times of need, was something I couldn't square morally. People have long circled young stars with dubious or exploitative offers, financial or otherwise, I point out."Athletes are thought of as dumb," he responds. "Oh, God, it just kills me. Like, it's an ism. Not racism; it's like intelligent-ism. Do you know how hard it was for me to start this thing? I'm going in with 10 legs down. I'm a former baseball player. They all assume I'm a moron. Like, it's hard."Schwimer is protective of BLA's algorithm, which he believes provides him with a competitive edge. He would only share certain small differentiators, like the way the model puts more weight on how a minor-league hitter performs against an elite pitcher than how he performs against guys who will never make it to the show. Steven Duncker, a former Goldman Sachs partner who sits on BLA's board, admits he doesn't fully understand how the model works, but nevertheless believes they're onto something game-changing. "This is 'Moneyball'-plus," he tells me. "People say, 'You know the advantage is going to go away?' I'm shocked it hasn't. But it really hasn't."People say rookie shortstop Elly De La Cruz is guaranteed to make $500 million. "He might," Schwimer says. "He also might not make $2 million. He could get hit by a bus."Dylan Buell/Getty ImagesThere are, of course, some obvious hazards to betting on a person instead of a company. Tatis, the shortstop whom BLA is banking on, was suspended in 2022 for 80 games without pay after testing positive for a performance-enhancing drug. Two more offenses would result in a lifetime ban. "Three of our players under the age of 25 have died," says Schwimer. "But now, at least, their families have the money." People tell Schwimer that Elly De La Cruz, the rookie shortstop phenom who signed with BLA while in the minors, is guaranteed to make $500 million. "He might," Schwimer says. "He also might not make $2 million. He could get hit by a bus."But for all his talk about how athletes are derided as unintelligent, there is one type of player whose thought process Schwimer questions: those who choose not to sign with BLA. Schwimer claims he now has enough data to prove that if two players are ranked equally by the algorithm, and one takes money from the BLA and one does not, the player who takes the money is statistically more likely to make it to the majors.I'm puzzled. Why would that be?"It's self-selection," Schwimer tells me. "The ones that do our deals really care about making it and will do whatever it takes to make it. The players that don't do it? They're probably less intelligent."Schwimer says that no player has ever signed with BLA because they were desperate for the money. "No one's forcing anybody to do anything," he tells me. "No one's doing this out of need." He says signees often use the payments to purchase everything from personal training or private chefs to a new mattress. "Our models are blind to your background," he says.But others dispute that assessment. The primary targets of BLA are "indigent and talented players from Latin America," the baseball superagent Scott Boras told reporters. "Few if any top American talents who received large signing bonuses would ever consider the usurious terms. The idea of giving millions in lump sums to players is the justification of candy used to attract and compel players to give up huge percentages of their careers. That solely benefits BLA."In response to Boras's quote, Schwimer wrote back a 700-word email that took it on with seven bullet-pointed objections, including: "4. He uses the term 'usurious' which is correlated to loans. Words have actual definitions. We do not give loans to players (no one thinks this)." The email ended: "Again, there are no two sides to BLA. Period."In 2021, HBO's "Real Sports" found that half of BLA's investments were in players from Latin America. Yermín Mercedes, a prospect highlighted in the segment, said he took $165,000 from BLA for 15% of his future earnings because his family in the Dominican Republic was relying on him for financial support. "I have a big family," he said at the time. "They need me all the time because right now I'm the head of my family. I just want to do the best I can do for them."Schwimer says he doesn't keep track of players' countries of origin, so he couldn't offer an up-to-date figure on who it's cutting deals with. "We have signed over 100 American players," he insists, "many of which have received signing bonuses in the millions of dollars." But that would mean, by Schwimer's own calculation, that the vast majority of the nearly 600 players signed by BLA are not American.In 2018, Francisco Mejía, a Cleveland Indians prospect who accepted $360,000 from BLA for 10% of his future earnings, sued the fund for "unconscionable conduct." In the complaint, he claimed that his mother was sick when BLA approached him and that the fund had him sign a draft of the contract in an airport without an interpreter present. BLA's response was to countersue Mejia, who wound up dropping his lawsuit and issuing a public apology. "To be clear," he said, "I do not believe Big League Advance has ever deceived me."Gervon Dexter is suing BLA for signing him after his sophomore year in college. He now owes the fund more than $1 million of his $6.72 million contract with the Chicago Bears. Icon SportswireBLA has more recently come under fire for cutting deals with athletes while they're still in school. In 2022, the defensive lineman Gervon Dexter signed over 15% of his pretax future earnings for $436,485 after his sophomore year at the University of Florida. A year later, Dexter signed a four-year contract for $6.72 million with the Chicago Bears — more than $1 million of which he would have to hand over to BLA. Last September, Dexter sued BLA, arguing that Florida law allows deals with athletes only while they're enrolled in college, not after, and therefore his contract is null and void. An initial hearing will be held in March.Schwimer, for his part, maintains that he has always followed the law. He tells me he tends to believe he was sued by Dexter and Mejía because advisors told them BLA would give them a settlement to avoid the expense and the reputational risk of going to court. "But we can't settle," Schwimer says. "If we settle one, the whole company's over."Before his Wharton panel begins, Schwimer finds me in the atrium of Huntsman Hall. He's been thinking about why all the media coverage of BLA has been so negative. "It always starts with a writer calling me and you can tell wanting to kill me," he says. "And then, after an hour, they're like, 'Actually, what you do is amazing. I can't write anything.'" Their publications, he suggests, refuse to run the stories because they don't want to piss off powerful sports agents.I tell him, as someone who has written many sports stories, that his theory is hard to square with my experience. But Schwimer continues with his Scwimosohpy. Sure, the lawsuits and the home-run investments like Tatis are newsworthy, he argues. But why not write about all the guys who flamed out and got to keep their payments? "I've done so many interviews just like this one where you go back to your editor and he'll be like, 'Nah, it's not a story because no one gives a crap about the people that don't make it,'" Schwimer says. "I know what it's like when the world leaves you for dead at 25, 26 years old. It's brutal. And nobody cares. The media doesn't care." He pauses. "I care." Schwimer's reasoning leads to thornier questions. Why is the system built in such a way that young strivers are so desperate for quick cash? And why is an upstart hedge fund the one to fix it? Throughout our many conversations, Schwimer is rarely combative; his presentation is that of an energetic star of a high-school debate team. He answers many of my questions with questions of his own. He thinks the moral quandary of what he's doing is a fallacy that can be disproven via hypotheticals. His argument that it's not anyone's place to make decisions on behalf of an athlete isn't especially convincing: Regulatory protections exist for a reason. But his other line of reasoning is more interesting. If giving up $10 million in earnings means little to a player who makes $100 million, and being handed $100,000 means everything to a broke minor leaguer, isn't there a justification to take money from the superstar and redistribute it to the underdog?Perhaps. But that, of course, leads to other, thornier questions. Why is the system built in such a way that young strivers are so desperate for quick cash? And why is an upstart hedge fund the one to fix it?When the Wharton panel on college sports begins, Schwimer is in his element. The other panelists — a sports agent, a college administrator, and a marketing executive — gently traipse through the intricacies of how NCAA athletes can be compensated today. Schwimer is having none of it. He rails against corruption in the college-sports system, scoffing at the half measures that keep amateur athletes from getting the money they deserve and casting himself as the trailblazing agent of disruption. So what if he's also done well for himself and his investors? He explains, again and again, that he's a free-market absolutist when it comes to getting kids paid. "I'm a believer in capitalism," he declares. "I'm a believer in America."During the Q&A session, an audience member asks about the way businesses and college boosters have begun pooling money to facilitate deals for student athletes. "That's what we want to know," the confused attendee says. "Like, what is going on?"Schwimer points to the college administrator seated beside him. "He'll give you the answer," he says. "I'll give you the truth!" The room erupts in laughter, and Schwimer smiles. For today, at least, the B-schoolers and MBAs see Schwimer just as he sees himself.Joseph Bien-Kahn is a freelance journalist based in Silverlake. He covers film, sports, true crime, and oddballs for GQ, Vulture, Sports Illustrated, and Businessweek, among other magazines.Read the original article on Business Insider.....»»

Category: personnelSource: nytJan 28th, 2024

Safety inspection reveals "many" loose bolts on Alaska Airlines 737 Max 9s after door plug flew off mid-flight

The inspection came after an in-flight emergency in which a door plug came loose and a window blew out. Alaska Airlines Boeing 737 Max 9.National Transportation Safety BoardA safety inspection of Alaska Airline's Boeing 737 Max 9 planes found "many" loose bolts.The inspection came after an in-flight emergency in which a door plug came loose and window blew out.The company's CEO told NBC News he was "angry" at the findings. A safety inspection of Alaska Airline's Boeing 737 Max 9 planes revealed "many" loose bolts were found on the commercial airline's fleet.The inspection was prompted by an in-flight emergency earlier this month, in which a door plug came loose, and a window blew out, causing Alaska Airlines flight 1282, heading from Portland to Ontario, California, to make an emergency landing and the airline to ground its fleet of 65 Boeing 737 Max 9 planes."I'm more than frustrated and angry that this happened to Alaska Airlines," Alaska Airlines CEO Ben Minicucci told Business Insider in a statement. "It happened to our guests and our people. My demand on Boeing is what are they going to do to improve their quality program in-house."The CEO's comments were first reported by NBC News.The CEO also said that the company would be sending its "audit people to audit their quality control systems" and oversee Boeing's production line.Boeing declined to comment, referring BI to Alaska Airlines.The Alaska CEO's statements come after inspections of the Boeing 737 Max 9 planes following the January 6 incident. United Airlines also previously announced that it had found loose bolts that appear to "relate to installation issues in the door plug."The door plug on Boeing 737 Max 9 planes — optionally put in place in some 737 Max 9 planes based on seating capacity — is installed with four stop bolts, according to the National Transportation Safety Board, which is investigating the incident. Earlier this month, the agency told reporters that the door plug fitted into the Alaska Airlines plane involved in the incident was found "fractured."This indicated to the NTSB that the door plug had disengaged, but the agency is investigating whether the bolts were there in the first place or if something happened that resulted in the bolts failing.On Monday, the FAA announced that it had found door plug issues with other Boeing models beyond the 737 Max planes and urged airline carriers to conduct inspections on the Boeing 737 900ER, Forbes reported.Because of the issues Boeing is facing with its planes, United Airlines CEO Scott Kirby told CNBC that he is considering moving away from the plane for future orders. The carrier had ordered 150 Max 10s — the largest version of the narrowbody jet — per CNBC."The Max 9 grounding is probably the straw that broke the camel's back for us," Kirby said. "We're gonna build an alternative plan that just doesn't have the Max 10 in it."There are still many questions that need answeringAlthough stories of loose bolts are concerning, the exact cause of the Alaska Airlines incident could take months to determine as the NTSB continues its investigation.Justin Green, an aviation accident attorney at Kreindler & Kreindler, told BI that new revelations raise more questions about the plane's design.Green said many pilots he had spoken to were confused as to why the door plug needed to exist in the first place. He said the optional emergency exit could be created solely for airlines that want to implement a higher seat capacity, which would reduce the potential for errors.Green also said that if investigators do find that the loose bolts are the culprit of the Alaska Airlines incident, the next step would be to scrutinize why the system in place had failed so easily."The fact that one or two or three bolts might be loose shouldn't cause the whole thing to fail unless the design of the system is too weak," Green told BI.While investigators search for answers, passengers are already bringing forth a lawsuit against Boeing and Alaska Airlines.Last week, four people who were on the January 6 flight filed a suit saying they had experienced "intense fear, distress, anxiety, trauma" and more, ABC News reported. In the lawsuit, the litigants say they were convinced they were going to die on the Boeing jet.Green, who served as a cochair on the plaintiff's committee prosecuting the case arising from the 2019 Ethiopian Airlines crash, told BI he believes their lawsuit will be "remarkably successful" and hopes it will help "improve the quality control process" for Boeing and its manufacturers."I think that they'll also, hopefully, put a price on what happened," Green said.Correction: January 23, 2024 — An earlier headline stated that a door had flown off of the January 6 Alaska Airlines flight. It was a door plug, not a door.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderJan 24th, 2024

The middle seat on an airplane is severely underrated

The longstanding debate over window versus aisle seats misses the benefits of what's in between: the middle seat. Shutterstock The middle seat has long been maligned as the worst seat on a plane. A recent trip helped me realize there are actually benefits to the middle seat. Aisle and window seats aren't all they are cracked up to be, either.  Window or aisle?The two seats might only be a few feet apart, but an ideological chasm exists between them. You fall into one of the two camps, and allegiances don't switch easily.Seat selection is all the more important these days after an Alaska Airlines flight lost part of its fuselage mid-flight. (No serious injuries were reported, thanks largely to the two seats directly next to the blown-out window being empty.) So, as we reexamine our preferred seats, what about what's between the window and aisle? Like yellow Starbursts, we all deal with the middle seat, but most of us don't prefer it.After all, who wants to be sandwiched between two strangers when you can have the freedom of the aisle or the comfort of a window?As a staunch member of Team Aisle, I was distraught to get stuck with a middle seat on a recent flight from New York to Las Vegas. As a bigger guy — 6'2" and nearly 220 pounds depending on my takeout order — flying middle for a five-plus hour trip didn't sound like a dream.But I'm here to tell you I was wrong. I now kneel at the altar of the middle seat, and you should, too. Here's why.Everyone feels sorry for the middle seat The first and biggest benefit of sitting middle isn't immediately obvious until you've spent time in the seat. But once there, it becomes clear: Your seatmates feel bad for you.On my recent trip to Las Vegas, my aisle partner quickly told me I was welcome to the entire armrest we shared. My window buddy didn't make the same offer, but he seemed to be leaning so far away from me that you would have thought I was radioactive.The stigma around middle seats has meant aisle and window passengers tend to give those stuck there more space. The ups and downs of the aisleMaybe you're all in on the aisle. If so, I have some questions. Do you like getting up 5 times a flight so your seatmates can use the restroom? Do you enjoy your shoulders and elbows getting crushed by passengers and flight attendants constantly walking down the aisle? Is it fun having random crotches or butts in your direct eye line as people randomly decide to stand in the aisle for 30 minutes mid-flight?It doesn't get better when the plane lands. Nothing like having people aggressively push up the aisle before the door is even open. We're in row 27, sir. It's going to be a while. Sitting in the window is a lesson in negotiationLet's set aside recently unlocked fears about sitting next to a window.The general thought around window seats has long been that it's one of the best in the plane. You can exist unbothered by the comings and goings of your fellow passengers. You have a nice wall to rest your head on if you want to sleep. And you can take pictures of the clouds to notify your 500 Instagram followers you are traveling. But unless you have a steel bladder, you'll need to use the restroom during a long flight. That means negotiating across two passengers for an escape. God forbid it's a red-eye, and they're sleeping.It's not just bathroom trips that become a headache. Since windows don't always line up evenly with seats, sometimes that means sharing it with the row in front or behind you. Does it stay up? Can we put it down? What about halfway? Your trip to LAX is now a crash course in diplomacy. Middle seats are cheaperPerhaps you're still not sold on the middle. If the above arguments aren't speaking to you, maybe a financial one will. Middle seats are almost always cheaper than aisles or windows.Since airlines are the kings of nickel and diming their customers, the "luxury" or being able to pick a window or aisle seat almost always requires an upgraded ticket.Meanwhile, they're just giving out middle seats at no extra charge. What a time to be alive!PS- This philosophy only extends to three-seaters. If you have a middle seat in a four-seater, may God have mercy on your soul. Read the original article on Business Insider.....»»

Category: worldSource: nytJan 21st, 2024

China sees the transition to green energy as a chance to elevate the yuan and dedollarize key markets

The transition to green energy is "an opportunity for the nation to raise the global standing of the renminbi in commodities markets." A 100 yuan banknote (R) is placed next to $100 banknotes in this picture illustration taken in Beijing Nov. 1, 2010.Reuters/Petar Kujundzic Chinese policymakers see the global energy transition as a pathway to boost the yuan, Zongyuan Zoe Liu wrote. China's currency is used in key commodity markets that are essential in decarbonizing. Its multilateral partnerships also provide Beijing with more influence in the commodity trade. While the US dollar reigns supreme in global finance, especially in commodities markets, China sees an opening to elevate the yuan: the shift to renewable energy.That's according to Zongyuan Zoe Liu, a China scholar at the Council on Foreign Relations, who pointed to developments in key resources that are critical for green technologies like EV batteries and wind turbines. "These policymakers and scholars see the ongoing energy transition as an opportunity for the nation to raise the global standing of the renminbi in commodities markets; to them, there's no guarantee that the US dollar's dominance in our current fossil fuel-powered global economy will persist in a decarbonized world," Liu wrote in Noema Magazine.That's as China is a dominant supplier of resources essential to turning economies green, such as rare earth minerals and critical metals such as cobalt.To take advantage of this, the country has established a number of commodity exchanges where prices are quoted in yuan, she pointed out. These include the Bautou Rare Earth Products Exchange in 2014 and the Ganzhou Rare Metal Exchange in 2019. In a similar vein, authorities have also established yuan-denominated exchanges focused on oil and copper, another metal used in green energy as well as other industries.Yet despite those advances, Beijing remains concerned about its heavy dependence on the US dollar for pricing and settling commodities contracts, Liu added. To that end, the country has also turned to multilateral partnerships. Groups such as the BRICS bloc and the Shanghai Cooperation Organization have not only helped China advocate for a less dollar-centric financial system, but have also bolstered the country's reach in the global commodity trade, she highlighted.For instance, China and Brazil, two BRICS members, are some of the largest lithium producers, while Iran may be added to that list. The Middle Eastern country, a member of both groups, also holds the world's largest zinc reserves."In this context, as a non-Western group of countries, SCO potentially represents a potent coalition of exporters and importers of commodities centered around using the renminbi to finance the entire commodities lifecycle from production to trade to consumption," Liu wrote.  To strengthen currency ties between trade partners, Chinese authorities have long advocated for the use of local currencies, while also promoting ideas of regional integration and settlement systems, such as an SCO development bank.Meanwhile, BRICS countries have been vocal proponents of de-dollarization, and some of the group's newest members could be the most aggressive about rolling back the dollar.Still, it's not China's aim to completely topple the dollar in international finance as that would be financially ruinous for the nation, given its heavy investment in US assets, Liu said. But Beijing's efforts shouldn't be ignored. "Should China successfully wean the world off the US dollar and the renminbi increase its status as a global currency or the dominant currency, it would reshape the global trade system and the international political landscape," she warned. Read the original article on Business Insider.....»»

Category: worldSource: nytJan 21st, 2024