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Academy Sports and Outdoors, Inc. (NASDAQ:ASO) Q2 2023 Earnings Call Transcript August 31, 2023 Academy Sports and Outdoors, Inc. beats earnings expectations. Reported EPS is $2.09, expectations were $2. Operator: Good morning, ladies and gentlemen, and welcome to the Academy Sports + Outdoors Second Quarter Fiscal 2023 Results Conference Call. At this time, this call […] Academy Sports and Outdoors, Inc. (NASDAQ:ASO) Q2 2023 Earnings Call Transcript August 31, 2023 Academy Sports and Outdoors, Inc. beats earnings expectations. Reported EPS is $2.09, expectations were $2. Operator: Good morning, ladies and gentlemen, and welcome to the Academy Sports + Outdoors Second Quarter Fiscal 2023 Results Conference Call. At this time, this call is being recorded and all participants are in a listen-only mode. Following the prepared remarks, there will be a brief question-and-answer session. Questions will be limited to analysts and investors. Please limit yourself one question and one follow-up. [Operator Instructions] I will now turn the call over to Matt Hodges, Vice President of Investor Relations for Academy Sports and Outdoors. Matt, please go ahead. Matt Hodges: Good morning, everyone, and thank you for joining the Academy Sports & Outdoors’ second quarter 2023 financial results call. Participating on the call are Steve Lawrence, Chief Executive Officer; Michael Mullican, President; and Carl Ford, Chief Financial Officer. As a reminder, statements in today’s earnings release and the comments made by management during this call may be considered forward-looking statements. These statements are subject to risks and uncertainties that could cause our actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the earnings release and in our SEC filings. The Company undertakes no obligation to revise any forward-looking statements. Today’s remarks also refer to certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are included in today’s earnings release, which is available at investors.academy.com. I will now turn the call over to Steve Lawrence for his remarks. Steve? Steve Lawrence: Thank you, Matt. Good morning to all and thank you for joining us for our Q2 earnings call. It’s been three months since Michael and I stepped into our new roles. Over the past 90 days, we’ve worked hard to improve our sales trend while our expenses and the current run rate of the business and to backfill some key positions on our leadership team. I’m excited that we’re able to fill all of our key roles with internal promotions, which speaks to the work the team has done over the past couple of years on building a strong internal bench and focusing on succession planning. To highlight that, I’m thrilled that Carl Ford, our new CFO, is one of these promotions, and he will be joining us on today’s earnings call. Carl has been with the Academy for 4.5 years, and during that time, he’s played an integral role in helping the Company achieve several milestones including navigating the pandemic, achieving all the objectives in our first long-range strategy, supporting our IPO and helping shape and create our new long-range plan. Turning to our Q2 results. For the quarter, we achieved net sales of $1.58 billion for a negative 7.5% comp. While we are not happy with running a decrease, these results were in line with our first quarter trend and in line with the guidance we shared during our last call. What was encouraging was that unlike Q1, we saw the business decelerate as we moved through the quarter. In Q2, we saw steady improvements in both sales and margin rates with each month getting successively better. Our belief is that we can continue to build on this momentum as we progress through Q3 and into the holiday selling season in Q4. Looking at sales by division, our best-performing business during the quarter was Sports & Recreation, which ran a 2.7% decrease. Sporting goods equipment, outdoor cooking and outdoor furniture all performed well during the quarter. However, the fitness equipment and bike business continue to be tough. Apparel was the second best performing division with a negative 3.7% decrease. We continue to see solid performance out of the men’s and youth businesses as well as our licensed apparel area. NIKE also continues to perform well for us along with our private label business. The women’s business has remained more challenging for us. As we move forward, we’re very focused on getting our women’s active business back on track. Footwear during Q2 ran a 4.5% decrease. We continue to see a strength in casual and work footwear driven by national brands such as Haydude with our private work boot and apparel brand, Brazos. The cleated business was also strong as we continue to be in a much better inventory position versus where we were a year ago. Our outdoor trend for Q2 was a 12.2% decrease which was an improvement versus Q1 was down 15%, but is still well below our expectations. Better performing categories for the quarter were fishing and camping. Hunting remained the most challenged business continued softness in both the ammunition and firearms businesses. Both of these categories continue to perform well above 2019 levels, but continue to decline from the peaks that we saw during the last couple of years. As we move forward, we expect to see the declines in these categories moderate as we start to lap softer comparisons from last year. When you look across the various businesses, many of the key themes that we called out in our Q1 call carry forward into the second quarter. Customers continue to gravitate towards value on one end of our assortment demonstrated by an increase in the penetration of private brand sales. At the same time, customers are also focusing on new and innovative products such as BOGG BAGS or recovery slides which, in many cases, were not value items. Bigger ticket items with long replacement cycles continue to be challenged, along with many of the surge categories that benefited from increased demand during the pandemic. We’ve also seen a consistent pattern of the customer aggregating their purchases during the natural shopping time periods such as Mother’s Day, Memorial Day, Father’s Day and the 4th of July. We are continually adjusting our assortment and future buys along with our promotional efforts to align with these trends. Customers will continue to see us lean into our position as evaluated in our space by expanding our everyday value offerings while also leveraging strong promotional efforts during the key shopping moments in the calendar. In regards to new brands and ideas, I’d like to highlight a couple of new initiatives launching in Q3 that will help us take advantage of the customers’ appetite for newness. This past week, we announced a new partnership with L.L.Bean become one of their key retail partners. We believe their focus on outdoor apparel and footwear with a Northern sensibility as the perfect complement to Magellan Outdoors and Columbia businesses, which mean more towards fishing and southern climates. Another new initiative is our partnership with Escalate and American League to become the exclusive seller of ACL Boards and bags for this fall. With the strong market share we have in all things tailgating, this partnership is a perfect fit for us. Later in Q3, we’ll kick off a new partnership with Fanatics to help expand our online offering and license team apparel. This business has been a strong suit for us over the years, but our offering has traditionally been anchored in the leagues and teams that live within our geographic footprint. Our new relationship will allow us to dramatically grow our assortment and to service a greatly expanded number of categories, teams and leagues moving forward. Shifting to profitability. We remain focused on proactively managing our business to deliver the best possible results for our shareholders this year while ensuring we remain on track to achieving our long-term initiatives and goals. Our gross margin for the quarter came in at 35.6% which was a 30 basis point improvement over last year, with a 180 basis point increase over our Q1 rate. Beneath the surface, our merchandise margin stabilized at down 21 basis points versus last year, which was a marked improvement over our Q1 run rate of down 110 basis points versus 2022. Carl will give you more color around our financial performance shortly. Turning to inventory. At the end of the quarter, our inventory balance was $1.3 billion, which was flat to last year in terms of dollars and down 2% in units in total. On a per-store basis, units declined 5% compared to Q2 of last year. The team has exhibited a very disciplined inventory management approach through the past couple of years, and we plan to continue to lean into this strength as we move forward. We are confident that our current inventory position is at the right level to support our business and the content is fresh and forward facing, which should position us well for the fall and holiday selling seasons. As we discussed in June on our Q1 call, we’re taking aggressive action in proactively addressing the trends that we’ve seen in the business this year in order to help improve sales and profitability as we move through the remainder of the year. I want to give a quick reminder of the key actions we’re taking to drive the business. First, we’ll continue to highlight and focus on our position as a value leader in the space across all customer touch points. Second, we’re introducing new offerings in our assortments such as L.L.Bean, Fanatics, American Holding to capitalize on the customers’ desire for newness, cross improving our advertising effectiveness with better targeted marketing that will be facilitated by our new customer data platform. We’re continually enhancing our omni-channel functionality and features to improve the customer experience. And lastly, we also expect a sales boost from the new stores we opened up in 2022 along 11 to 12 new stores opening this fall. Now I’d like to turn the call over to our new CFO, to walk you through the financials. Carl? Carl Ford: Thank you, Steve. Good morning, everyone. It is an honor to be selected to follow Michael as the Chief Financial Officer of Academy Sports and Outdoors. I am excited about the opportunity to lead our finance organization into what I believe is a very bright future. I have been with the Company since 2019, and I am proud of the work we have done to strengthen our balance sheet and improve our operating model. Academy is not the same company as it was then, and I am excited about our long-term growth initiatives and capital allocation philosophy. I will now walk you through the details of our second quarter results. Net sales were $1.58 billion, a 6.2% decline compared to the second quarter of 2022, with comparable sales of negative 7.5%. Sales were impacted by an 8.3% decline in transactions, partially offset by a 0.8% increase in ticket size. During the quarter, customers were more active during holiday periods and we saw an improvement in the comp during each month of the quarter. Gross margin rate was 35.6%, an increase of 180 basis points sequentially and 30 basis points higher than last year. The improvement compared to last year was driven by 88 basis points of lower freight costs, partially offset by a 21 basis point decline in merchandise margins and 37 basis points of higher shrink. Our merchandise margins improved sequentially as we benefited from our ongoing efforts to manage inventory through system capabilities, price optimization and localization. We saw a 42 basis-point sequential improvement in shrink, driven by actions taken to detect and deter losses. We continue to be able to operate at substantially higher gross margin rates even in a challenging environment. During the quarter, SG&A expenses were $352.5 million or 22.3% of net sales, an increase of 220 basis points compared to the second quarter of 2022. This deleverage is primarily driven by investments we are making in our long-range plan. We are investing in new stores, omni-channel, IT and digital marketing projects that support our growth initiatives. Approximately 80% of this quarter’s SG&A dollar increase is related to growth investments. When compared to Q1 of this year, SG&A expenses were 230 basis points lower as a percentage of sales. As we discussed during our first quarter call, we focused on aligning our expenses with our revised sales guidance and the sequential improvement of our expenses as a percentage of sales reflects the hard work done across the organization to right-size our spending. Examples of areas of the business we have focused on rightsizing include flexing store and distribution labor hours based on revised sales and inventory receipt expectations. Targeted distribution scheduling during non-peak times and scaling back on projects that are not aligned with long-term growth strategies or current year sales growth. Net income was $157.1 million or 9.9% of sales, a 130 basis-point decrease from the second quarter of 2022, resulting in GAAP diluted earnings per share of $2.01, adjusted diluted earnings per share were $2.09. Moving to the balance sheet. At the end of the quarter, we had $311 million in cash and no outstanding borrowings on our $1 billion credit facility. Academy generated $191 million in net cash from operating activities during the second quarter. This is a 19% increase compared to the second quarter of last year. We deployed this cash to invest in our growth initiatives and to repurchase approximately 2 million shares for $107.3 million and pay out $6.9 million in dividends. The Board has approved a dividend of $0.09 per share payable on October 11, 2023, to stockholders of record as of September 13, 2023. Capital expenditures were $69.3 million. For the full year, we still expect to spend between $200 million and $250 million. With that, I will turn the call over to Michael to provide an update on some of our key initiatives and our full year guidance. Michael? Michael Mullican: Thanks, Carl. Good morning, everyone. I want to say congratulations to Carl on his promotion to Chief Financial Officer. He has been a core member of Academy’s finance organization for the last several years. During that time, Carl has been a key driver of our financial performance. I know that Carl and his team will continue to be excellent financial stewards of the business as we move forward with our long-range plan. I’d like to take some time to update everyone on the progress of a few key initiatives that will drive the long-range growth plan we described during our Investor Day this past April. As a reminder, the key components of the growth plan are. First, to open new stores to expand the store base by 50% in existing and new markets; second, to build a more powerful omni-channel business; third, to drive our existing business by improving service and productivity in our stores, strengthening our merchandising and attracting and engaging customers through communication, content and experiences; fourth, to leverage and scale our supply chain and to achieve these objectives by building the best team in retail. I’ll start with our new store initiative, which we expect will be the largest driver of sales and profit growth over the next few years. As a reminder, all of our mature stores are profitable and collectively have sector-leading store productivity metrics. We opened nine stores in 2022. And even though they opened in a challenging economic environment, they are, as a group, meeting expectations and already positively contributing to EBITDA. As I have said in the past, 2022 was a test and learn year, and we are in the very early innings of this initiative. While our current new store pro forma assumes approximately $18 million of sales in year one, inclusive of omni-channel sales, we have learned that new market stores need time to build brand awareness and may have longer sales maturity ramps, while stores in existing markets generally come out of the gate faster. Our sample size is limited and the current economic environment is challenging, but we continue to learn and refine our expectations and processes with the goal of making each new store opening better than the last one. So far, we are pleased with the learnings that we have implemented. Given the positive preliminary results of the stores we opened in 2022, we are confident that we can take our unique Academy brand, concept and business model to many new markets with great success. In the second quarter, we opened one store in Peoria, Illinois, which was our second store opening this year. We have six scheduled openings in Q3, including our first store in the Indianapolis, Indiana area, which opened last Friday. We are on track to open another five to six stores in Q4. Steve and Carl mentioned the challenging economic environment, but I want to emphasize that in spite of these challenges, we are able to fund store growth with our existing strong cash flow. As of today, we are only in 18 states, so we have a large runway for growth in front of us. In addition, with other retailers scaling back their outdoor product offerings, there are many markets that are favorable for market share gains. Our past experience has confirmed that our market research and due diligence identified locations where stores will be successful for the long term. We launched our new customer data platform in July to drive further sales growth. This valuable tool will allow us to aggregate customer data from multiple sources within our organization, creating a comprehensive view of our customers. With this new perspective, we will have the ability to create and develop a robust customer portfolio segmented by cohorts, shopping behaviors, outdoor interest, sports fandom and many other filters. We can use this refined customer data to proactively design highly targeted marketing campaigns tailored to specific customer behaviors and interests. We anticipate that connecting with our customers on this deeper level will drive an increase in traffic, conversion rates and loyalty. We look forward to updating you about this exciting new capability as we develop and refine it further. Finally, a brief update on our supply chain initiatives, as we discussed at our Investor Day in April, part of our long-range plan is to generate 100 basis points of adjusted EBIT margin improvement from our supply chain. We intend to do this by increasing our unit productivity, leveraging existing distribution capacity, lowering our e-commerce fulfillment costs, decreasing lead times and leveraging transportation costs. A major component of achieving this goal is the implementation of a new warehouse management system in partnership with Manhattan. We are on track to convert one of our distribution centers to the new system in 2024. We are also taking other steps to improve supply chain logistics and productivity by implementing consistent processes and procedures, increasing cross-stocking and multi-store deliveries and investing in technology to improve visibility of product flow. I expect us to achieve our EBIT margin contribution goal by the end of the long-range plan. To sum it all up, based on our results, current trends and back half expectations, we are reiterating our full year sales and net income guidance while updating our earnings per share forecast to reflect the share repurchase activity in the second quarter. Net sales are still expected to range from $6.17 billion to $6.36 billion with comparable sales ranging from negative 7.5% to negative 4.5%. Gross margin rate between 34% and 34.4%. GAAP income before taxes is still expected to range from $675 million to $750 million and GAAP net income between $520 million and $575 million. GAAP diluted earnings per share are now expected to range from $6.65 per share to $7.35 per share. Adjusted diluted earnings per share are expected to range from $6.95 per share to $7.65 per share. The earnings per share estimates are calculated on a share count of 78.1 million diluted weighted average shares outstanding for the full year and do not include any potential future repurchase activity. Finally, we still expect to generate $400 million to $450 million of adjusted free cash flow. With that, I will now turn the call back over to Steve for his closing remarks. Steve Lawrence: Thanks, Michael. As we move forward, I think it’s important to note that despite some short-term headwinds, Academy is a much stronger company than we were before the pandemic. Our sales and gross margin rate remained significantly above 2019 levels driven by the operational improvements made over the past few years that have structurally enhanced our earnings power. We have a strong and flexible balance sheet, a very productive four-wall operating model that is scalable and transportable, a solid team with a track record of executing and delivering results and high customer affinity within our core markets. Longer term, we believe we have a compelling growth strategy with multiple ways to capture market share and drive growth through new store expansion into adjacent new and existing markets. We have an improving dot-com business with significant upside, and we have the ability to continue to refine and drive more productivity out of our existing store base. Most importantly of all, this growth can be funded from the free cash flow generated by the business while also returning value to our shareholders through dividends and strategic share repurchases. In closing, I’d like to thank all of the Academy team members for their dedication and hard work in helping deliver an outstanding experience to our customers. Now let’s go ahead fun out there. We’ll now open the call up for your questions. See also 10 Stocks That Could 10X Over the Next 10 Years and 10 Stocks That Are About To Explode. Q&A Session Follow Academy Sports & Outdoors Inc. (NASDAQ:ASO) Follow Academy Sports & Outdoors Inc. (NASDAQ:ASO) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. The Company will open the call for your questions. [Operator Instructions] Our first question comes from the line of Daniel Imbro with Stephens. Please go ahead. Daniel Imbro: I want to start just broadly on the consumer trends that you’re seeing. We’ve talked in the past about Academy benefiting from a more discerning customer, maybe looking for value. Do you see any signs of that this quarter, whether it was new customers shopping the store, any trade down within the store? And then also within the quarter’s kind of improvement, was any of that attributable to the new marketing plan? Or is that really going to be on the comp for the back half of the year when you think about the sales cadence? Steve Lawrence: Dan, this is Steve. I’ll start with the first part. I’m sure Michael will jump in. We definitely see the customer under stress and under pressure. We see that reflected a couple of different ways. We talked about customer gravitating towards value. We see that in terms of growth in private label, which represents kind of the value end of our assortment. We see them also taking a bigger advantage of deals or clearance when we sell that. So, there definitely is a move towards customers seeking out value. On the flip side, we also see them seeking out newness, right? We see them going after things that our new and innovative to the market like we talked about BOGG BAGS or slides. That’s why we’re excited about some of the new brands that we’re launching this fall between L.L.Bean and Fanatics and ACL. So that’s definitely a trend we’ve seen. We’ve also seen the customer shop during kind of the key appointment shopping time periods and aggregate the purchases there. And then we’ve also seen them kind of when we get past those key shopping time periods, pull back a little bit, and that’s really how we planned our marketing, our promotions throughout Q2 and all the way through the remainder of the year. In regards to the targeted market from the CDP, that was really put in place really late in the quarter. So we really didn’t get any benefit out of that. We think we’ll start seeing some benefit of that in the back half of the year. Michael Mullican: Yes. Danny, on the CDP, we’ve been flying a propeller plane in a dog fight holding our own against fighter jets for the past three or four years. And now we have our own fighter jet. And we’re learning to fly it. Most of that benefit will start to come next year. We should see a little bit this year, but it will not be a meaningful driver of comp this year. The big benefit will come in the out years. Daniel Imbro: Super helpful. And then maybe a follow-up just on gross margins. Obviously, there was discussion from peers around maybe higher promotions. Your margins held in well. I’m curious, when you look at your competitive pricing analysis, are the peers coming down to where Academy is priced? Are they actually trying to undercut you on certain items? Just any granularity on that or changing promotional backdrop? And then tied in to that, shrink improved, I think, a little bit quarter-over-quarter. What was the main driver there? Anything worth calling out there for the back half? Steve Lawrence: Yes, I’ll start and answer the question on promotions and then we’ll have Carl jump in on shrink. Definitely, it’s more promotional out there this year than it was a year ago at this time. We talked about in the past call, where we really started seeing promotions creep into the marketplace in the back half of last year and then carried forward into the first half of this year. That being said, as I just said earlier, we’re definitely seeing those promotions most effective during those key shopping moments. So we’re certainly leaning into that as we move forward. We did have a 20 basis point erosion in merch margin that came from some additional promotions. But probably the best thing that we’ve done to help manage through that is our inventory management. When you think about all the strong disciplines we put in place in terms of our planning and allocation, assortment planning, all those things have really helped us control inventories and control margins and not see the same erosion that maybe other people have seen. Michael Mullican: Let me — I’ll take Shrink. It’s a real issue. In spite of the headwinds we faced from higher shrink, as Steve said, we were able to meaningfully expand our gross margin rate compared to last year. We sequentially improved our gross margin from last quarter. We’ve taken a lot of actions, many of which are confidential and frankly, clandestine in nature, and we can’t talk about many of them, but they’re working. One thing that we do from a process standpoint is we count our stores regularly throughout the year. And we take our high-strength store inventories early in the year that gives us some chance to adjust them and to take some actions and perhaps count them again. And so, we have visibility into trends throughout the year. It’s a difficult environment. I would tell you that good leaders adjust, and that’s what we’ve done. I do have to take the time to thank all of the Academy team members in our stores, the folks in the blue shirts that have been so attentive in helping us manage these issues. They want to do what they do best, and that’s help customers have fun. And the best way to prevent shrink is to provide great customer service in the stores. We can do that and provide more labor and more customer service because our stores are significantly more productive than our peers. So, we can have people in the stores helping customers. Our LP department has worked very hard with law enforcement. We’ve got great partnerships with law enforcement. And we’ve been able to, frankly, help intervene and take down some organized crime rings that have helped shrink. So last thing I’ll mention here on this issue because it is a big issue. We’ve heard a lot of people talking about it. If you reflect back on many challenges facing retailers over the past few years, we’ll start with the COVID pandemic. During the peak of the COVID crisis, I believe we manage that better than anybody else. We got our stores opened more quickly. We were able to help the community get back on their feet more quickly. If you look at ballooning freight costs over the past few years, we’ve managed that better than most other folks in the space. If you look at back to a year ago, when many retailers were overbought and didn’t manage their inventory well, we did that better than others. We’re going to do the same with shrink. We have a great team. We’re nimble and we’re going to manage it. We’re not going to use it an excuse to not hit our gross margin goals. Operator: Our next question comes from the line of Greg Melich with Evercore. Please proceed with your question. Greg Melich: First, I want to let us look at the comp. Were transaction counts getting better sequentially and did that drive the negative 7.5% comp or was it more average ticket? Steve Lawrence: So for the quarter transactions, which is also a proxy for us for traffic was down high single digits, AUR up slightly and per transaction down slightly. We did talk about how the comps successfully got better as the quarter progressed. You can defer traffic improve steadily as we got less negative as we got through the quarter. Greg Melich: And it sounds like given the — I guess, the midpoint of the guide now would have you sort of a negative 4.5, 5 comp in the back half, is that where we’re running now? Steve Lawrence: So we obviously don’t give inter-quarter guidance, but the performance of the business continues to be within the guidance range that we’ve shared......»»

GeneDx Holdings Corp. (NASDAQ:WGS) Q2 2023 Earnings Call Transcript August 12, 2023 Operator: Good day, and thank you for standing by. Welcome to the GeneDx Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Be advised that today’s conference is being recorded. I would now like to hand the conference over to Tricia Truehart, Head of […] GeneDx Holdings Corp. (NASDAQ:WGS) Q2 2023 Earnings Call Transcript August 12, 2023 Operator: Good day, and thank you for standing by. Welcome to the GeneDx Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Be advised that today’s conference is being recorded. I would now like to hand the conference over to Tricia Truehart, Head of Investor Relations. Please go ahead. Tricia Truehart: Thank you, Joel, and thank you to everyone for joining us today on this call. I’m Tricia Truehart, Head of Investor Relations at GeneDx. On the call today, we have Katherine Stueland, President and Chief Executive Officer; and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx released financial results for the second quarter of 2023 ended June 30, 2023. A copy of the press release and our second quarter earnings slide deck are available on the company’s website. Before we begin, I’d like to remind you that management will make forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. Additionally, these forward-looking statements, particularly our 2023 financial guidance, our expectations for revenue growth, gross margins and profitability over the next several years and our expected cost savings and reduction in cash burn, involve a number of risks, uncertainties and assumptions. For a list and description of the risks and uncertainties associated with GeneDx’s business, please refer to the Risk Factors section of our latest Form 10-K filed with the Securities and Exchange Commission and the other documents filed by us from time to time within the SEC. We urge you to consider these factors. And you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of the non-GAAP financial measures to GAAP financial measures as well as other information regarding these measures, please refer to our earnings release and other materials in the Investor Relations section of our website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, August 8, 2023. GeneDx disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. And with that, I will turn the call over to Katherine. Katherine Stueland: Thank you, Tricia. Over the course of this year, our team has been focused on 3 clear goals: one, driving sustainable growth measured by increasing the utilization of our flagship exome; two, becoming the most efficient company measured by improving our gross margins and reducing COGS; and three, driving our company to profitability by way of increasing revenue while reducing cash burn and by building a phenomenal team to get us there. We are relentlessly focused on these goals, and I’m pleased to share that we turned a critically important corner in Q2. We saw our biggest revenue month in history in June, and this is the direct result of the exome conversion strategy that we doubled down on in the first quarter. More specifically, we saw record-breaking increase in whole exome and genome test volume this quarter with nearly 12,000 patients tested, a 56% increase year-over-year and 36% increase compared to the first quarter of this year. Revenue from whole exome and genome testing increased 28% compared to the first quarter of this year to $28.7 million. What our second quarter performance tells us is that our team is well on our way to delivering on a growth strategy centered on exome and balances the use of strategic tests that serve as a pipeline for introducing and expanding the use of our exome. While our test menu is expansive today, our goal is to get to an optimized test menu of simply exome and genome as the backbone for testing all inherited diseases, going beyond the rare disease population to cover every stage of life from newborn screening to adult diagnostics. So I’d encourage you to think about our business in 2 parts: one, our exome and genome business, which today is generating more than 60% gross margins and growing rapidly; and two, the broader rate of tests that we’ve called stepping stones that directly enable the growth of our exome and genome business. These tests are critical to achieve our goal of putting an end to the diagnostic odyssey for patients, and we’re gaining momentum and growing this entire pediatric market. We’ve had a great quarter. Our focus on accelerating physician conversion to genomic sequencing is working. And we continue to shift our test mix and our gross margins, strengthening our financial outlook. We expect to continue this ramp through the second half of the year to meet our previously announced revenue guidance of $205 million to $220 million in 2023. Let’s turn to our commercial strategy, which has accelerated the use of exome and genome testing in patients with rare disease, which is increasingly recognized as being better for patients as well as better for our business. As discussed during our last earnings call, we’re actively working through several cross-channel initiatives to build this momentum. These include investments in our commercial team to include new territories and dedicated cross-functional teammates and launching a variety of marketing and educational outreach to aid in physician engagement. We’re also focusing efforts on product development to improve customer experience and operating efficiency, including automation of services and shortening the turnaround time for results. We continue to contribute to clinical research demonstrating the value of exome sequencing for patients. And importantly, this work is amplified by medical societies and by payers. Through this strategy, we’re gaining significant traction with both geneticists and nongeneticists, who recognize the superiority of exome and genome tests. Exome volume is growing at a faster rate than what we call stepping stone tests, which include tests such as CMA and FMR1 as well as multi-gene panels that have long been a standard practice. These strategically important non-exome panels lay an important foundation for us to execute product switch to clinically superior, higher-margin whole exome and genome tests. Encouragingly, we’ve been able to demonstrate we can expand markets and gain new customer types. We’ve increased utilization of our services among pediatricians by 17% in June. We’ve also seen growth among pediatric neurologists, who have made up the largest proportion of new exome ordering clinicians in 2023, and ordering productivity is going fastest in this clinician segment. Based on recent claims data, we have more than [ 80% ] of the exome and genome market share in the United States. And physicians have come to rely on our exceptional diagnostic and analytical expertise, clinical support and speed at which we can reliably provide a full report. We are also — we also continue to strengthen our leadership by leveraging our unique knowledge and database and building a better product with AI. These tools enhance our interpretation capabilities such as improved genetic variant discovery and mapping and better understanding of variance in certain noncoding regions of the genome, which can provide a more precise diagnosis for physicians and patients. To enable this, we recently acquired and welcomed a team of Icelandic engineers, who have spent decades in the industry, including pioneering work at deCODE genetics. They are already accelerating our work to continuously improve our clinical interpretation platform. As a leader in the market, we’re also focused on navigating improved payer medical policies and reimbursement coverage. And this is another pillar in our strategy to provide patient access to this new standard of care and capitalize on our commercial success. There’s been continued momentum in Medicaid coverage with 28 states covering outpatient whole exome sequencing. And recently, Florida and Arizona added inpatient whole genome sequencing coverage, becoming the seventh and eighth states to do so. We have a focused team continuously working on improving ASPs, and we have increased resources for claim management to improve collections. We’re confident that these initiatives will enable reacceleration of ASP growth for the next several quarters, and Kevin is going to dive into that in greater detail. Our commitment to patients extends to our recent collaborations and partnerships as well. We signed several new partners to our growing network this quarter, including a strategic deal with Prognos Health to integrate our rare disease data into the Prognos Marketplace, providing life sciences companies with a comprehensive de-identified data set to accelerate patient access to life-saving therapies. This partnership gives us the opportunity to go a step further in ending the treatment odyssey to connect clinicians and their patients with rare diseases to appropriate treatment options and to ultimately improve health and health economic outcomes. And we just announced yesterday morning a fantastic collaboration with PacBio and our [Seek First] partners at the University of Washington to study long-read whole genome sequencing. This is the first study of its kind to compare diagnostic yield rates across short- and long-read sequencing platforms for neonatal and pediatric care. Our pioneering interpretation platform built on genomic-based diagnostics will be paired with innovative technology to further advance the field of genome sequencing to deliver precise genetic diagnosis for young children. As we continue to drive progress over the rest of the year, we’ll remain absolutely focused on our 3 goals of sustainable growth, operating efficiency and strengthening our path to profitability. And you can expect our teams to continue to drive expanded use of our exome, continue to improve ASPs and continue to reduce our cash burn. And any day now, we’ll be hitting a new milestone of more than 0.5 million exomes sequenced since we introduced it a decade ago, nearly half of those just in the past 2 years since we implemented a strategic shift in the company. It’s a privilege to be able to set a new standard of care and to help so many more patients each and every day. And we’re grateful for the opportunity to do so. With that, I’d like to pass the call over to Kevin. Kevin Feeley: Thank you, Katherine, and good afternoon. I would like to first take you through the growth in revenues, both on a year-over-year and sequential basis, cover the expansion of gross margins from continuing operations and then address what we are doing to continually reduce spend and cash burn. I’ll wrap up with 2023 guidance. During the second quarter of 2023, total revenues were $48.7 million. Pro forma revenues from continuing operations was $45.2 million compared to $40.1 million in the second quarter of 2022 and compared to $40.7 million in the first quarter of 2023. Those increases were driven entirely by growth in whole exome sequencing revenue, which grew 36% year-over-year and grew 28% sequentially compared to the first quarter. Our team resulted nearly 12,000 exome results in the quarter. That is by far an all-time high in terms of the number of lives we are impacting and represents exome volume growth of 56% year-over-year and sequential volume growth of 36% compared to the first quarter. Pro forma adjusted gross margins from continuing operations in the second quarter of 2023 was 37%, expanding from 34% in the first quarter. As a reminder, we exited 2022 with 41% pro forma adjusted gross margins and have reaffirmed our guide to expand beyond that for the full year of 2023. Let me bring you through the ways we will do that. First, growth in exome. Adjusted gross margin for whole exome sequencing remained at a portfolio-leading 60%. Whole exome sequencing represented 22% of all tests delivered in the second quarter of 2023, up from 17% in the preceding quarter. Notably, we saw momentum with each month of the second quarter, with June topping out at 26% of all test results being whole exome. In the first half of this year, we’ve successfully built up volumes on certain non-exome tests that represent near-term candidates to convert to whole exome. Examples include CMA and FMR1, which made up approximately 16% and 10% of all test results in the second quarter. Although these carry lower average reimbursement and low to negative gross margins, we previously discussed that the strength in non-exome mix is meant to be transitory this year. And we’re pleased to see momentum in the proportionate exome mix this quarter. As our strategy to weigh volume mix towards whole exome and genome takes hold, we expect to see continued natural accretion in our blended gross margins. Second, increased payment rates. Within the exome and genome test portfolio, 82% of aggregate volume runs through commercial insurance, managed care and Medicaid programs. Approximately 70% of all commercial payers and nearly half of all state Medicaid programs have some level of positive coverage for exome and/or genome, all subject to various medical necessity criteria. Today, we are currently being reimbursed on less than half of all claims. Our revenue cycle improvement efforts are mobilized and focused on improving — targeting towards well reimbursed regions and the use of automation and artificial intelligence and process design to ensure we are capturing upfront medical necessity information in real time prior to claim submission. This will help drive ordering behavior and adherence with individual payer policy and increase the likelihood of payment. We also have identified a number of process improvements necessary to navigate disparate prior authorization hurdles in order to avoid unnecessary denials. Improving claim payment rates are within our control and offer a substantial opportunity ahead. The remaining 18% of all volume is institutional bill, which tends to be highly predictable with near 100% collectability. As utilization of whole exome and genome increases on the back of emerging guidelines and clinical support, in particular, with respect to our rapid product in the NICU and PICU, where there is a large unmet need, we expect over the long term the proportion of this relatively high-priced institutional payer mix to increase. Overall, we’re pleased with where pricing has leveled out on this portion of the portfolio following some pricing resets we discussed last quarter. Third, reducing cost per test. In the second quarter, our team implemented a number of projects aimed at further improving both turnaround times and COGS throughout our lab operations. These include, but are not limited to, wet lab savings through the validation and launch of our first next-generation Alumina X+ sequencer in June with another machine expected to be validated in the third quarter. Dry lab savings through consolidation of our library preparation processes to Twist Biosciences, which is on track to launch this month. And we expect to implement further automation and AI across a number of end-to-end production steps in the fourth quarter and beyond. Fourth, portfolio rationalization. We are closely monitoring the economic and clinical performance of our legacy panel test menu through periodic review. We’ve begun retiring low-volume, low-margin tests and have a phase planned over the coming quarters and years to continue this work as guidelines, policies and the marketplace evolves ultimately until we arrive at our goal of an exome and genome backbone for all inherited disease tests. Turning to expenses. Adjusted operating expenses has declined 5% in the second quarter compared to the first quarter of 2023, are down 22% from the fourth quarter of 2022 and have declined a transformative $31 million or 34% from the comparable 2022 period. In April 2023, following the completion of substantially all Sema4 wind-down activities, we reduced our combined workforce a further 5% primarily across G&A support functions. This is equivalent to roughly $10 million in cost reductions, the effect of which will not translate into operating expense declines until the third quarter of 2023. We will continue to drive operating expense leverage as we separate from discontinued operations, leave substantial legacy tech debt behind in the coming quarters and continue our work to gain efficiency across all aspects of the business. At the bottom line, total company adjusted net loss for the second quarter of 2023 inclusive of all activity, including the discontinued legacy Sema4 diagnostic operations, was $42 million compared to an adjusted net loss of $49 million in the first quarter of 2023 and $66 million in the same period of 2022, improvements of 14% and 37%, respectively. We’ve decreased our cash burn by 10% sequentially and 36% year-over-year to $53 million for the second quarter of 2023. Our total cash and cash equivalents and restricted cash were $157.6 million as of June 30, 2023, which included proceeds from the final tranche of $7 million from the registered direct offering that was part of the $150 million capital raise in January 2023. Now turning to guidance. We reaffirm our previously issued 2023 revenue and gross margin guidance of $205 million to $220 million in revenue and our expectation to expand gross margins in 2023 beyond the 41% adjusted pro forma gross margin reported in the fourth quarter of 2022. We are updating previously issued cash use guidance and now expect to use $70 million to $85 million of net cash in the remaining 6 months of 2023, inclusive of servicing obligations of the discontinued Sema4 business. By the end of 2023, we expect to have the quarterly cash burn from continuing operations from today’s levels. We are reaffirming our long-term guidance to turn to profitability in 2025. To conclude, as of June 30, 2023, we had 25,761,147 shares of common stock outstanding. And as a reminder, we effected a reverse split of our stock at a 1:33 ratio. Accordingly, all common stock share numbers, per share amounts and additional [indiscernible] capital for all periods presented today and filed in our 10-Q have been retroactively adjusted, where applicable, to reflect the reverse stock split. And with that, I will turn the call over to Katherine. Katherine Stueland: I’d like to take a moment to thank our incredibly dedicated team, the parent advocates who fight each day to get their children tested and the clinicians who work with us to get them answers. The work we do is hard, but the parents and children we serve inspire us to continue to strengthen our company every day. And it is our shareholders who enabled this. And for that, I want to say thank you. And with that, we can open it up for questions. Q&A Session Follow Genedx Holdings Corp. Follow Genedx Holdings Corp. We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Our first question comes from the line of Mark Massaro of BTIG. Mark Massaro: Congrats on the strong growth in exome and genome. If I — yes, if I’m doing this math correctly, it looks like you generated about 40% to 41% of revenue in the first half, obviously implying nearly 60% revenue growth in the second half. I think we knew that this year would be back-end loaded, but it seems a little more back-end loaded than I previously thought. So maybe could you just walk me through some of the moving parts and what gives you confidence that you can maybe get to the midpoint of the guidance? Or do you think you’re now perhaps more likely to hit the low end? Katherine Stueland: Certainly, I’m happy to kick it off and would like Kevin to share as well. I think we’ve talked previously about the commercial investments that we’ve made to add territories. So we added about 10 territories. We have built out for the first time ever a team of medical science liaisons or MSLs. So we now have a team of 9 who are fully [staffed] in the field, I believe, as of June. And they work really hand in hand with sales reps to be able to focus on that conversion to exome. And what we’ve seen just based on some of the early experience with those MSLs that we had is that they are able to really effectively accelerate that switch. So they help kind of supercharge our sales team. And I think what we saw in June this year was our strongest month ever. It’s the direct product of the strength of our exome performance and commercial execution. So I would say that, that is the major factor that really gives us the confidence, and we’ve gone through to really understand what that sales execution looks like for the second half of the year. And now that we have, I would say, a more robust sales team amplified by those medical science liaisons, we feel really confident that we’re going to continue to be able to drive that conversion and that growth in the second half of the year. Kevin Feeley: Yes. The only thing I’d add to that is that, that amplified team is just also supported by typical seasonality, which sees the fourth quarter for us come in the strongest over the years, both in terms of ordering volume but also average reimbursement rates. Mark Massaro: Yes. Great. And then just for housekeeping, Katherine, the 10 territories and the 9 MSLs, sorry, is that 10 direct reps or is that 19 adds? And can you just remind us when these folks joined the company? Katherine Stueland: Certainly. So we — last year, we ended, I believe, it was about 58 territories. And so we’ve added about 10. We usually account that there’s going to be a handful of regions that are open throughout the course of the year as we continue to drive sales force productivity. So the total size of the field force is in that range. And then on top of that, there are 9 regions, and those 9 regions each have a medical science liaison. So each of those MSLs is working with all of the reps within each of those regions. Mark Massaro: Great. And sorry, just to double check, when did the new reps start at GeneDx? Katherine Stueland: So we’ve been adding them throughout Q1, and they were largely in place by, I would say, middle of Q2. So we expect really that there’s about a 3- to 6-months window by way of them getting ramped up and getting to full productivity. So we’ve had a really good seasoned team that has been working with each of those reps to make sure that they know exactly who their targets are. They have the targeting data that really helps ensure that they’re going to clinicians where there’s good coverage, and then they now have the additional bolster of that MSL. And the MSL, for clarity were fully staffed as of June. We’ve been adding them throughout the first half of the year. Mark Massaro: All right. Great. And just a last one for me. The exome and genome volume was 22% of your volume. At the time that you expect to become profitable in 2025, do you have a sense for what percentage of your mix will come from exome and genome? Kevin Feeley: Yes. I think we’ve said in the past, the longer-term target there is around 40%. Operator: Our next question comes from the line of Brandon Couillard of Jefferies. Matt Kim: This is Matt on for Brandon. Appreciate all the color around the part of the portfolio that 80% or so that’s not currently — or I guess it’s under 50% reimbursed. Katherine, you talked a little bit more about investing to increase collection. So any chance you guys could talk about where that number could go over time? And what any improvement there would be? I think, Kevin, you talked about it being a substantial opportunity. So any more color on where that improvement in reimbursement can go and kind of how to think about it from a timing perspective? Kevin Feeley: Yes. Look, I think from a timing perspective, it’s going to take several quarters. I think in the longer term, we would expect a mature product in our space to likely see a payment rate around 70% to 80% of the time. What we’ve found recently is that across commercial insurance and even a number of state Medicaid programs, there is coverage for exome and genome. It’s fairly opaquely written in many cases, which is just a function of the product not being well established for many years under coverage policy. We expect that those guidelines and payer policies to tighten up and crystallize over time. And in the meantime, we’re really focused on the front end of our processes to ensure that we’re driving home ordering behaviors that as closely can — as closely align to payer policies as we see. And we think there’s a number of operational steps that we can improve on to drive higher payment rates. It will take some time to get there. But nonetheless, we see the overall denial rate and payment rate today as a significant opportunity to accelerate ASPs and therefore, revenue growth into the future. What has us most encouraged is GeneDx very well contracted across the country. I think 80% of all commercial lives or thereabout we are in-network with for a number of years now and not necessarily reliant on new payer policies to come out in order to ensure we get paid properly for the work, but more so ensuring that in the fields, ordering behaviors and our front-end processes are paying attention to the various web of rules and requirements that are specific to each payer. And so we look forward to providing you progress reports in coming quarters on how we’re progressing in that regard. Matt Kim: And then, Kevin, maybe stick with you. Appreciate all the color around the gross margin improvement in the quarter is really helpful. Any clarity or just additional clarity adding into the back half of the year? I mean, is kind of the improvement we saw here sequentially fair to think about 3Q and then 4Q maybe a bit higher, given the seasonality in some of the other initiatives you guys have underway really starting to take form, any help there? Kevin Feeley: Yes. I think that’s precisely how we would walk to get to that full year being above that 41% mark, which will mostly be driven by overall mix. But it’s also going to be helped by a number of COGS reduction initiatives that we have in place for the exome portfolio. And so the order of magnitude of expansion we saw from Q1 to Q2, you might expect something in that range sequentially over the next 2 quarters. Matt Kim: Okay. Great. And then if I can just sneak one more in on the Prognos Health partnership you announced a few weeks ago. How long do you expect it to take to become fully integrated on their platform and be live? And maybe just talk a little bit more about the structure of the deal. Is there an opportunity to work with or expand your work with some of the biopharma customers that are leveraging their marketplace? Katherine Stueland: So we’re getting started working with Prognos now, and we expect it will be a few months for us to be able to upload the rare disease database. And I think we see this as a great opportunity over the next several years just to be able to really ensure that the rare disease data is being put to work for patients themselves by really connecting the clinicians who may have a patient who may be eligible for an FDA-approved therapy. So this is something that we think is a wonderful long-term partnership. And we expect that as Prognos really leads the way and working with these companies to bring them onto the platform, we’ll get a nice additional lift over time. Simultaneously, we’re going to be continuing to drive additional, what we call fine deals where, again, in a de-identified way, so similar to Prognos in that respect, we are able to connect biopharma companies with clinicians who may have patients eligible for clinical trial development and other efforts more on the R&D side of things. So we think this is a nice way to have both the commercial stage biotech companies engaging with us and with Prognos as well as the R&D stage companies interacting directly with us. So we’ll continue to drive business development across both of those efforts. Operator: [Operator Instructions] Our next question comes from the line of Prashant Kota of Goldman Sachs. Prashant Kota: Can you speak to the impact of the PanGenome Research study? What are the key findings from that study and how they informed your R&D spend? Katherine Stueland: Certainly. So the PanGenome study, I think, is one that was an important development coming out of the combination of Sema4 and GeneDx. It certainly is something that I would say is not a huge area of focus for us from a commercial standpoint. But we think that ultimately, they really help to advance the scientific community’s understanding of the complex genetic structure and variations across diverse genome sequences. So it’s our way of contributing to ensuring that the data that we have continues to be presented in peer-reviewed fashions that continue to advance our overall understanding of a diverse group of humans and how their genomes may be different. I would say what’s really a moment of pride for us at GeneDx is the diversity of patients that we have in our database, which I think is very unique to our space. And I think it’s reflective of the patients who we serve. Our diversity is actually quite similar to the general population of the United States. And typically, because of the use of genomics and hereditary cancer, it tends to be really optimized for the Caucasian population. So we have a unique database. We want to continue to ensure that we have a diverse group of patients who we are serving and that we’re able to contribute to a growing body of evidence that really helps support our understanding of disease. Prashant Kota: Got it. That’s great to hear. And have there been any updates in the federal regulatory landscape in terms of additional funding for rare disease research? And could you just remind us of the current federal or private initiatives in this space? Katherine Stueland: Sure. It’s a really important element of the business because the Orphan Drug Act has been for a decade now, one of the most important enablers of ensuring that patients have access to treatments. If you go to any of the patient advocacy groups, the #1 thing that they advocate now for is diagnosis. And they are very strongly talking about full exome sequencing because they recognize the fact that we’re able to provide a more definitive diagnosis and then panels or single gene tests. So we work cooperatively with the patient advocacy organizations. And I think as we’re starting to see a stronger voice on the hill as it pertains to opening up access for rare diseases, we’re only seeing greater momentum to support, I would say, a more robust future for the Orphan Drug Act. Operator: [Operator Instructions] Our next question comes from the line of Dan Brennan of Cowen. Dan Brennan: Great. Congrats on the quarter. Maybe the first one would just be on exome mix. Should we expect this, call it, 22% mix in Q2 to be the baseline going forward? Or are there some more one-off factors in the quarter? Kevin Feeley: Yes, I wouldn’t call out any one-off factors other than to say, Dan, that we did see with each month throughout the quarter that number of exome results as a percent of total increase with each month of the second quarter with, again, June topping out at 26%. And we really think that, that’s a launching point and would expect that as we move into the third quarter that we’d see continued growth commensurate with what we saw quarter-over-quarter from the first quarter to the second. Dan Brennan: Great. And then maybe just on — and sorry if this was discussed earlier, but we were under the impression that Q1 was generally the ASP [indiscernible] for the year. It looks like [indiscernible] exomes’ went down sequentially in Q2 a bit to 20 — I think from 2,600 to 2,400. So kind of how should we think about pricing? And should we expect kind of prices to rise going forward from here? Kevin Feeley: Yes. From Q1 to Q2, we saw some variation. We’ve got a keen eye on it, but we don’t necessarily view it as down for any systematic or pervasive reason, more so just fluctuations. I do expect that in the third quarter, we’d hold flat or slightly up within an uptick in ASPs in the fourth quarter, consistent with past seasonal practices. What we expect to more significantly contribute to in terms of revenue growth is continuation of the volume momentum that we’ve seen through the first half of this year and would expect growth rates on the volume side to be consistent with what we saw sequentially achieved in the second quarter within really the fourth quarter uplift coming in part through increased reimbursement rates or collection rates and then in part by continued volume ramp. Dan Brennan: Great. And then if I can sneak one more in just in terms of gross margins. When we were thinking gross margin — like mix shift is the biggest driver. You had a material mix shift is there from this quarter. The GM went below the 40%, you’ve gotten in prior quarters. So can you just walk us through a little bit of this dynamic? Kevin Feeley: Yes. I think from a mix perspective, what’s important to also keep an eye on is the number of non-exome tests, those really are important seeds for future growth as we expect tests like CMA and FMR1 to convert over time to exome. But they are low and, in some cases, negative gross margins within our portfolio. So improving the ultimate mix and then just seeing the overall either retirement or trimming of volumes in those low to negative gross margin tests, very important to the overall blended gross margin accretion that we expect over time. At the same time, in the background, there’s COGS reductions that we do expect to materialize in the second half of this year and beyond. And overall increase in payment rates or ASPs can have a significant upside to us in the future periods outside of 2023. So it really is the combination of all of those factors over time that come into play to boost gross margins from today’s levels. Katherine Stueland: Well, we appreciate everyone joining us today. Again, I want to thank our shareholders who support us and make all of this important work possible. And we look forward to seeing you at upcoming conferences. Have a great rest of your day. Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Follow Genedx Holdings Corp. Follow Genedx Holdings Corp. We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Xos, Inc. (NASDAQ:XOS) Q2 2023 Earnings Call Transcript August 10, 2023 Xos, Inc. misses on earnings expectations. Reported EPS is $-0.14 EPS, expectations were $-0.11. Operator: Greetings, and welcome to Xos. Inc.’s Second Quarter 2023 Earnings Call. At this time, all participants’ lines are in a listen-only mode. For those of you participating in the […] Xos, Inc. (NASDAQ:XOS) Q2 2023 Earnings Call Transcript August 10, 2023 Xos, Inc. misses on earnings expectations. Reported EPS is $-0.14 EPS, expectations were $-0.11. Operator: Greetings, and welcome to Xos. Inc.’s Second Quarter 2023 Earnings Call. At this time, all participants’ lines are in a listen-only mode. For those of you participating in the conference call, there will be an opportunity for your questions at the end of today’s prepared remarks. Please note this conference is being recorded. At this time, I would like to turn the conference over to General Counsel of Xos, Christen Romero. Thank you. You may begin. Christen Romero: Thank you, everyone, for joining us today. Hosting the call with me today are Chief Executive Officer, Dakota Semler; Chief Operating Officer, Giordano Sordoni; and Acting Chief Financial Officer, Liana Pogosyan. Ahead of this call, Xos issued its second quarter 2023 earnings press release, which we will reference during this call. This can be found on the Investor Relations section of our website at investor.xostrucks.com. On this call, management will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect because of factors discussed in today’s earnings news release, during this conference call or in our latest reports and filings with the Securities and Exchange Commission. These documents can be found on our website at investors.xostrucks.com. We do not undertake any duty to update any forward-looking statements. Today’s presentation also includes references to non-GAAP financial measures and performance metrics. Please refer to the information contained in the company’s second quarter 2023 earnings press release for definitional information and reconciliations of historical non-GAAP measures to the comparable GAAP financial measures. Participants should be cautioned not to put undue reliance on forward-looking statements. With that, I’ll turn it over to Dakota. Dakota Semler: Thanks, Christen, and thank you, everyone, for joining us for our second quarter 2023 earnings call. On today’s call, I will cover the quarterly business highlights, provide an update on our vehicles and Energy Solutions deliveries, and share the latest on the regulatory tailwinds supporting the industry. Then, our COO, Giordano Sordoni, will provide an update on our manufacturing efforts. To wrap up our Acting CFO, Liana Pogosyan will share the company’s second quarter financial performance. I’ll begin by discussing our deliveries and the growing demand we are seeing for our vehicles. During the second quarter, we delivered a total of 38 units modestly higher than the first quarter. Deliveries in the quarter were negatively impacted by customer charging infrastructure delays that pushed some plan second quarter deliveries into the second half of this year and into 2024. In light of our deliveries in the first half of the year, we have elected to revise our full-year 2023 guidance to 250 to 350 units delivered an associated revenue and non-GAAP operating loss expectations, which Liana will cover later. The updated ranges reflect both slower than anticipated deliveries and higher than expected ASPs driven largely by customer uptake of the long range 200 mile step van variant. Our success in generating follow-on orders from large national accounts gives us confidence in achieving these targets. We’re seeing the benefits of our sales approach focused on long-term customer relationships with orders like the 30 units per UniFirst that we announced last week as part of a 200 unit memorandum of understanding we signed in 2021. We also expect to deliver between 120 and 150 vehicles to repeat customer Loomis in the second half of this year. Additionally, we are seeing more customers bringing charging infrastructure online spurred on by the Inflation Reduction Act and Advanced Clean Fleets rules, many of our customers began investing in charging infrastructure at the beginning of 2023, and we expect these chargers to come online over the next 12 months. Turning back to the second quarter, we successfully produced and shipped our first gross margin positive units. These units are the first 2023 step vans shipped to customers, and we expect our financial performance to continue to improve as we scale production. This is an exciting milestone for both Xos and the industry as we are among the first OEMs to demonstrate that commercial EV trucks can be produced profitably. We do still have a number of previous generation trucks in inventory and on their way to customers that will have a negative impact on company gross margin performance through the rest of this year, even as we expect to deliver gross margin positive units throughout the second half of 2023. Moving now to Xos Energy Solutions and charging infrastructure. As a company, we underestimated the challenges for the EV truck industry in installing new charging infrastructure. However, the outlook is improving for last mile fleets we serve both in growing demand for our suite of comprehensive charging services and in growing infrastructure investments by customers at the time of vehicle purchase. Though charging infrastructure will remain a constraint on EV truck adoption, we anticipate improvement through 2024; will be motivated by incentive capture and emissions mandate compliance. In addition to our permanent charging infrastructure projects, we are also seeing growing interest in the second generation Xos Hub. As you may recall, the hub is capable of charging five vehicles at the same time from a single power connection, enabling fleet operators to transition to EVs before installing permanent infrastructure. These capabilities are bringing a diverse set of customers to the table from fleet operators to utilities and construction companies looking for off-grid power solutions. Shifting to the regulatory environment. Recent changes are driving demand for Xos’ vehicles. In California, the Advanced Clean Fleets or ACF rule requires medium duty fleets, including step vans to transition to zero emissions vehicles. By 2025, large fleet operators in California will be required to have 10% of their fleet be zero emissions vehicles. This means that thousands of step vans over the next two years will be required in order to comply in California alone. Outside of California, 14 other states have signed a pledge for 30% zero emissions fleets by 2030. The ACF rule is administered by the California Air Resources Board or CARB, which has a history of setting aggressive targets and strictly enforcing them. California fleets experienced a similar event in 2008 with the passage of CARB’s California Statewide Truck and Bus Rule. At the time, the rule required all new trucks to comply with lower particular emission standards and eventually required the phase out or retrofit of older engines. While most fleets anticipated this landmark legislation to be challenged or delayed, the implementation proceeded as planned with the final phase out of older diesel engines having occurred in 2022. We expect CARB to enforce the ACF rule with the same rigor including fines for non-compliance. Our conversations with customers reflect the seriousness of the new zero emissions mandates. We have received orders and are delivering vehicles that will bring a number of California fleets into compliance. Where step van fleets are not yet on track to comply, the limiting factor is typically charging infrastructure, which is why Xos Energy Solutions remains such a focus for us. On the incentive front, we are seeing a strong uptake of the $40,000 IRA tax credit and additional incentives available in 11 states covering 42% of the U.S. population. In some cases, the stackable federal and state incentives bring the cost of an Xos step van meaningfully below the purchase price of a diesel alternative, providing a total cost of ownership advantage on day one. I would like to stress however, that we do not need to and are not relying on these incentives to support customer purchasing decisions. Our vehicles already offer a compelling TCO advantage on an unsubsidized basis. Finally, before I wrap up, I would like to discuss our focus on cost efficiency. During the quarter, we set aggressive operational expenditure reduction targets and have made meaningful changes in order to achieve them. First, we reduced our spend on a range of overhead costs including subscription software, insurance, and professional services. Second, we made the difficult decision to reduce our headcount during the quarter. We remain committed to building a sustainable business with the appropriately sized workforce. This is never an easy decision to make, and I would like to thank every Xos employees for their support in achieving our mission. Finally, heading into the third quarter, we prepared to bring our manufacturing in-house, which Gio will cover shortly. We are confident that these actions have placed Xos on the right path to profitability without sacrificing our growth targets. With that, I would now like to turn the call over to our COO, Gio Sordoni, who will share an operational update. Gio? Giordano Sordoni: Thanks, Dakota. As was just mentioned, we made the decision to in source our contract manufacturing activities within the Xos organization. This decision was made after the team identified opportunities to significantly lower our costs, improve quality control and simplify inventory management relative to the contract manufacturing agreement. As such, at the beginning of the third quarter 33 employees from our former contract manufacturer formerly joined Xos. All Xos vehicles continue to be manufactured in the same Tennessee facility using the same processes and by the same team. As many of you know, Xos’ operational focus remains on delivering gross margin positive units, and as Dakota briefly mentioned earlier, we’re happy to announce that we’ve successfully produced and shipped our first gross margin positive units. The team has taken meaningful steps in order to achieve this goal. Chief among them, the release of the 2023 step van in both 100 and 200 mile variance. The new vehicle, which began shipping to customers in the quarter, is yielding a COG savings of over $15,000 per vehicle compared to the prior model. Significant portion of those savings come from design improvements that simplify the assembly process and save time on the production line. We expect to continue rolling out cost savings updates over the next year as further improvements are made and we work through the existing component inventories. At the same time, we’re building a higher performance and higher quality product for our customers. On the quality front, our team is wrapping up a block of test track time, simulating a 300,000 mile real world lifespan to validate durability. On the production line, we’ve made improvements to the vehicle design and assembly process that results in a quieter driving experience for the driver. These continuous improvements provide a competitive advantage for Xos in step van fleets where drivers are regularly subject to high noise levels. Elsewhere in the factory, we implemented a new incoming part inspection process. We ensure we accept quality parts from our supply base and avoid future inventory write-downs. In summary, we remain well-positioned to scale our business, expand margins, and look towards generating positive cash flow. I’ll now turn the call over to our Acting CFO, Liana Pogosyan, who will cover our financial results for the quarter. Liana Pogosyan: Thank you, Gio, and good afternoon, everyone. For the second quarter, our revenue was $4.8 million compared to $4.7 million in the first quarter of 2023. Our cost of goods sold during the quarter increased to $8.5 million compared to $5.6 million from the first quarter of 2023. Gross margin during the quarter was a loss of $3.7 million compared to a loss of $0.9 million in the first quarter. This was driven by a lower average selling price due to channel mix, additional reserves recorded during the second quarter and physical inventory and other adjustments. Turning to expenses, our second quarter operating expenses decreased to $16.8 million from $19.2 million in the first quarter of 2023, and was largely driven by lower general and administrative expenses of $9.8 million during the quarter compared to $11.6 million in the first quarter of 2023. Non-GAAP operating loss for the second quarter was $17 million. As mentioned earlier in the call, we made additional cost cutting changes during the second quarter, including bringing our manufacturing in-house, reducing our subscription software spend, and then reduction of head count. The outcome of these changes is a more streamlined organization with Xos resources focused on our top priorities of delivering more units, expanding margins, and preserving a healthy liquidity profile. We closed the quarter with cash, cash equivalents and investments of $41.1 million. In addition to cash used in operating activities, we used $7.8 million during the second quarter in financing activities, primarily related to payments on our convertible debentures with Yorkville and other short-term insurance financing notes. Operating cash flow less CapEx or free cash flow of negative $15.8 million for the quarter was in line with negative $15.6 million last quarter. We believe that as we grow delivery volume, build working capital and progress towards positive gross margin, we’ll have options to raise additional capital and we’ll continue to maintain sufficient liquidity. Looking forward, we’re revising our full-year 2023 guidance to 250 to 350 units delivered, revenue to be in the range of $36.3 million to $54.7 million, and a non-GAAP operating loss of between $50.5 million to $61 million. The change in our outlook reflects lower deliveries in the first half of the year and a more conservative forecast based on our current backlog orders for the second half of the year as our customers continue to work through infrastructure permitting and delays. Our revised revenue range is supported by stronger than initially anticipated ASPs, and we expect our non-GAAP operating loss to improve compared to our original expectations, reflecting the cost efficiency progress we have achieved over the year. I’ll now turn the call back over to Dakota. Dakota Semler: Thanks, Liana. We are encouraged by our position at the forefront of the industry with established customer relationships, the second generation vehicle in production and gross margin positive units in customer fleets. The challenges remain we are focused on maximizing our advantage over our competition, most of whom remain in the development phase of a first generation product. Beyond complete trucks, the maturity of our vehicle technology is reflected in renewed interest in Xos powertrains for use in specialty and off highway vehicles that we hope to share more on soon. As we look towards the second half of this year, our internal strengths and direct benefits from ED mandates and incentives have Xos on track for long-term success. We look forward to sharing that success with you in the coming quarters and remain committed to cost efficiency and maximize Xos’ ability to deliver value to both our customers and shareholders. With that, let’s open up the line for questions. Q&A Session Follow Xos Inc. Follow Xos Inc. 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]. The first question comes from Donovan Schafer with Northland Capital. Please go ahead. Donovan Schafer: Hi guys, thanks for taking the questions. I want to start with just the guidance, so it — you guys did lower it a bit. It’s — but it’s still — it is still quite high given the relatively low levels of deliveries in the first half of the year, so I’m just wondering if you can give us a sense of what kind of visibility you have there. How — what the confidence level is, it gives you that confidence. I believe Dakota, if you could confirm this, if I heard it correctly, you said there were 120 to — I don’t know if it was 150 or something, Loomis vehicles that you are sort of committed to delivering in the second half of the year maybe that’s a big part of that and the UniFirst 30 if that’s in there just in general kind of what the things get included there that give you that confidence. Dakota Semler: Yes, absolutely. Happy to provide more context, Donovan and get to connect. So for our revised guidance, we really wanted to make sure that we had 100% confidence in achieving the bottom end of that range. So just as you noted, we have several deliveries that are going to be made to Loomis in the range of 120 to 150 vehicles for the second half of the year. Many of those vehicles are actually already in production and are going to be shipping very soon from our facility. We’ve actually shipped some of them already. And then we have several national accounts like UniFirst and others that are also going to be shipping in the very near future from the facility that we are basically finalizing pre-delivery inspections on and expect to go to customers, including folks like Canada Post. But really, we do have strong conviction about being able to achieve those numbers. The other really important dynamic here is that a large national fleets, many of them have been planning for infrastructure for some time now. So while infrastructure continues to be a hurdle in the quarters that we’ve seen, many of these customers have been installing infrastructure proactively, that we know as these trucks come off the line, they’re going to have a home and we can get them into service as quickly as possible. Donovan Schafer: Okay. That’s helpful. And you actually kind of preempted my follow-up question there. I was going to ask, what is it with given the infrastructure challenges, what is it that get — that enables a company like Loomis to commit to so many vehicles? So I guess if what I’ll ask instead then is just if there are updates for what you are seeing and hearing kind of more directly on the EV infrastructure challenges, is it primarily — are there equipment shortages? I’ve heard I think like switchgear and like disconnect cabinets that are often required on these sites with the higher voltages. Is it kind of supply chain there and that’s where fleets have — the larger fleets have been able to get out ahead of that or anticipated or even have better relationships with vendors to get their hands on product. Is it more just utilities kind of being a stick in the mud and combination of all of it just any illumination on kind of trends or developments there and maybe what the kind of more granular on why the fleets the big national operators can get around it? Dakota Semler: Yes. It’s an important question. When we look at the process of deploying charging infrastructure, we start really as soon as we have the purchase order from the customer. And in many cases, we’re actually having conversations now with customers that are recurring customers of ours to pre-plan more chargers than truck orders than we’re receiving from them. Just because they know the timeline for getting infrastructure deployed can be a lot longer than actually building a vehicle. The two longest tent poles in the process of deploying infrastructure are the approval and getting permits for a specific site and getting additional power from the utility if there’s not currently enough power on site. And what we do whenever we start with Xos Energy Solutions in deploying charging infrastructure for customers, we actually do site assessments of several of their fleet locations, and that’ll consist of us going out to the utilities, inspecting the sites, seeing what existing power exists on site, and then actually preparing a plan that’s going to enable them to maximize their deployments of vehicles and concentrated depots and also maximize incentives and minimize the amount of time to deploy vehicles in those areas. So several customers, Loomis being obviously a big one of those. We are actually supporting with that infrastructure process and we’ve gone through a couple iterations of finding the perfect sites that can be deployed as quickly as possible. And we worked through that with several other customers. In the cases where we can’t get around that, we have been deploying hubs to some of those customers. So the Xos Hub that we’ve talked about in previous quarters and also in this quarter is now going out to customers. And what we’re doing is, we’re able to install that hub within about a week on site and at least get up to five chargers to support the vehicles that are already there. And while that permitting is being permitted — while that infrastructure is being permitted, approved, or the utilities bringing additional power or it’s being constructed, that hub can provide a small stop gap for smaller depots or depots where you have the power to be able to utilize multiple hubs. So it’s really a useful tool as we start rolling more vehicles out to customers in these concentrated locations. Donovan Schafer: Thank you. That’s helpful. And if I can squeeze just one more kind of detail or question and honing in on the guidance. Do you have a sense for kind of how much if it’ll — if it would be weighted more towards the third quarter or the fourth quarter kind of between the two with push-outs from second quarter to third quarter and you could look at that and think, well maybe that means the third quarter, that’s going to be the big one, but you guys ramping, growing quickly and everything, tendency is going to be to favor fourth quarter. And if there’s risks of further push out, so maybe it’s too early to say, but should we sort of be thinking with less guided for the second half of the year if it’ll be more heavy in the third quarter or heavier in the fourth quarter? Dakota Semler: Yes. I think it in looking at both of these quarters going to be a significant uptick from the previous two quarters for both of them. While there is still some seasonality because of the peak shipping season in October, November, and December in Q4, we expect deliveries to carry over into Q4 and potentially be a little bit higher than Q3. That being said, we’re taking every possible opportunity to accelerate deliveries before the busy season. And so there’s a chance that Q3 could come in a little bit higher if we’re able to pull in some of those delivery dates or charging infrastructure commissioning. Donovan Schafer: Okay. Yes. That’s actually helpful because then it’s just sort of like an a positive thing. If you can get it all into the hands of everyone ahead of time, fantastic. But there’s not like kind of a downside to if it plays out the other way. Okay. That’s helpful and that makes sense. I know, yes, it’s holidays that makes it hard for the shippers just are so busy to take receipt of the equipment in the fourth quarter, so, all right. Thank you, guys. Well, congrats on the Loomis commitments, that’s fantastic. And I’ll take the rest of my questions offline. Dakota Semler: Yes. Thanks, Donovan. Operator: The next question comes from Mike Shlisky with D.A. Davidson. Please go ahead. Mike Shlisky: Hi, good afternoon, and thanks for taking my questions. We want to touch first on some of the comments you made, Dakota on the ACF rules. We’re 4.5 months away from this becoming something that people are starting to have to follow. I guess I’m curious, I’m not sending any sort of urgency out there amongst states to actually trying to meet these rules. Can you give us a sense as to have your customer conversations and actual orders and your backlog increased over the last month or two? It just seems like we’re not seeing a lot of backlog change, even though they’re going to start ordering only a few months. Dakota Semler: Yes, absolutely. Happy to provide more context, Mike, and thank you for the question. We have seen an uptick, and just to clarify the phase in milestone for the ACF rule is actually at the end of 2024. So the requirement date will be January 1, 2025. But for large fleets, that still means they need to start planning now at least one purchasing cycle in advance of the phase-in date to ensure that they’re going to be compliant. And we have started to see an uptick, particularly for those fleets that are going to be subject to the regulations. There’s some recurring purchases as well as some new customer purchases that we’ve seen lately that have been driving additional demand for the vehicles. It’s to be determine of when those vehicles will actually get delivered, if they’re going to be a part of the end of Q4 or if they would be a part of deliveries early next year, but we are seeing an uptick in order demand. Mike Shlisky: And just a little bit about the penalties, if someone doesn’t meet the rules, I mean, if someone has ordered a charging station and the PG&E is just so backed up, they can’t install it, they don’t have a transformer nearby, I mean, it’s not the fleets fault. So I guess are there exemptions for those that just don’t get the infrastructure where things are out of their control? Dakota Semler: We haven’t seen any guidance on that from CARB and from the regulatory agencies, but we were remaining on top of it and trying to monitor the situation to make sure we can best inform our customers. If nothing does change, we have solutions like the hub that obviously can be a good stop gap in the short-term at least until customers are able to get the approval from utilities and the permanent infrastructure completely commissioned. Mike Shlisky: Okay. And you had mentioned there’s potential for thousands of units of volume here, and I’m trying to figure out if any other company or the Xos on the step van side can fulfill that volume. I mentioned it last quarter, but now we had a major supplier of batteries Proterra potentially this week. I think the only other player I can think of in step vans uses Proterra as a battery supplier today. Another step van that’s about to be launched also has Proterra expect into their battery. So I mean, not that they’re going away at any time soon, but if any other companies are having challenges with getting step vans out the door, what’s your ability to step in and meet whatever demand they’ve got out of your factor? Dakota Semler: Yes, it’s a really important context and you’re right in that several of the or the only other real competitor building step van chassis an electrified step van chassis was utilizing a Proterra battery system. So that’ll definitely impact their ability to continue to deliver products. We can obviously ramp production pretty flexibly to support incremental growth and demand. The biggest thing we want to ensure for customers for their own success as they deploy these vehicles is that they’ve got that charging infrastructure ready to roll and ready to go. And while we don’t like to see any failures within this industry the fact that we are going to be one of the few vendors that are going to be able to provide solutions for step van fleets obviously bodes well for us as the demand and regulations continue to advance the need for our vehicles. It also is a potential expansion for us as we think about our powertrain business powered by Xos. We’ve been continuing to grow that business and actually are selling into some off on highway specialty vehicle applications now as well that could supplement and continue to build out our growth in the powered by Xos business too. Mike Shlisky: Okay. Maybe one last one for me. Can you maybe put some brackets around where you think your cash burns going to be over the next 12 months? Just trying to get a sense obviously for when and if you may have to access any additional capital or whether you’re okay for the foreseeable future. Liana Pogosyan: Thank you for the question. Happy to provide additional context. As we previously mentioned in our prepared remarks, we do have sufficient capital to go into 2024 and we also have made various cost reductions that we continue to evaluate and are also pursuing additional funding opportunities the in the quarters to come. Operator: Our next question comes from Jerry Revich with Goldman Sachs. Please go ahead. Jerry Revich: Good afternoon, and good evening, everyone. Dakota in terms of your cost of goods sold so that was up sequentially more than unit shipments. I am wondering, can you just talk about what proportion of that is overhead and any moving pieces from here, because it looks like the COGS per unit was up sequentially. Liana Pogosyan: Happy to provide additional context on that. So the main — the primary drivers of why cost of goods sold was up sequentially this quarter was just overall lower average selling price as well as additional inventory write-downs and reserves that we took this quarter that were — that was more part of standard, course of business and specific to this quarter. Jerry Revich: And thank you for the context. How much was the write-down? Liana Pogosyan: The write-down was for the quarter was approximately $1.1 million. Jerry Revich: Okay. Okay. Thank you. And then in terms of the transition to new truck production in the back half of the year out of the guidance for back half deliveries, what proportion are going to be the new truck where you expect positive gross profit contribution versus the previously priced first generation truck? Dakota Semler: Yes. We don’t have a specific split between older inventory and the newer inventory, but the majority of vehicles will be the newer inventory that is positive gross margin. And the other thing that we noted, which is really important as we look at the back half of the year and is part of the revised guidance is we’re delivering a significantly larger proportion of our long range vehicles, including the long range strip chassis for specialty vocational applications, as well as long range step vans. And those actually are higher ASB vehicles because of the larger battery size. They’re double the battery that’s onboard 100 mile range vehicle. So it drives higher ASPs and it helps also lower our inventory levels for tail end of the year. Those platforms are also higher gross margins than our typical 100 mile range vehicle. Jerry Revich: Okay. And I’m wondering if you folks wouldn’t mind just expanding on your prepared remarks, comments on transitioning production in-house, what exactly the timeline looks like and what are the steps in that process and just a few more words on what’s driving the change in the profile. Thanks. Giordano Sordoni: Hey Jerry, this is Gio. I appreciate the question. The transition’s been complete as of the end of Q2 start of Q3, and so that’s just taking the employees that were previously on our contract manufacturer’s payroll over to Xos payroll and assuming that responsibility. Jerry Revich: And Gio, okay, can you just say more about the rationale? Just expand on what’s driving the change, please. Giordano Sordoni: Yes. So we’ve been working with them for a few years now, and I think we just got to a place where the Xos team was deeply involved in the factory and the operation already. We had our own quality folks on site, our own manufacturing engineering folks on site, and it just made sense to streamline and simplify by bringing those folks onto the Xos team rather than having that sort of arm’s length contract manufacturing relationship in place. And it’s made things run a bit more smoothly and it’s also an opportunity to reduce costs as well. Jerry Revich: Okay. And the magnitude of cost reduction that you’re anticipating 3Q versus 2Q as a result? Dakota Semler: From a manufacturing standpoint, our manufacturing costs, we’ll see savings of fees that are around 5% to 10%. But there’s probably additional operational savings that come from improved communications and improved timeline to get vehicles assembled and delivered. Operator: Our next question comes from Sherif El-Sabbahy with Bank of America. Please go ahead. Sherif El-Sabbahy: Hi, good afternoon. So just staying with the change in bringing production in-house, have you begun to produce packs internally or are all the packs on the new vehicles still coming from CATL as a supplier? Dakota Semler: We are producing both packs, so we’re producing the Xos packs for our vehicles as well as utilizing packs from CATL. Sherif El-Sabbahy: Understood. And are you able to get a sense of, are the CATL packs covering the majority of the new product platform versus the legacy, if you can give a breakout there? Dakota Semler: Yes. We don’t have existing breakdowns of how many are utilizing for our packs or how many utilizing the LFP packs. But we’re continuing to utilize both of the systems and we’re seeing strong performance across different applications and use cases that are more suitable to the different chemistries NMC or LFP. Sherif El-Sabbahy: Understood. And just with vehicles that have been produced but not delivered, are you able to give us a sense of the scale of how much you’ve produced year-to-date? Dakota Semler: We don’t actually guide to that but we have been moving through inventory and continuing to move into our 2023 step van model, which is going to be the positive gross margin model. That’ll be the majority of shipments for the second half of the year. Operator: The next question comes from Mike Shlisky with D.A. Davidson. Please go ahead. Mike Shlisky: Yes. Hi, thanks for taking my follow-ups here. Just got two, one in the transition to in-house manufacturing, confirm there’s no additional CapEx or other costs that have to take place. It’s just where they get their paycheck from. Is that basically the idea? Dakota Semler: There was an incremental CapEx investment that was made in Q1 and Q2 very nominal amount. We bought some fixtures and equipment associated with the facility but I believe it was less than $1 million in incremental CapEx. Mike Shlisky: Okay. Got it. I just wanted to ask the folks who have actually received the 2023 truck model, have you gotten any feedback as to how they’re performing compared to the previous year’s model as far as range, reliability, et cetera? Any feedback you can give us on how different the product is in the field would be appreciated? Dakota Semler: Yes. There’s been several improvements, Mike first of which is one you mentioned, which is the range increase. So we have an incremental 20 kilowatt hours on board of energy storage as well as a different software package and different sub ranging the battery system, which means a longer range vehicle. And that really is important for the extreme climates. So in parcel delivery where they typically still do under 100 miles a day, we are seeing in some of the extreme range climates or extreme climate areas where we have vehicles deployed like in Canada in Northern climates they are utilizing their heater systems really for the full length of their routes during the day. And so that has a incremental weight on the battery. But we’re still able to achieve that 100 mile range with this new pack system. The other improvements really center around a lot of the driver comforts and driver — drivability of the vehicle. So our new cooling system on the vehicle has a much more robust HVAC system, which is already being noticed by the drivers. We also have our new cluster and new software package on this vehicle, which is being appreciated by the drivers. And with the capability to do over the air updates on this platform and flash new software releases, we anticipate continuing to improve the software and efficiency of the vehicle as well as releasing several incremental hardware improvements to this vehicle over time that, that customers will get the benefit of. And ultimately, we will accrue to the drivers and fleet operators and form a reduced TCO. Giordano Sordoni: Yes. I would just add to that and double click on what Dakota said, as far as over the air updates this is a huge deal to our customers having the ability to not only monitor their fleet remotely, but also push software updates when needed. This is a really unique capability in the commercial vehicle space. I think we might be one of the only — if not the only commercial truck provider that is offering over their update capability in our vehicles. I’ll also mention that in addition to customer feedback and customers being excited about the new platform, these vehicles also went through a very intense battery of tests both in thermal chambers as well as durability. So completed thousands of miles of real world durability testing anecdotal, but the folks at the durability track technicians and drivers who test commercial vehicles all day long mentioned that this is the highest quality EV they’ve seen that’s come through their facility in terms of the build quality and the performance on the durability course. Operator: This concludes our question-and-answer session. I would like to turn the conference over to Dakota Semler for any closing remarks. Dakota Semler: Thank you, operator, and thank you, everybody for joining us today. We appreciate all of these insightful questions and inputs. And as we continue to deliver vehicles through the second half of the year, we want to reiterate the three core tenants that we’ve been focused on over the last year, which is growing the demand and the deliveries of our products, we expect to see that in the third and fourth quarter, improving gross margins, which we also expect to see as we launch the new platform of our 2023 step van and strip chassis into customer hands and maintaining healthy access to capital to ensure we are strongly positioned to fund and scale the business, which we see into 2024 and continue to work with the capital markets to find other sources of capital to help grow the opportunities that we have within Xos. Thank you everybody for your questions and your time today. Looking forward to catching up with you on our next earnings call. Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect. Follow Xos Inc. Follow Xos Inc. 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Markel Corporation (NYSE:MKL) Q2 2023 Earnings Call Transcript August 3, 2023 Operator: Good morning, and welcome to the Markel Group Second Quarter 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] During the call today, we may make forward-looking […] Markel Corporation (NYSE:MKL) Q2 2023 Earnings Call Transcript August 3, 2023 Operator: Good morning, and welcome to the Markel Group Second Quarter 2023 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] During the call today, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in or suggested by such forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is included in our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the caption Safe Harbor and Cautionary Statements and Risk Factors. We may also discuss certain non-GAAP financial measures during the call today. You may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in our most recent Form 10-Q. Our Form 10-K and Form 10-Q can be found on our website at www.mklgroup.com in the Investor Relations section. Please note, this event is being recorded. I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead. Tom Gayner: Good morning. Thank you. From Richmond, Virginia, I’d like to welcome you to the Markel Group’s second quarter conference call. This is indeed Tom Gayner, has served as your CEO, and it is my pleasure to welcome you to the call this morning. I’m joined by our Chief Financial Officer, Teri Gendron; and our President of Insurance, Jeremy Noble, to share our results with you and to answer your questions. We are very pleased with the results we’re reporting to you today. Each of our three engines: Insurance, Markel Ventures and Investments produced positive thrust during the first half of 2023. In our insurance operations, we enjoyed double-digit growth in earned premiums and solid underwriting profitability with a combined ratio of 93% for the first half of 2023. Pixabay/Public Domain Importantly, we report those results with an ongoing commitment to putting up insurance reserves in a way, which we believe will be more likely to prove redundant than deficient. You can see that commitment through our years of reporting favorable loss development in the vast majority of the times when we report to you each quarter’s results. This quarter continues to show that same pattern of favorable development. There’s unrelenting commitment at the Markel Group to our culture based on our values. The conservatism we embrace in setting reserves demonstrates our words and action. Both Teri and Jeremy will provide more details on our insurance results and their comments. Markel Ventures produced excellent results during the first half of 2023. Revenues rose to $2.5 billion compared to $2.3 billion a year ago, and EBITDA reached $317 million versus $250 million in the first half of 2022. It’s worth pointing out that this growth in revenues and profitability was largely organic. These are the results of the existing businesses as there were no major acquisitions at Markel Ventures. We did get to apply some capital at a couple of our existing businesses. They added to their businesses with acquisitions of companies in their respective industries, and we love it when that happens. We also continued the ongoing process of purchasing certain non-controlling interests as originally planned in the original acquisitions. Investments also provided excellent returns. Recurring investment income rose 74% to $329 million versus $189 million in the first half of 2022. Our publicly traded equity portfolio produced six-month returns of 11.9%, while this trails the white hot return of 17% posted by the S&P 500. We remain 100 basis points ahead of that index for over 30 years. We don’t usually move ahead during sprints, but we do tend to outlast the competition when it comes to marathons. During the first half of 2023, we repurchased $187 million of Markel Group shares. Last year, we repurchased $126 million in the same time period. We also made net purchases of publicly traded equity securities of $155 million compared to $63 million a year ago. The tax-efficient net unrealized gain on our equity portfolio now stands at $5.4 billion compared to $4.2 billion a year ago. While we, as a public company, always provide you with the split times quarterly results, we are running a marathon, not a series of sprints. The split times that we are reporting to you today look good to me as the head coach, but I think these results demonstrate that we remain on track to produce excellent marathon results as we have over long periods before. To put some actual numbers on that and quantify that, I remind you that we consistently use rolling five-year measurement intervals to gauge longer term progress at the Markel Group. The last five years included some of the most difficult insurance and investment markets we’ve ever faced. The last five years also included the effects of some acquisitions and expansions into new businesses, which did not go as well as we would have hoped it first. Despite that, we’ve made meaningful progress. Please consider the following: Revenues in the first six months of 2018 were $3.6 billion. Revenues in the first six months of 2023, five years later, came in at $7.8 billion, an increase of 119%. Underwriting profits in the first six months of 2018 were $209 million. Underwriting profits in the first six months of 2023 were $264 million, an increase of 27%. Recurring investment income for the first six months of 2018 was $213 million. Recurring investment income in the first six months of 2023 was $329 million, an increase of 54%. The EBITDA of Markel Ventures in the first six months of 2018 was $82 million. The EBITDA of Markel Ventures in the first six months of 2023 was $317 million, an increase of 284%. The total number of shares of Markel outstanding five years ago was $13.9 million. The total number of shares of Markel today is $13.3 million, a decrease of 4.3%. The price per share five years ago on June 30, 2018, was $1,084. Five years later, the share price stood at $1,385, an increase of 28%. This combination of facts, along with many other factors, seems to have created a situation for many of the indicators of the economic value of Markel Growth, seem to have appreciated at a faster rate than that of the share price. In response to those circumstances, we’ve repurchased shares in recent years. Additionally, our rate of repurchases was higher in the first half of 2023 than any other period. It’s also a matter of public record that in five of the last six quarters I’ve personally taken money out of my pocket to purchase some Markel Group shares. Now I’ll turn things over to our CFO, Teri Gendron, to provide you with some details from the quarter and then to Jeremy Noble to discuss our insurance operations. I’ll then return with just a few brief comments about our ventures and investment results, and then we’ll open the floor for your thoughtful questions. Teri? Teri Gendron: Thank you, Tom, and good morning, everyone. As Tom mentioned, each of our three engines produced a solid quarter, strong revenue growth within our insurance operations, higher profitability within Markel Ventures and excellent returns from our investment engine showed the benefits of our diversified three-engine architecture. Starting off with our underwriting operations. Gross written premiums grew 7% to $5.4 billion for the first half of 2023, compared to $5 billion in 2022. Our increased premium volume reflects new business and more favorable rates across many of the product lines within our insurance segment. The most notable growth came from our personal lines, marine and energy, property and general liability product lines while we saw lower premium volume within our professional liability product lines. Our consolidated combined ratio for the first half of 2023 was 93% compared to 90% for the first half of last year. The increase was driven by a higher attritional loss ratio and expense ratio in 2023 within our insurance segment. Prior year loss reserves developed favorably by $139 million in the first half of 2023 compared to $123 million in the first half of 2022. We experienced favorable loss reserve development across multiple product lines in 2023, most notably across our international professional liability product lines. The favorable development in 2023 was partially offset by adverse development on our general liability product lines due to an increased frequency of large claims over the past several quarters on our excess and umbrella product. Turning to our investment results. Net investment gains of – I’m sorry, of $857 million in the first half of 2023 were driven by favorable market value movements. This compares to net investment losses of $1.9 billion for the first half of 2022, driven by unfavorable market value movements. As you’ve heard us say many times before, we focus on long-term investment performance, expecting variability in the equity markets and the timing of investment gains and losses from period to period. As Tom noted, we’ll continue to measure investment returns over longer periods of time. With regard to net investment income, we reported $329 million in the first half of 2023 compared to $189 million in the same period last year. The increase is largely attributable to higher interest income from our money market and short-term investments due to higher short-term interest rates in 2023. Additionally, interest income on our fixed maturity securities increased, reflecting a higher yield and higher average holdings compared to last year. During the first half of 2023, we recognized net unrealized gains on our available-for-sale investments of $30 million within other comprehensive income, primarily related to the positive impact of net foreign exchange movements on our fixed maturity portfolio. This compares to net unrealized losses of $882 million for the same period last year, corresponding to the impact of increases in interest rates on our fixed maturity portfolio. Recall that we typically hold our fixed maturities until they mature and would generally expect unrealized holding gains and losses attributable to changes in interest rates to reverse in future periods as bonds mature. Our fixed maturity portfolio had an average rating of AAA as of June 30 and there are no current or expected credit losses within the portfolio. Now I’ll cover the results of our Markel Ventures segment. Revenues from Markel Ventures increased 8% to $2.5 billion in the first half of 2023, up from $2.3 billion for the first half of last year. The increase reflects organic growth and improved pricing across several of our businesses. EBITDA from Markel Ventures increased 27% to $317 million for the first half of 2023 from $250 million during the same period last year. The increase was driven by our products businesses, which had higher margins in 2023 compared to 2022 as we saw material and freight costs stabilize. Looking at our consolidated results. Our effective tax rate for the first half of 2023 was 21% compared to 22% in the same period last year. We reported net income to common shareholders of $1.2 billion for the first half of 2023 compared to a net loss to common shareholders of $986 million in the same period a year ago, with the change largely attributed to the year-over-year swing in our public equity portfolio valuation. Comprehensive income to shareholders for the first half of 2023 was $1.2 billion compared to comprehensive loss to shareholders of $1.7 billion in the first half of 2022, with swings in both fixed maturity and public equity valuations of the largest drivers. Turning to cash flows. Net cash provided by operating activities was $1 billion for the first half of 2023 compared to $921 million for the same period last year. Operating cash flows in the first half of 2023 reflected strong cash flows from each of our operating engines with the most notable year-over-year increase coming from our Markel Ventures operations. Within our underwriting operations, operating cash flows in 2023 were net of a $125 million payment made in the first quarter to complete a retroactive reinsurance transaction to seed our runoff book of UK Motor Casualty business. Total shareholders’ equity stood at $14.2 billion at the end of June compared to $13.2 billion at the end of the year. Overall, we’re very pleased with our performance during the first two quarters of 2023 and we remain confident in our ability to continue building long-term shareholder value. With that, I’ll turn it over to Jeremy to talk more about our insurance engine. Jeremy Noble: Thanks, Teri, and good morning, everyone. It’s great to be with you this morning to recap our insurance engine results the first half 2023. The midpoint of the year, we continue to remain focused on achieving profitable growth across all of our insurance businesses. I’m pleased to report that we are well on our way to achieving that goal with revenues across our insurance operations totaling $4.1 billion for the year, up 7% from last year, while generating pre-tax operating income $325 million. Additionally, we continue to invest the float created by our underwriting operations at attractive yield. Let me now share a few thoughts on our first half results from across our collection of insurance businesses, which include our insurance and reinsurance underwriting operations, state national program services, and Nephila insurance-linked securities. Looking first at our Insurance segment. For the first six months of the year, we continue to grow premiums in lines where we see opportunities and feel good about the levels of rate adequacy. Overall gross written premiums in the Insurance segment grew by 9% from a year ago. We are taking advantage of the improved pricing environment in property. We are also growing in many of our other product offerings, including inland marine, binding, personal lines, programs and select marine and energy classes within the London market. As we have discussed in recent quarters, the current market cycle is nuanced with each product line having a bit of its own story. Fortunately, our breadth of product offering when combined with our exceptional underwriting talent allows us to develop robust go-to-market strategies by product. We have continued to decrease our writings in certain of our professional liability lines, most notably in the large account public D&O space, as we continue to remain uncomfortable with the rate decreases and loss cost trends in these products. Professional line space has also been impacted by changes in the broader economy, including the slowdown in M&A and public listings. We remain resolute in our disciplined approach to underwriting and are walking away from business that we believe is not adequately priced and does not meet our profitability targets. We also continue to see benefits from our actions taken over the past few years to reduce our exposure to outsized losses in our underwriting results through actively managing our net exposure to natural catastrophe property losses. As a result, we’ve experienced only modest losses this year from secondary peril events such as winter and convective storm events, while the industry grapples with this more broadly. Within our Insurance segment, we produce a combined ratio of 93 for the first half of the year up 5 points from a year ago. This is primarily due to higher attritional loss ratios in our professional liability and general liability product lines. We recognize that the economic and claims environment that will exist in the future when we ultimately settle claims on these long tail lines is uncertain. Given recent trends, our view is that it’s best to err on the side of caution and build in more of a margin of safety to address the inevitably unpredictable nature of estimating future loss costs. We also continue to maintain a cautious approach to relative to recognizing prior accident year loss takedowns. However, across all of our insurance product lines, we realized $124 million of favorable development on prior year’s loss reserves for the first six months of the year contributing a 4 point benefit to the combined ratio. Prior accident year loss takedowns decreased slightly from a year ago, representing a 1 point increase in the year-to-date combined ratio. This was driven largely by two offsetting factors. First, we realized a more meaningful amount of favorable loss development on our professional liability book within our international operations compared to a year ago, due to benign experience across several product classes. It is worth noting, we continue to remain cautious on prior year loss reserve development trends on our professional liability lines within our U.S. and Bermuda risk managed portfolio. Second, offsetting the increased takedowns within our international professional liability lines with adverse development within our U.S. casualty book, most notably our excess and umbrella product line. This is primarily on the pre-COVID 2017 to 2019 accident years, where the loss experience continues to outpace expectations. Our loss reserving philosophy remains unchanged. We continue to hold loss reserves at levels more likely to prove redundant than deficient and react quickly when loss trends outpace expectations by strengthening loss reserve levels. Further, we are generally not taking credit for favorable trends observed on the 2020 and later accident years where we expect the benefits of improved underwriting conditions could lead to greater long-term profitability. Turning next to the Reinsurance segment. Our re-underwriting actions within the portfolio over the past few years continue to deliver profitable improvement. We produced a combined ratio of a 93 for the first half of the year, an improvement in the combined ratio of 4 points, while premium volumes decreased by 4% from a year ago. Decrease in gross written premiums within the Reinsurance segment was due to lower premiums in our professional liability lines, partially offset by higher premiums in our marine and energy lines. Premium volume trends are impacted by both premium adjustment activity and timing differences related to renewals. This continues to be most notable in our transactional liability book within our professional liability product line where deal flow continues to remain slow, resulting in ultimate – lower ultimate premium volumes year-over-year. Lower premium adjustment activity has the effect of increasing our current year attritional loss ratio, which is offset by a decrease in our prior accident year’s loss ratio. Overall, the combined ratio within our reinsurance operations improved year-to-date in 2023 given the losses incurred last year on the Russia-Ukraine war, as well as experiencing greater favorable prior year loss reserve development in the current year. Next, I’ll touch on our program services and other fronting operations and ILS operations, both of which are reported as part of our other operations. Total premium production within our program services and other fronting operations totaled $1.5 billion this year versus $1.4 billion a year ago. This 5% increase in operating revenues for the first six months of the year was due to expansion of existing programs and addition of new programs. Our state national team continues to perform extremely well. We are pleased with the business development pipeline we see. Further, any dislocation in the fronting space should see state national benefit given its strong and reputable history and leading market position. Within our Nephila ILS operations, revenues and expenses for the first six months of the year were down due to the impact of the sale of our Velocity MGA operations in the first quarter of 2022 and the sale of our Volante MGA operations in the fourth quarter of 2022. In addition, revenues within our fund management operations are down from last year due to lower assets under management, which stand at $7.2 billion at the end of the period. As a reminder, we realized a gain of $107 million in the first quarter last year related to the sale of our majority stake in Velocity. While our current results in Nephila reflect the lower levels of AUM being experienced, results for the second quarter generated a pre-tax operating profit. The current pricing environment for catastrophe exposed property risk has created an attractive return proposition for investors. Our team is working very hard to capitalize on these market opportunities, focusing on price transparency, portfolio construction. Turning to current market commentary and outlook. Submission activity and new business opportunities generally remain strong outside of professional lines, particularly for our excess and surplus funds operations. Clients are still turning to specialty market solutions given current levels of uncertainty and ongoing economic activity and see the attractiveness or our breadth of product offering. Just a couple comments on rate across our portfolio. As I mentioned before, each product area and region of the world has its own story, but broadly speaking, rates are holding up fairly well and by and large in our estimation are keeping up with and in some cases are slightly ahead of our view of trend. We have many products where rates are up 5% to 10%, for most product lines if rate adequacy is in question, we are seeing success pushing for rate. Equally, we can see evidence of reducing new business, policy retention and quote and bind rates when we aren’t getting the traction we need. We’re also able to push on terms and conditions as well as structure or shape the portfolio if it helps towards desired retention. This is what I’d expect to see under the circumstances and is a demonstration of our commitment to underwriting discipline. Big exceptions are property lines where rates are accelerating more meaningfully from the start of the year and risk managed large account D&O where prices continue to decrease somewhat inexplicably. I’m at a loss for why public D&O pricing continues to deteriorate as well as professional liability pricing trends generally, we remain cautious in these areas, which is contributing to our shrinking exposure. Generally speaking, we’re focused on maintaining rate adequacy across the entirety of our portfolio where we are unable to attain sufficient rate increases or effectively adjust terms and conditions or limits, we are walking away from accounts that do not meet our profitability targets. These actions may have the effect of slowing the top line growth trend from what we’ve seen in the past couple of years. Given the breadth of product offering we have, we are confident we will find pockets that are attractive to grow and we remain very optimistic around longer-term profitable growth objectives. I think we are very well positioned as we approach the latter half of 2023 and look ahead to 2024. Thank you. And with that, I’ll turn things back over to Tom. Tom Gayner: Thank you, Jeremy. As Teri reported, we enjoyed an excellent first half in our Markel Ventures operations. The CEOs and the people of those organizations continue to do a great job of serving their customers and their associates. Total revenues Adventures rose 8% in the first half from $2.3 billion to $2.5 billion. EBITDA rose 27% from $230 million to $317 billion. One of the very encouraging points about this comparison is that it’s largely organic. It’s largely apples to apples and not due to additional acquisitions. I hope you take some comfort in seeing these results. I know that I do. I’m delighted that we were able to apply some capital to purchases of non-controlling interests in our array of ventures companies as fully planned for at the time of the original acquisitions, and that a couple of our companies were able to add some additional companies to our family. The acquisition of additional businesses within our platforms of existing businesses is one of our favorite ways to deploy capital, and I’m encouraged to see the maturation and ongoing development of this aspect of Markel Ventures. We remain interested in additional platform acquisitions at Markel Ventures, but remain disciplined in our approach. We remain involved in a few conversations, but I have nothing to report to you on that front, and all I can say is that we continue to work at the task and we will be both opportunistic and disciplined in considering opportunities. In the investment engine, you can see the effect of higher interest rates and solid equity performance shined through. Recurring investment income grew 74% from $189 million to $329 million in the first half, and new money investment rates continued to be higher than the fixed income maturities rolling off as they mature. We continued to purchase only the highest credit quality securities that we can find and remain roughly matched in duration and currency to our insurance liabilities. In our equity portfolio, we earned 11.9% returns in the first half and we purchased $155 million net of new holdings compared to $63 million a year ago. We continue to find securities which meet our hurdle rates for new investments. We also have cash flowing in to fund the growth of our insurance and ventures operations and repurchase Markel Group shares all at the same time. All right, as is always the case, there are challenges at your company. There always will be. That’ll always be the case, and there never is a time when we’re not worried about something or working on some problem. That’s reality. The good news is that you’ve got decades to judge a spy to ascertain whether we’re up to those challenges or not. I think the preponderance of evidence would suggest that we are. The additional good news is that the values and the culture we’ve developed over decades to guide our actions and decisions remains unchanged. We’re committed to continuing on that path to building one of the world’s great companies with our win-win-win architecture, and I look forward to answering your thoughtful questions and working on the future. As Buzz Lightyear would say, to infinity and beyond. With that, we welcome your questions. See also 10 Best Small Cap Automotive Stocks To Buy and 11 Most Advanced AI Companies. Q&A Session Follow Markel Group Inc. (NYSE:MKL) Follow Markel Group Inc. (NYSE:MKL) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Our first question will come from the line of Mark Hughes with Truist. Please go ahead. Mark Hughes: Thank you. Good morning. Tom Gayner: Good morning. Mark Hughes: I wonder if there’s any more detail you could provide on the reserve development that you’re seeing that you described in the 2017 to 2019 accident years. Is that social inflation, medical inflation? Just a little more on that would be interesting. Jeremy Noble: Yes, sure. Mark, it’s Jeremy. It’s very similar to what we’ve talked about in recent quarters, and I think what’s being reported broadly across the industry. The reality is, is that the business that we put on the books in years like 2015 to 2019, our view now is it’s not going to be as ultimately profitable as we believe at the time, and that’s because for the time that has passed since then. And so you get into that confluence of events, rising economic inflation, compounding aspects of that, the impacts of COVID, the court closures, the lag in sort of reporting, and then certainly to the point that you raised. Social inflation is a very real thing, so the cost of handling and adjusting and settling claims has gone up, and the role and the prominence of litigation financing has been rising. And so ultimately, we’re witnessing pockets in those longer tail lines, particularly casually like we report this quarter where actual loss frequency and severity are in excess of our expectations. And the reality is, is when we see a little bit of that activity, we allow a bit of time to make sure that we think that there is a trend there. And if we see that trend, then we’re reacting very quickly and we’re acting to try to push hard to get ahead of that and put that behind us. Equally, I would say it’s really important to point out that a lot of times has passed obviously between those sort of this quarter, 2017 to 2019 years for that block of business from 2015 to 2019. And in those years more recently, right, a lot of changes that have taken place. So pushing rate, improving terms and conditions, addressing limits, attachment points, segmentation strategies. We’ve seen deductibles rise. So lots of things have improved the overall health of the portfolios, but we are left to address those older years. Mark Hughes: Yes. Appreciate the detail. How about the workers’ comp line? How are you approaching that at this point? And then are you seeing any medical inflation pick up there? Jeremy Noble: Yes. Great question. So within workers’ comp it continues to be a great – and you have to recall, our workers’ comp book is pretty sort of niche within the broader segment. So it’s a lot of very sort of micro workers’ comp and some of the trends that we would see would be a little bit different than maybe broader workers’ comp more broadly. That line of business has been very profitable for us. We’ve consistently seen reductions in prior year loss reserves over time. We still see some of that that the levels aren’t as significant. We don’t yet see the impact – and prices have been coming off consistently in recent years because of the very positive performance in the product line. We continue to monitor it very closely. We have not seen an impact or rising medical inflation impacting that book for us as of yet, but we’re very focused on reviewing that trend. And the book has not been, it is not been growing at the rate of the broader portfolio as well. So we’ll see. We’re paying very, very close attention to that. Mark Hughes: Then one other question, the program services fronting big increase this quarter, I think for the six months it’s been not quite as big. Is that just a timing issue on renewals or is there some new business this quarter? Jeremy Noble: Yes. It’s a handful of things. So within our state national business really pleased with where we stand there, we are expanding a few very strategic relationships. We’ve actually probably done a little bit better in retention of some of the programs than we would’ve anticipated. We’ve onboarded a number of new programs. And equally I think the pipeline at state national looks very good. So some of that played out in the second quarter and we’re up modestly year-to-date. Also within that total fronting space is some of the fronting we do associated with our Nephila operations when we offer a rated balance sheet. So we’ve seen some opportunistic growth in that space because of the attractiveness of the property, catastrophe environment more broadly. So less sort of timing and you never know with our state national platform, we have some very large deals and there’s always an ebb and flow of what’s kind of coming in and what’s leaving the platform. But feel really, really good about where we’re positioned right now. Mark Hughes: Appreciate it. Thank you. Tom Gayner: Sure. Operator: Your next question comes from the line of John Fox with Fenimore Asset Management. Please go ahead. John Fox: Thank you. Well, Mark asked two of my questions, so I’ll go with the third. Well, first of all, great results. Tom Gayner: Thank you, John......»»

Cognex Corporation (NASDAQ:CGNX) Q2 2023 Earnings Call Transcript August 3, 2023 Cognex Corporation beats earnings expectations. Reported EPS is $0.32, expectations were $0.25. Operator: Greetings. Welcome to the Cognex Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I […] Cognex Corporation (NASDAQ:CGNX) Q2 2023 Earnings Call Transcript August 3, 2023 Cognex Corporation beats earnings expectations. Reported EPS is $0.32, expectations were $0.25. Operator: Greetings. Welcome to the Cognex Second Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Nathan McCurren, Head of Investor Relations for Cognex. You may begin. Nathan McCurren: Thank you, Shamali. Good morning, everyone, and thank you for joining us. With me on today’s call are Rob Willett, Cognex’ President and CEO; and Paul Todgham, our CFO. Our results were released earlier today, the press release and quarterly report on Form 10-Q are available on the Investor Relations section of our website. Both the press release and our call today will reference non-GAAP measures. You can see a reconciliation of certain items from GAAP to non-GAAP in Exhibit 2 of the press release. Any forward-looking statements we made in the press release or any that we may make during this call are based upon information that we believe to be true as of today. Our actual results may differ materially from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent Form 10-K and our Form 10-Q filed this morning for Q2. With that, I’ll turn the call over to Rob. Rob Willett: Thanks, Nathan. Hello, everyone, and thank you for joining us. We delivered second quarter revenue at the top end of our expected range gross margin in line with our guidance and operating expenses favorable to expectations. We had a strong sequential step-up in operating margin as gross margin returned to our mid-70% long-term target, and we carefully managed costs in the quarter. While these results were in line or better than our outlook, conditions weakened as the quarter progressed. You can see this in the latest PMI data, which has trended downward over the past three months. China has not gained the momentum we expected at the time of our last call, and there is slower manufacturing activity in important factory automation markets, including Germany and the United States. Our customers remain cautious with their capital investments, particularly in consumer electronics and semi where we have seen the steepest decline in demand. As a reminder, we tend to see the impact of these dynamics more rapidly than many of our industrial peers given the short-cycle nature of our business. These challenges are not as apparent in our second quarter results since we recognized approximately $15 million of revenue from consumer electronics that we had previously expected in Q3. Before I go into further commentary on the business and outlook for Q3, I’d like to turn the call over to Paul to walk you through more of the results. Paul Todgham: Thank you, Rob, and good morning, everyone. Second quarter revenue was $243 million, a 12% year-on-year decline. Foreign currency translation remained a headwind, reducing revenue by $5 million or 2% year-on-year. From an end market standpoint, consumer electronics and semi have had the most significant slowdown in demand. Revenue from our largest e-commerce customers remain muted in Q3 – Q2, yet has been roughly flat for each of the past four quarters. The rate of year-on-year decline is improving as we anniversary the slowdown in large investments from these few customers. The remainder of our logistics business has continued to outpace our largest e-commerce customers. Shifting to automotive, EV battery growth continues to materialize. Yet the growth we are seeing there did not outweigh the decline in traditional automotive. Revenue in other end markets was mostly lower year-on-year with the exception of consumer products and food and beverage. Looking now at the change in revenue on a geographic basis. Revenue in the Americas declined 10% and in Europe declined 8% year-on-year. Excluding the impact of approximately $15 million of consumer electronics revenue we had expected in Q3, revenue in China and other Asia each declined by close to 30% year-on-year, driven by the softness in consumer electronics and semi. Gross margin in Q2 was 74%, which is in line with both our guidance and mid-70% long-term target now that the higher-priced inventory we source through brokers has worked its way through the P&L. Slightly offsetting the improvement in gross margins was deleverage on lower revenue, and foreign exchange headwinds. Let’s turn now to operating expenses. OpEx declined by 13% year-on-year on a GAAP basis, which included $20 million of items related to the June 2022 fire at our primary contract manufacturers facility. It would be helpful for me to explain two items related to the fire. First, was a noncash net charge of $17.4 million in Q2 of 2022, primarily for the estimated value of inventory on our books that was destroyed or abandoned net of estimated insurance proceeds. The other was a gain of $2.5 million in Q2 of this year for proceeds from business interruption insurance. Excluding fire-related items, operating expenses increased by 3% year-on-year due to investment in our emerging customer initiative. Beyond the investment in emerging customers, non-GAAP OpEx declined year-on-year as we have been closely managing costs given the challenging outlook. On a sequential basis, OpEx in Q2 declined by 4%, excluding the insurance proceeds. This was better than our guidance due to headcount management, lower incentive compensation and tighter management of discretionary spending. Operating margin, excluding fire-related items, was 26% in Q2, which was a significant step up sequentially, but below Q2 of 2022 due primarily to operating deleverage and our investment in emerging customers. The non-GAAP effective tax rate, excluding discrete tax items and fire-related items, was 15% in Q2 of 2023 and 13% in Q2 of 2022. Reported earnings were $0.33 per share in Q2. Non-GAAP earnings per share were $0.32. Turning to the balance sheet. Cognex continues to have a strong cash position with $832 million in cash and investments and no debt. Cash flows in Q2 reflected a return of $37 million to shareholders in the form of stock buybacks and dividends. Now, I’ll turn the call back over to Rob. Rob Willett: Thanks, Paul. We remain focused on long-term growth, yet disciplined in the near term as we manage through this softer demand environment. We had a strong quarter of product launches. Our investment in emerging customers is on track and momentum is building in EV battery. Our products and platforms innovation strategy is resulting in more rapid new product introductions and the proliferation of Cognex’ industry-leading technology across our product lines. In 2022, we launched a new product platform, which includes our Insight 2800 vision system and our DataMan 280 fixed-mount barcode reader. In the past, our next product would have been built on a new architecture. Today, we’re leveraging common architectures, which eliminates the need to replicate prior work, allowing us to move faster to market. The latest example of this is the DataMan 80, which we launched in July and leverages the same platform as the Insight 2800 and DataMan 280. We trialed this product over the past year with a select number of customers, including a global e-commerce leader. After a very positive reception, we’re excited to fully launch this product globally. The DataMan 80 delivers the superior barcode reading performance Cognex is famous for, but it’s easier to sell and easier to use. We continue to roll out products that offer our industry-leading edge learning technology, which began with the Insight 2800. Our latest launch with edge learning was the Advantage 182 Series, our next-generation image engine for life science OEMs. The 182 leverages Cognex’s edge learning tools for automating diagnostic tasks by weeding letters, numbers and vials and codes on vials, running inspections and detecting substances in blood samples, among other applications. We launched 13 new products in the first half of 2023, a record number of new Cognex product introductions in a six-month period. We’re excited about bringing these products to a broader audience through our emerging customer sales force. We have now completed the bulk of hiring of these new sales needs [ph] for this year and training is progressing well. We’re learning from this initial stage and remain excited about the growth potential and strong returns of this investment to broaden our customer base. We also have strong momentum with EV battery manufacturing customers. We see this as a long-term growth driver as the activity we are now engaged in fuels growth in future years for us. Some of these projects have faced delays or are ramping up more slowly than our customers anticipated, and we expect EV battery revenue to be lumpy as our customers roll out large projects. Turning now to our outlook. We expect revenue in the third quarter to be between $180 million and $200 million. This represents a sequential decline of approximately $25 million at the midpoint, adjusting for the approximately $15 million of consumer electronics revenue that shifted from Q3 to Q2. The decline is primarily driven by further softening of manufacturing investment, resulting in a step down in demand in our factory automation business. We expect gross margin in Q3 to be in the low 70% range due primarily to further operating deleverage and the negative mix impact of a more significant decline in consumer electronics revenue. Considering these near-term pressures, we will remain diligent about cost management. Despite a further ramp in emerging customer investment, we expect OpEx to decline by low single digits sequentially in the third quarter. We remain confident in our strategy and our ability to manage through a challenging operating environment and return to our long-term growth model. Now we will open the call for questions. Operator, please go ahead. Q&A Session Follow Cognex Corp (NASDAQ:CGNX) Follow Cognex Corp (NASDAQ:CGNX) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you. [Operator Instructions] Now our first question comes from Josh Pokrzywinski from Morgan Stanley. Please proceed with your question. Josh Pokrzywinski: Hi, good morning all. Rob Willett: Good morning, Josh. Josh Pokrzywinski: While I was hoping to dig in a little bit on what you’re seeing in logistics market. I think some of your peers out there, maybe some with perhaps some more inventory destock risk have seeing the market get a little choppier, but you guys have started to see this for a few quarters now. I’m just wondering if you feel like we’re more bouncing along the bottom? Or if 2Q represented sort of another step-down in activity. Rob Willett: Yes. Thanks, Josh. I think if we turn our minds to a year ago, that was when we really saw some of our big customers in e-commerce really return off their investment in kind of new infrastructure right? And we’ve sort of unwound any backlog a long time ago related to that. And what we really see now is, we’re kind of we think we’re kind of bumping along the bottom of where we were. Our logistics bookings are very consistent over the last few quarters as we’re waiting really for spending to come back on. That’s a phenomenon with large customers. Then we also have, as you well know, a kind of base logistics business, which are other customers, right? That’s a business where we expect growth this year still, but we’re still also seeing some caution that we’re seeing elsewhere across all of our markets, where I think sort of macroeconomic concerns and other concerns perhaps hitting that market, too. So I think we feel we’re kind of at the bottom of the trough. When will things pick up, I guess, is the big question. We don’t think this year, but we’re optimistic about next year. Josh Pokrzywinski: Understood. That’s helpful. And then just shifting over to consumer electronics. If I try to take a wider view maybe going back to the OLED cycle several years ago, I think Cognex’s outgrowth has sort of happened inside of some of those industry cycles. Obviously, we can see some of that spending coming in, and I think multiple companies would say that China reopening was a little disappointing. But what can you tell us about either content growth or anything on kind of the new product introduction side, where there’s a chance, like OLED did in the past for contents go up? Or are you guys really just seeing sort of the cycle at this point, govern the activity. Rob Willett: Yes, thanks. I think it is a lot about the cycle. We tend to see bigger years very frequently followed by lower years. We sort of saw that when we last spoke to you, but I think that the level of softness is greater than we anticipated. So certainly, that’s a factor going on. I think some of the things that we expect to drive investment in electronics haven’t been materializing as quickly as we might have thought overall and those include, obviously, the introduction of new products and features and some of the change in location away from China towards Vietnam and India. I think those things are going a little more slowly than we might have expected. But Josh, you also really ask about kind of new technology and new waves that are coming. And I think we see a number of things that we’re very optimistic about in terms of long-term growth for Cognex and electronics. One is just the number of people still involved in manufacturing of electronics and the challenges of inspection and quality that exists and the power of our technology to really assist with customers. So those are things that, I think, offer us a lot of confidence about longer-term growth. You’re also asking about kind of – you asked about OLED, for us, really kind of peak OLED was probably 2017, right? So that’s quite a long time ago, at this point, but where we see kind of newer technologies, we saw 5G, of course, giving us a lift also in the business. What’s coming next? Clearly, we all see virtual reality products kind of being wheeled up from a number of companies in the industry. So products like that or other things that we see in our customers’ product lines do offer us optimism about growth in future years. And some of those devices, they are costly, complex and very, very difficult to manufacture, which is really where industry leaders rely on Cognex and the power of our engineering and technology to help them. So challenging year, not the strength that we would like to see in electronics this year and less strong than when we last spoke with you, but plenty to feel optimistic about as we look forward. Josh Pokrzywinski: Understood. Thanks for the comprehensive answer. Best of luck, second half. Operator: Our next question comes from the line of Tommy Moll with Stephens, Inc. Please proceed with your question. Tommy Moll: Good morning and thanks for taking my questions. Rob Willett: Hi, Tommy. Tommy Moll: Rob, I wanted to circle back to the comment you made about logistics. I think you said you’re optimistic about next year. And so I just wanted to unpack that a little bit. Is it based on conversations that you’ve had with end users or a view on when some of the larger players there will have fully absorbed a lot of the capacity that was built out recently? We’ve noticed you’ve got some content on some symbiotic systems that are being deployed to some of the key players in omnichannel. I wonder if that might be something that we should pay attention to. Anything you can give us on those points would be helpful. Rob Willett: Yes, Tommy. I mean we work closely with the engineering teams that – major e-commerce players. We see that they overbuilt capacity around the pandemic and that they’ve kind of turned the tap off on that about a year ago, right? And they have plans that go out multi-year to address growth in their markets, whether it’s here in the United States or overseas, and those investment plans are moving along. They take longer to get approved. We’d say that there’s a lot more scrutiny going on now. But we do see plans, which may get delayed, but we see plans for further investment coming. And I think to think that we would see that start to flow into our business next year is realistic and we would expect to sort of inflect back to growth on some of that bigger logistics business. But far from certain at this point, but certainly some reasons for optimism at Cognex. Paul Todgham: Yeah, and Tommy, we spoke about this at our Analyst Day, 11 months ago and different levels of growth and logistics, but one that where we made some recent progress is the parcel and post sector. Some technology we introduced there late last year, early this year, we really are starting to see sort of early signs of traction there despite again a challenging macro environment. Tommy Moll: Thank you. That’s helpful. I also wanted to follow up on the emerging customer initiative investment. Should we think about the third quarter as the full run rate level of investment there through your operating expense line or does it step up again as you exit the year in fourth quarter and as you look to next year, what’s a reasonable time frame you envision, where we’ll be able to look back and have some observations on the performance there versus your expectations for the investment? Thank you. Paul Todgham: Sure, I’ll start with this year question, Tommy. I think yes, we should hit the ramp rate in Q3. Effectively, we’re hiring largely college grads, which meant sort of hiring began in Q2 and through early mid-Q3 or really early Q3. So we really should be at ramp rate with this – with the Q3, which was reflected in our guide. And it is – we’ve discussed previously about a $25 million to $30 million investment this year in our operating expenses and roughly $10 million quarter-to-quarter. Now that we’re at run rate in Q3, Q4. In terms of next year, lots of excitement and more to come, but I think it’s premature to sort of speculate when we’re going to have ROI or other insights. And I think we would expect to be hiring for a class next year as well. Tommy Moll: Thank you. I’ll turn it back. Operator: Our next question comes from the line of Joe Giordano with Cowen. Please proceed with you question. Joe Giordano: Hey, guys. Thank you. Can you give a little color on the margin guide for next quarter with the mix issues that you called out in the press release? Like, which markets are driving that? Is this kind of like a, in your view, kind of a one quarter blip downwards? Paul Todgham: Yes, Joe, I’ll take it. I mean, obviously, our hope and expectation once the broker buys would be behind us that we’d be in the mid-70% range pretty consistently and that is still our expectation. I think right now the biggest challenge we’re faced is deleverage on lower revenue levels. So, we have certain fixed costs associated with our COGS and if we’re guiding to revenue below – even in Q2 versus a year ago, deleverage was a partial offset to the broker buy phenomenon being significantly reduced. That will increase at the guide we gave, $180 million to $200 million. So I’d say deleverage is a big phenomenon. And then yes, revenue mix. I see revenue mix is really varying quarter to quarter. It can be product related, it can be industry or it can be geography related. In Q3 if I think about sort of versus a year ago, we are expecting significantly less consumer electronics revenue in Q3 versus a year ago. When we mapped out the view for the year for consumer electronics in our last call, we expected Q2 and Q3 to be roughly equal this year in consumer electronics revenue. But because of this $15 million that we’d expected to recognize very early in Q3 that recognized late in Q2, it’s going to be a significant step-down this year from Q2 to Q3 in our consumer electronics revenue and the year-on-year comparison is also very steep. Consumer electronics is a very high software component to the business. So the gross margins are high associated with that. So that’s the biggest factor in Q3, but there could be other factors to going forward. We do have growth levers for gross margin beyond just the broker buys going away. Emerging customers, for instance, we’re seeing good gross margin profile of the business we’re doing there. We have specific initiatives in logistics to improve our gross margins over time as well. So we do expect to be at that mid-70s level, but that’s going to be very challenging at lower revenue levels because of the deleverage. Joe Giordano: Right. And now that we’re through August – well, beginning August here, do you have more of a full year update on growth for CE auto logistics? Rob Willett: So, I’ll start and then I’ll invite Paul to comment. Generally, we don’t give guidance for full year, but I think some of the factors we are seeing, we’ve spoken about consumer electronics and the level of revenue we’re expecting much lower in the second half, partly as a result of that earlier revenue recognition of the $15 million at the end of Q2. In terms of automotive, what we see going on there is, we see nice strength building in EV, right? We’re seeing – we had – in the last quarter, we had good growth, more than 30% year-on-year growth in our EV business, but it’s still representing less than a quarter of our automotive business overall. And we’re seeing headwinds offsetting that currently in auto, I think as big car companies and dealers have excess inventory and there isn’t such a desire to produce going on. So that’s sort of the take in automotive. So and you also asked about logistics, I think that’s what we’re seeing is kind of bumping along at this level currently and probably continuing at that level until things start to pick up with new investments. Paul Todgham: Yes. So I mean that will give a – full year info. Go ahead, Joe. Joe Giordano: No, no, sorry, go ahead. Paul Todgham: Yes. No. I mean without giving full year guidance, which we don’t do, of those three sectors, we would say automotive is probably the healthiest right now. We’ve talked about logistics where we were up against on a year-on-year basis, right? We were up against a very tough compare in Q1 of this year in logistics because Q1 2022 was really our last big quarter of logistics and then Q2 we work through some backlog. And then as Rob mentioned, it’s been sort of fairly steady since then Q3 2022 to this most recent quarter and we’re sort of expecting steadiness reflected in our guide for Q3. And as Rob said, I don’t necessarily see a big pickup in Q4. So I think that the tough compares are largely behind us in logistics, but a fairly steep [ph] hill versus what we’ve already seen in the first half of this year. And then consumer electronics, we’re expecting to be down meaningfully we expect it to it down modestly and now we’re saying down meaningfully. So both of those are end markets having a tougher year, automotive relatively better, and then kind of all other industries relatively better as well as we called out consumer products and food and beverages, relative points of strength within that other packaging group. Joe Giordano: If I could just sneak in one last one, just given the weakness in the markets, a lot of smaller companies probably can’t weather that to the same extent that you can with your balance sheet and your scale. So, like the M&A environment changed significantly where new technologies are kind of in need, maybe the businesses in need of some help and are more willing to be sellers here? Rob Willett: I think that’s definitely the dynamic that we see. It’s similar to what I said to you on the last call, which is I think a lot of companies had very high valuation expectations and pretty strong kind of funding environments that no longer exist. So yes, we see – we definitely see it as a pretty rich environment for M&A activity, and we have lots of activity going on. Paul Todgham: I think our acquisition in December last year of SAC was a good example of that, relatively small organization based in Germany with great technology, great engineers, and difficulty in accessing the market they need access which was EV with their technology, they were accessing traditional German automotive primarily. And we view that has been a great acquisition for us, and we would love to put more money to work than we did just with that one buy. Joe Giordano: Yeah. And that was a cool product. So thanks guys. Operator: And our next question comes from the line of Jim Ricchiuti with Needham & Company. Please proceed with your question. Unidentified Analyst: Hi, good morning. This is Chris on for Jim. Thank you very much for taking the questions. If you could, could you elaborate on the traction that you’re seeing with the emerging customers? Maybe speak to the composition of the funnel and the prospects. And could you frame maybe for the customers that you’re targeting. Is this – for how many of them, is this a first foray into adopting machine vision versus in effort to take share or just lodge an existing solution? Rob Willett: Yes. Thanks, Chris. So to paint the kind of picture in context here. So Cognex, our business has succeeded over the years as our name implies the cognition expert. We’re the most sophisticated provider of vision technology to automation. And you can see that in terms of the companies that we work with, they’re the most sophisticated automation companies in their industries very often. And that’s been great for us, and it’s allowed us to serve what is a customer base of about 30,000 customers worldwide, very successfully. But over the years, as happens in our industry, technology has changed and our products have changed. And now our products aren’t so difficult to use. They’re a lot easier to use and a lot more powerful. And that’s allowing us to have a different approach to the market where as witnessed say, with the 2,800 that we launched with our Edge learning technology is, an area where we lead in the market in terms of bringing powerful deep learning tools to customers easily. We’re able to take this technology and provide it very quickly and easily to customers who don’t have heavy engineering teams on board. So we expect that to broaden the number of customers that we can serve profitably from the 30,000 we serve today to hundreds of thousands, perhaps 200,000 and going forward over the years. And we need a sales force to go out and meet and call on those customers regularly. And they don’t have to be. Our sales force don’t have to be highly qualified engineers, right? They can be more people coming out of college who have great sales personalities and reasonable technical skills. So that’s kind of the backdrop, right? So now we’ve been running pilots and working on that process through this year. And we’ve been learning a lot about the customers that we can serve with our products, how they respond, what they need, and we’ve been able to profile them. We’re doing that in a number of markets overall. So we’re learning. To your question about are they new division or are they experienced users of vision I think we’re finding more of them have vision than we had anticipated, but still a good portion. So a little less than half really don’t have much experience with vision products or vision technology. And others of them have less sophisticated vision technology and less capable products from other companies. And we’re seeing a pretty broad range of those. So it’s kind of what we’re seeing overall. We’re in the process now of training up a large group of emerging customer sales noises, and they’ll be entering the field around the end of the year and we’ll be – we’re optimistic about our ability to have them make a lot of sales calls and sell our products very effectively to those target customers that we have in mind. Unidentified Analyst: Great. Appreciate the color. Thank you very much. Operator: And our next question comes from the line of Jacob Levinson with Melius Research. Please proceed with your question. Jacob Levinson: Thank you. Good morning, everyone. Rob Willett: Good morning. Jacob Levinson: Yes Paul, I think I heard you mention that consumer products and food and beverage for a couple of the only verticals that seem to be in decent shape these days. I suppose you might think that they were in that sort of covered tailwind bucket and might not be holding up so well. So is that just a function of customers having delayed projects that they couldn’t get done during COVID or maybe projects to address labor shortages really just any color on what you’re seeing there would be helpful. Rob Willett: Yes, Jake. It’s Rob. Let me start off here. I think we – the markets that we have seen some better traction in this down market based logistics. We’ve spoken about consumer products, which you mentioned and EV. So in terms of consumer products, we sell to companies making often regulated goods or difficult to manufacture goods, and they might include pharmaceuticals. They might include razor blades, diapers, products like that. And often, these companies have longer programs that they’re rolling out. Some of them can be quite regulated in terms of tax and other things that are going on. And they can be more sizable products opportunities too. Food and beverage also kind of fits in with that kind of profile. So we have seen more traction on that over the years and last quarter was no different where companies are concerned about tracking and tracing their products through the supply chain, some often collecting tax revenue on those types of products. We have great technology for them, which can really read barcodes and capture data very reliably through the supply chain. And sometimes those companies are pretty well financed and have very high and demanding standards for how they operate and they can be fined right for lacking tracking and tracing technology. So they look to us. And yes, we – so that’s the kind of business that we’ve seen pretty healthy over the last few years and still looks. I think, quite good for us. Paul Todgham: Yes. And some of the COVID headwinds you mentioned, Jake, we would have put those in our medical-related industry. So a little bit of a separate classification than consumer products and food and beverage. Jacob Levinson: Okay, that’s helpful. I’ll leave it at that. Best of luck. Operator: [Operator Instructions] Our next question comes from the line of Jairam Nathan with Daiwa Capital Markets. Please proceed with your question. Jairam Nathan: Hi, thanks for taking my question. I just had a kind of follow-up on the emerging customer initiatives, so have you – how you thought about the payback period? How should we think of the payback period for that investment to $25 million to $30 million. And internally, what metrics are you using – is it kind of a sales per employee kind of metric or – and would appreciate if you could give some more details on that? Rob Willett: Yes. I think for competitive reasons, we want to be a little bit careful what we say about that. But we’re running pilots. Of course, sales per salesperson is pretty important. We implemented salesforce.com over the last few years. So we’re really able to have a much more professional, I would say, approach to tracking sales activity and call and what the calls are. We’re also going to gain a lot of data and value from the market where we can also sell these customers into more sophisticated technology as they grow and develop with us. So we have a lot of KPIs around this that we’re tracking very carefully. I think of this as a long-term initiative for Cognex. So I think if this goes very well, we’ll put salespeople in the field. We will see them ramp to our expectations. They’ll be contributing hopefully accretive to gross margin. And over time, the people we hire now will be operating margin accretive. But I think if this goes well, we’re going to keep adding them because I think we, like – some other companies see a lot of potential for a larger end user sales presence where we’re calling on customers that are underserved today. Jairam Nathan: And thanks for that. Sorry, go ahead. Paul Todgham: My boss did a great job, nothing to add from the finance side. Jairam Nathan: Thanks. On the EV battery side, we are seeing – we are hearing of some push-outs in China and even in the U.S., forward, I think a couple of weeks back talked about kind of pushing out their ramp on the EV given the higher losses. Are you seeing any impact from lower-than-expected pricing for EVs and things like that impacting your EV business here? Rob Willett: That’s not apparent to me, no. I – to manufacture batteries, and there aren’t a ton of them. I’m thinking really of 10 or so. They have plans to execute on scaling up manufacture, right. So China might be a little different. I can see perhaps there’s more capacity in China in EV battery, but I think outside of China – And that’s slowed things down in terms of time to execution. And then it’s not an example of EV, but I think we’ve all read about semiconductor, I think, who faces some sort of similar challenges and where they’re looking to start up manufacturing in the United States. It’s proving more difficult finding the qualified labor that they need or getting the resources lined up and executing on that. So I see that sort of phenomenon being driven by the investment, the IRA and I think it’s a phenomenon that’s just causing some delays. Jairam Nathan: Okay. Thanks. And final question is on 4Q, and I know you don’t – you guys only do one quarter ahead, but it’s a seasonally 4Q is it’s typically been down about let’s say 10% or so sequentially. Would you expect any change in that seasonality this year? Rob Willett: So Q4, it’s difficult to make calls and we don’t forecast for Q4. Some of the phenomenon that – the phenomena that go on in Q4, it tends to be a lower consumer electronics quarter for us, and there’s no reason to think different from this year and there can be end of the year spend that goes on kind of budget flush spend. In this case, we’re not expecting that given the environment that we see. Paul Todgham: I would just caution, Jairam, that we’ve had a lot of variation of our seasonality with the impact of logistics. I know I think 2022, 2021, 2020; there was quite different seasonality of logistics from Q3 to Q4. Consumer electronics is more predictable as Rob noted. And then, excluding those two industries, I think the, the presence or absence of a budget flush. It’s probably the biggest driver of how well revenue holds up in Q4 versus potentially declines a bit. So there’s a reason we’re not really giving – we’re not giving guidance on that. I think the only one of those that we could probably call out would be, at this point, we’re not projecting an increase in logistics in Q4 as kind of per Rob’s comments, and we would expect consumer electronics to remain muted. Rob Willett: So ladies and gentlemen, I got a little note here from our Head of IR saying that the phone line might have cut out during my fascinating discussion of EV. So I’ll just try to reprise that a little for anybody who missed it. Basically, yes, we’re seeing slower ramp on some projects in EV nothing to do really with Cognex, I think, to do with the market overall. And that has to do with company is struggling with execution really and moving of geography away from certain markets towards the United States because of the Inflation Reduction Act and the incentives to build out here versus in Europe and other parts of Asia. I did mention too, that I think there may be more supply and more capacity in China currently. So that may mean that some of the plans there may be cooling a little. But it doesn’t change, I think our long-term view about the huge opportunity we see in helping to automate this important growth industry. Jairam Nathan: Thanks guys. Thank you. Operator: Our next question comes from the line of Rob Mason with Baird. Please proceed with your question. Rob Mason: Yes, good morning. There was questions around the logistics business. Earlier on, you suggested maybe seeing some green shoots around the Parcel Post effort to try to penetrate that further. I’m just curious, is that mainly going to be through the penetration of some greenfield opportunities. I would think that’s more of a brownfield opportunity, but just where you’re seeing those early signs. And then just around the – maybe the installed base, is there a refresh cycle that needs to happen there? I’m just curious what the state of the current technology is in that installed base. Rob Willett: Hi Rob. Thanks for the question. Yes, I think we were really focusing quite a lot on big e-commerce in those answers. But I’m glad you bought our parcel and post because those are important markets that we’re making a lot of progress then. We launched the Modular Vision Tunnel earlier this year, which is – and the DataMan 580, which is very capable for parcel and packaging companies. And those companies we’re in trials with them on this product and that technology. And I think it’s going very well. Their applications very often are about getting more capacity out of existing facilities that they have. There’s no – there’s almost no Cognex product in those facilities. So it’s replacing older, often line scan technologies that that is hard to maintain and somewhat out of date that they’re replacing with our technologies. And then, you know, there are also potential new facilities also being built for them. We see some of those in Europe currently where we’re working and I think we’re well positioned. So that is another area where we may see inflection in our business. Rob Mason: I see. And then just a quick question. Paul, the third quarter operations, OpEx guidance calls for expenses to be down even though the emerging customer investment would be going up. And I may have missed this, I joined late. But did you quantify what that investment will be sequentially in that emerging customer level? And then, I’m just curious how the fourth quarter OpEx would look if that becomes more visible in the fourth quarter that increased emerging customer investment? Paul Todgham: Sure, yes. I mean the emerging customers is a few million dollar increase. I’d say again it’s about a $30 million – $25 million to $30 million annual investment and about a $10 million run rate in Q3 and Q4. So not necessarily a step up, a meaningful step up in Q4, Rob. There’s a – there’s always a little bit of one offs in any given period. We might expect incentive compensation to be down a little more in Q3 versus Q4. So that could be some driver between the two. But overall, we’re managing discretionary expenses quite tightly. I think our emerging customers investment is sort of at run rate reflected in our guidance. And there’s always a little bit of movement in things like incentive compensation and stock expense and so on that can lead to some one-offs, but we get more guide on that in November. Rob Mason: Understood. Very good. Thank you. Operator: And our next question comes from the line of Keith Housum with Northcoast Research. Proceed with your question. Keith Housum: Good morning, guys. I just want to unpack your commentary regarding new products over the past six months. Is there an opportunity with the new products that are opening guys up to new use cases and new end markets that perhaps we haven’t seen in historical results? Rob Willett: Hi, Keith. I think a big play there, which I tried to try to cover in my prepared remarks is really that’s a lot of the products we’re launching are easier to use and easier to sell. And edge learning technology is a great example of that. It’s very powerful, can be trained on a very few number of samples, doesn’t require much of any programming. The DataMan 80 is another example, very easy to use and integrate. So that opens up markets, it opens up customers with less engineering capability, and it’s very well suited for our emerging customer sales force, who will be selling it going forward. So that’s certainly a big player in that regard. I would also point, as Rob Mason was asking about, parcel and post the products we’ve launched over the last year of the last six months such as the Modular Vision Tunnel, the DataMan 580 are very much targeted at high speed, high performance, mass flow type applications, lots of parcels, moving down a line, lots of image capture, lots of management of data that comes off and out of a tunnel, right. So those are markets that we haven’t been able to serve with our technology before, but parcel and post and logistics is now an area that we can serve. So I would certainly point to those as markets where we have little or no presence today and would expect to have significant presence thanks to these products going forward. Keith Housum: Great. That’s helpful. I appreciate it. And then just as a follow up, there’s been a lot of communication over the past year or two regarding near shoring manufacturing facilities, moving plants out of China to Vietnam to India and whatnot. Are you seeing the growth opportunities from that transition or are these yet to develop, maybe a commentary on that. Rob Willett: We certainly do see lots of activity in that area. We see some of our large customers diversifying their supply chains away from China, particularly in consumer electronics and – but also in automotives. And I would say it’s definitely a trend that’s continuing and will continue over many years. I think some of the challenges around execution though have been difficult for them, labor shortages, getting the quality of engineering and just quality of production in some of these markets. So that may be causing some of the progress to be a little slower than we would have expected and as – than they would have expected, I think. Keith Housum: Great. Thank you. Operator: And we have reached the end of our question-and-answer session. I’ll now turn the call back over to Rob Willett for closing remarks. Rob Willett: Well, thank you very much for joining. We look forward to speaking with you again on next quarter’s call. Operator: And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation. Follow Cognex Corp (NASDAQ:CGNX) Follow Cognex Corp (NASDAQ:CGNX) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

SP Plus Corporation (NASDAQ:SP) Q2 2023 Earnings Call Transcript August 2, 2023 SP Plus Corporation beats earnings expectations. Reported EPS is $0.78, expectations were $0.64. Operator: Good day and thank you for standing by. Welcome to the Second Quarter 2023 SP Plus Corporations Earnings Conference Call. At this time, all participants are in a listen-only […] SP Plus Corporation (NASDAQ:SP) Q2 2023 Earnings Call Transcript August 2, 2023 SP Plus Corporation beats earnings expectations. Reported EPS is $0.78, expectations were $0.64. Operator: Good day and thank you for standing by. Welcome to the Second Quarter 2023 SP Plus Corporations Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Kris Roy, Chief Financial Officer. Please go ahead. Kris Roy: Thank you, Catherine, and good afternoon everyone. As Catherine just said, I’m Kris Roy, Chief Financial Officer of SP Plus. Welcome to our conference call following the release of our second quarter 2023 earnings. During the call today, management will make remarks that may be considered forward-looking statements, including statements as to the outlook and expectations for 2023 and statements regarding the Company’s strategies, plans, intentions, future operations, and expected financial performance. Actual results, performance and achievements could differ materially from those expressed or implied due to a variety of risks, uncertainties, or other factors, including those described in the Company’s earnings release issued earlier this afternoon, which is incorporated by reference for purposes of this call and available on the SP Plus website and the risk factors in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q and other filings with the SEC. In addition, management will discuss non-GAAP financial information during the call. Management believes the presentation of non-GAAP results provides investors with useful supplemental information concerning the Company’s ongoing operations and is an appropriate way to evaluate the Company’s performance. They are provided for informational purposes only. A full reconciliation of non-GAAP financial measures to comparable GAAP financial measures were presented in the tables accompanying the earnings release. To the extent other non-GAAP financial measures are discussed on the call, reconciliations to comparable GAAP measure will be posted under the Regulation G tab in the Investor Relations section of the SP Plus website. Please note, this call is being broadcast live over the Internet and is being recorded. A replay will be available on the SP Plus website shortly after the end of the call and will be available for 30 days from today. I will now turn the call over to Marc Baumann, our Chairman and Chief Executive Officer. Marc Baumann: Hey, thank you, Kris, and good afternoon, everyone. This is another strong quarter for SP Plus. Adjusted gross profit and adjusted EBITDA were at record levels for both the second quarter and first half of this year. By combining innovative technology solutions with a highly trained workforce, we continue to build in our competitive advantages, expand our adjustable market, and execute effectively on our long-term growth strategy. Adjusted growth profit increased at a double-digit rate, reaching a second quarter record for SP Plus driven by solid growth in both our commercial segment, which was up almost 9% year-on-year, and our aviation segment, which was up 24% above last year’s second quarter. This strong performance is largely due to our continued success in winning new business, growing net new locations, as well expanding the scope of services we provide at existing locations. Commercial segment adjusted gross profit growth was achieved across nearly all verticals led by hospitality, healthcare, and large event venues. The breadth of capabilities we bring to clients is exceptional, positioning SP Plus as a leader in the digital transformation of our industry. We added 126 net new locations during the first half of 2023 with 55 net new locations added in the second quarter, our ninth consecutive quarter of net new location growth. At the same time, we succeeded in increasing our location retention rate to 94% the highest in recent memory. Turning to aviation, Q2 adjusted gross profit increased 24% year-over-year, reflecting both organic and acquisition growth as we benefited from new contract wind and renewals, as well as expanded services, we provided 160 global airports. Notably, our curbside concierge service continues to gain traction. The pilot program we launched with a second airline is performing above expectations and we anticipate to rollout this service at additional airports with this airline in the near term. Also, we expect to bring additional airlines onto the program, which provides a cost-effective way to ease congestion and enhance the travel experience. Gross profit from technology solutions continued to grow in the second quarter, and we are on track to double the 2022 contribution as a percentage of adjusted gross profit for the full year 2023. More than a quarter of the new locations added during the second quarter were for standalone Sphere deployments, where we currently do not provide other SP Plus services illustrating the appeal of our technology solutions, and the way they’re expanding our addressable market. In addition to achieving strong financial performance, we succeeded in effectively executing on our long-term growth strategy in the second quarter. First, we strengthened our leadership position by bringing innovative technology solutions and superior operations to existing and new clients. A great example of this is the technology overhaul we implemented for the city of Richmond, Virginia. We replaced outdated equipment with our Sphere technology solutions, which has already resulted in increased transactions as well as a significant boost in revenue. Other benefits include improved operating performance, reduced operating costs, and a completely digital frictionless consumer experience that eliminates the need for paper tickets. In Baltimore, SP Plus was chosen to design an ambitious and tech-forward parking plan for a large scale development project to transform a former industrial port into a vibrant shopping and entertainment hub. Also, the city of Los Angeles, where we already operate one of the largest on street meter programs in the United States recently awarded us an add-on contract to manage the parking for an additional 23 facilities consisting of off street surface lots and parking structures, demonstrating how well our solutions and services are meeting the needs of the city. We’re experiencing similar positive momentum in our aviation business. Recent new awards in the aviation segment include Omaha and West Palm Beach airports and contract renewals were secured at San Francisco, Detroit Metropolitan, and Buffalo Airports. In addition, we’re beginning to regain traction with our sponsored remote airline check-in service. We recently started up operations at the Orlando Airport, and we’ll shortly begin to provide remote airline check-in services at an airport serving a major tourist destination on the West Coast. We hope to be able to talk to you more about this win on our next call. And with the addition of one additional airline, our remote check-in services are now available to passengers traveling on eight airlines, which account for 96% of domestic travel. Secondly, we continue to increase our addressable market and achieve revenue synergies in the second quarter. SP Plus is working together with public-private partnerships or P3s that are helping universities monetize their assets with our role to bring being to manage their parking operations. The program has been so successful at one large university in Ohio that another university in the state has asked us to replicate and expand upon it on their campus. Our technology is designed to enable students, faculty, staff, and visitors to pay by phone, QR code, or via text. Based on the success of our initial P3 deployment, we’re seeing strong inbound activity to replicate the success, and we expect this area of opportunity to continue to grow. With respect to revenue synergies we recently launched our Arrow Parker online parking reservation system at Houston’s Intercontinental and Hobby Airports, where SP Plus was already providing parking management services. We’re working together with our Arrow Parker colleagues to further leverage our relationships and combined expertise to gain additional synergies. Third, we continue to leverage and monetize our technology investments. In the second quarter, we processed 5.4 million transactions on SP Plus technology platforms up 36% sequentially. Transactions in June are up almost 70% over December, 2022. These transactions include reservations and on-demand transactions for both on and off street parking, as well as at large venues and payment processing for remote airline check-in and curbside concierge. These examples indicate how well our services are aligned with client demand and consumer preferences. And finally, last week we announced the acquisition of certain assets of Roker, a provider of fully integrated parking solutions that simplify permit violation and enforcement management for organizations and municipalities. We believe this transaction will enable SP Plus to take advantage of the demand from municipal clients for a comprehensive mobility solution that helps them leverage smart city applications, and from healthcare and university clients looking to digitize the complex permitting requirements that are common on their campuses. This is the third technology acquisition we’ve made in the last nine months demonstrating our commitment to accelerate the pace of deployment, of cutting edge technology offerings, which is a key element of our continued growth. Now, I’m going to turn the call back over to Kris for financial review. Kris? Kris Roy: Thank you, Mark. Strong business momentum continued in the second quarter, enabling us to reaffirm our full year guidance. Consistent with prior quarters, comments about our financial performance and outlook, we’ll focus on our adjusted results. Adjusted gross profit and adjusted EBITDA were at record levels in the second quarter. Adjusted gross profit, which excludes depreciation as well as integration and restructuring costs increased 12% year over year to $66 million attributable to a number of factors, namely increased profitability at same locations, new business wins and successful deployment of technology enabled solutions at both existing and new locations. Adjusted EBITDA increased 9% to record $34.4 million compared to $31.7 million in the same period last year. This is particularly impressive given we continue to invest in G&A to support technology solutions that position us to deliver sustainable long-term gross profit growth. Second quarter adjusted G&A excluding acquisition integration and other costs was $30.6 million compared to $26.3 million in last year’s second quarter. This level was consistent with our comments on last earnings call. Note, this level was consistent with our comments on the last earnings call during that Q1 adjusted G&A was a good run rate for the remainder of the year. Our expectation remains unchanged for the balance of the year. As a result of higher interest rates and increased G&A expenses from technology related capital investments, second quarter 2023 adjusted earnings per share were $0.78 compared to $0.81 in the second quarter of last year. This was another solid quarter of cash flow generation, bringing our year to date operating cash flow to 21 million and free cash flow to $8.3 million compared to 35.7 million and $25.5 million in the year growth period respectively. As a reminder, 2022 included the receipt of a one-time federal income tax refund of $20.5 million. Adjusting for this operating cash flow in the first half was up 38% and free cash flow increased 66% year over year. Based on our visibility into the second half and our anticipation of continued investments for technology related capital expenditures, we reaffirm our free cash flow gains of 60 million to $70 million, or approximately $3 to $3.50 per share, which at the midpoint is 35% above 2022 levels adjusting for the tax refund. We expect to deploy our healthy cash flows coupled with our $600 million credit facility to fund our capital allocation priorities, which include organic growth, acquisitions and share repurchases. With regard to our expectations for full year 2023, we are reaffirming our guidance on all metrics. Adjusted gross profit is expected to range from $240 million to $260 million, 11% above 2022 level at the midpoint. Adjusted EBITDA is expected to be in the range of $125 million to $135 million, 11% above are ahead of 2022 at the midpoint, and we’re forecasting adjusted EPS to range from $2.70 to $3.20 per share, approximately 6% above 2022 levels at the midpoint. As you update your models, I do want to point out that year-to-date revenues excluding reimbursed management contract expenses increased 15%, and adjusted gross profit increased 13%. Based on our increased gross profit contribution from higher margin technology services and a greater proportion of management fee contracts, we expect this close correlation of revenue and gross profit trend to continue. Additionally, we still forecast 2023 G&A to be approximately 15 million higher than 2022, primarily due to technology related investments that support future growth. With that, I’ll turn the call back over to Marc. Marc Baumann: Hey, thanks, Kris. First half results together with our current visibility underpin our confidence that 2023 will be a record year for SP Plus in terms of adjusted gross profit and adjusted EBITDA performance. While we continue to make investments to support our multifaceted growth strategy, SP Plus continues to build its market leadership within a business environment where commercial, retail, and travel activity is increasing, and where clients and consumers are seeking solutions and services that reduce congestion and offer low friction transaction options. Through our ongoing investments in technology and people, we’re leading the digital transformation of our industry and positioning SP Plus to capture the considerable growth opportunities ahead, providing innovative solutions to make every moment matter for a world on the go. Operator, let’s open the line for questions. Q&A Session Follow Sp Plus Corp (NASDAQ:SP) Follow Sp Plus Corp (NASDAQ:SP) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Our first question comes from Daniel Moore with CJS Securities. Your line is open. Daniel Moore: Let me start with — maybe I believe it’s pronounced — you pronounced it Marc, Roker. Maybe talk a little bit more that opportunity, if there’s anything you can disclose in terms of purchase price kind of run rate revenue, but more importantly, the revenue model and, and what are the exact capabilities that they bring to the table that would maybe, would’ve been more difficult to build in-house. Marc Baumann: Sure. No, I’d be happy to, and I mean, you do have it right as Roker and we at SP Plus have been working in the areas that we talked about for some time. We have many municipal clients, university clients and others. And what we have found is that there is some functionality out there that we really would like to add to the Sphere platform. And a bit like, what we told you last year when we were acquiring DIVRT, acquiring Roker gives us the ability to accelerate the deployment of additional functionality and in some cases bring those things to market more quickly than we would have before. This is an early-stage company. Mostly, we were acquiring the capability to add to our platform, and it really is around digital permitting, citations and enforcements. And in some areas the complexity of some of the client requirements weren’t met by the current Sphere platform. So, this will roll into the Sphere platform. We expect to integrate it fairly quickly, and be out in the market place proposing on opportunities that will enable us to sell this additional functionality. It’s not a big acquisition. It certainly doesn’t contribute anything meaningfully to our P&L in the short run. It’s more about making this Sphere platform more compelling in the marketplace. Daniel Moore: Very helpful. Maybe switching gears a little bit and can use the recent contract extension in McCormick Place as an example perhaps. Maybe talk about how Sphere is changing your positioning or leveraging and negotiating renewals. Are there specific examples of kind of cross-selling opportunities, incremental services that you’re winning as these renewals come up? Marc Baumann: Yes. Well, as you point out, we did get a five-year extension with McCormick Place in Chicago. It’s a client we’ve served for many, many years. It’s a very complex operation, and I’m sure they recognize that we operate their facilities very, very efficiently, and that was really a key ingredient for us in the renewal. But in general clients are looking to reduce congestion and friction. And whether that’s in an event venue like a McCormick Place convention center, or just in the everyday movement of people in and around airports and away from curbs where we can bring technology solutions either through Sphere or bags we’re actually solving a problem for the traveling public. And what we’ve learned in large venues a big consideration for those clients is really getting people in before the activity starts and not having people leave before it’s over. So a lot of it is actually making it easy for people to get in and out. It’s as simple as that. And of course, do that with our legacy operating business, but with technology, we have the tools to process transactions, to check credentials and to get people in and out more quickly than before. Daniel Moore: Excellent. Last for me, and I’ll jump out back in queue, sounds like curbside concierge is starting to gain significant traction. I think you alluded to some additional airports, but also probably as critical expect additional airline agreements in the coming months, quarters. Any more detail on kind of the pace of those conversations? Thanks again. Marc Baumann: Yes, Sure. I’d be glad to address that. And I think as you know, from the conversations we’ve had over the years in particularly pre-pandemic the proprietary remote check-in tool, which as I commented, can now accommodate eight airlines instead of seven airlines. And that represents 96% of domestic deployments offers the ability to get people checked in some cases at the curb of the airport, but also in parking garages or other parking lots and other facilities away from the curb. So it’s about reducing congestion through technology. And prior to the pandemic, the business model was to go to airports or cruise lines or ports and ask them to sponsor a model. So provide a free service for the traveling public. And there’s a lot of interest in this tool, but in, in many cases, the concern that the sponsor was facing was, do I want to pay on behalf of the public? Do I want to be pay on behalf of other stakeholders that might be benefiting from the service? And so coming out of the pandemic, our beg leadership team recognized that there’s a consumer pay model that really works and that’s what consumer or curbside concierge really is. And we’ve rolled it out to 40 airports with one airline. We are having a successful pilot with a second airline and believe that we are on the verge of adding additional airports there. But as congestion continues to build and travel volumes go to levels above the pre-pandemic period, we we’re getting some inbound interest for the first time from other airlines that would like to join in. And particularly because this service can be offered free to the airline, it doesn’t cost them anything for this to be provided. But we’re also seeing, and I mentioned this in the prepared remarks, that the sponsored model’s coming back, there’s many airports that have construction going on, or the travel volumes are just way beyond the pre pandemic levels. And so, they’re willing to entertain, once again, the idea of the sponsored model. And so, we’re now bringing a couple of those out as well. But fortunately for us, it’s the same technology in either case. And the only question of whether the public is going to be paying for it, whether the client might pay for it or potentially even a hybrid model where it’s subsidized by an airport or an airline on behalf of the public, and then the public pays the rest. So, I think we feel very confident we have the right tool for reducing congestion, the check-in experience. And what’s exciting for us is to see that I think both pricing models are now gaining traction in the marketplace. Operator: Thank you. And our next question comes from Tim Mulrooney with William Blair. Your line is open. Tim Mulrooney: Kris, I’m looking at the SG&A, and I appreciate all the color you gave, but if I just step back and I look at SG&A as a percent of sales, it’s like 13% in the first half of ’23, similar to 2022, but well above the pre pandemic levels of around 9%, 10%, 11%. My question is, is this a temporary increase due to investments in technology or should we expect SG&A levels to remain around that, like 13% to 14% beyond the short term guide that you gave for this year? Like, has there been a structural change in your cost structure? Kris Roy: Yes, I mean, Tim, this is — that the short answer is no. I think, where we have seen opportunities in terms of growth, in terms of new business wins technology, we really want to make some of those investments. Those investments don’t immediately contribute to gross profit on day one. And so these are things that we think are out there in terms of providing for us to be able to deliver that kind of high single digit growth in the long term. So, there are some investments this year that will pay off in the latter part of this year and into next year. So, I don’t see that this is not a trend that’s going to continue where we’re going to continue to dump the P&L with G&A and investments. We think there’s going to be some operating leverage as we kind of move forward through this year and into next year. Tim Mulrooney: Same question on CapEx. I see, I look back at your P&L I see 10 million, 10 million, 8 million, 9 million, and then 22 million in 2022. It’s going to be another 20 million this year. Is that kind of the same story as with SG&A, like you’re making the investments now, but as a percentage of sales that CapEx should go down over time? Or are we in a structurally different situation here? Kris Roy: I think, we’ve certainly made some large investments last year. I think it was around ’21, ’22, uh, right around there in terms of CapEx this year. Certainly, if you look at it on a trend basis, we’re kind of getting to that same point this year as it relates to CapEx. I think in the back part of the schedules, we kind of said 19 million to 21 million or so in terms of a range. I think that’s a good range for this year. I think as we look at future CapEx, you’re going to probably see CapEx maybe come down a bit. I don’t see that kind of upper levels, sustaining through these next couple years. But certainly, I think we really want to be focused on is, are there things, and Marc has mentioned this before, are there things that we can develop that we think will benefit the clients and allow us to grow faster? And so, while I say I would expect it to come down slightly, I don’t want to also take off the table those opportunities to make investments that we think can facilitate faster growth. Tim Mulrooney: Understood. We wouldn’t want you to do that either. That makes sense. Just one more for me on your retention levels, I mean, 94%, it’s really high near the highest I think we’ve ever seen. Do your technology solutions make your services stickier or is it too early to say that those solutions are having a tangible impact on retention rates and it’s just more about execution? Marc Baumann: Well, I think our thesis is that they will make us stickier. The more things that we provide for a client and do so successfully, the fewer options they have in terms of looking elsewhere to provide those services. And there’s nothing easier for a client than they have a one-stop shop to do everything. And so whether a client needs boots on the ground or wants needs, technology needs both, we are there to provide it, and we’re not just providing it in a simple scenario above surface parking lot or parking garage, but really all the various verticals and permutations of where people are parking. And so, I think our ability to manage complex environments and bring technology along if that’s what the situation requires, I think does make us more-sticky to the client. We’re also benefiting, I think, from the fact that some of our competitors have not invested in technology and many are lagging in technology, and there’s others who are struggling operationally, and aren’t really delivering value to the client base. And so, our new business wins and the retention of our existing business, I think there were a reflection that when clients are thinking about who is best positioned to deliver against my objectives, they’re thinking SP Plus. Operator: Thank you. [Operator Instructions] And our next question will come from Marc Riddick with Sidoti. Your line is open. Marc Riddick: So, I was wondering if you could talk maybe sort of stretching out on the retention question, because certainly 94% is obviously really, really good. What, if you talk a little bit about maybe some of the pricing dynamics that you’re seeing as far as renewals, as well as, and certainly appreciate you providing color on net new wins and the technology contributions, Spears contributions to the new wins. So maybe you talk a little bit about sort of the pricing dynamic when renewals come up, and as well, maybe they could talk, and then segue into maybe the labor environment inflationary realities. Thanks. Marc Baumann: Sure. I mean, I would say that the competitive dynamic and pricing hasn’t really changed much for a long, long time. And I think that’s partly we’re talking about the pricing of what we charge for our services as opposed to what the consumer pays. And the reality is that what we are charging a client to manage their facility or bring in technology solutions is a very small amount as a percentage of revenue. And so, I think when a client is looking at who’s going to provide the services, they’re really looking at who is best poised to execute and deliver the value that the client’s looking, whether it’s a low friction consumer experience, updated technology or maximizing profit. And so I don’t think that that competitive pricing environment has changed much. One of the things that’s new for us is that as we have developed the Sphere platform, we’re able to offer it to clients at little or no upfront cost if the transaction volumes are high and a lower cost than maybe some of the traditional parking equipment companies are charging for those locations that don’t have a lot of transactions. And that’s because we’re asking the consumer to pay a transaction fee. And so it, and a client or a prospective client has the ability to upgrade antiquated technology, capture more revenue and have more reliability in their tech platform, and not have to make the capital outlays that they might have. And of course, as we as people feel financial pressures or higher interest rates and the like, not having to make capital outlays is an important priority for a lot of both of our current clients and prospective clients. I think the labor challenges have moderated significantly. Obviously coming out of the pandemic, there was a big reset that went on in terms of people weren’t in the workforce wage rates rose significantly in many places. And of course there’s a lot of demand for delivery drivers and the like, I think some of those industries, they have plateaued in terms of their growth trajectories. And so, we’re finding in general that the labor market is in much better condition than it was say a year or two years ago. But that being said it’s another attraction of our business model where we are heavily skewed toward management type contracts. And of course, as you know, on the fixed fee contracts increases in labor costs are passed on to the client, and so they don’t affect our P&L directly. Marc Riddick: Great. And then I was wondering if we could shift gears. It seems as though from the prepared remarks as well as the press release that the strength that you’re seeing in the activity that you’re seeing is quite broad based when it comes to industry vertical customers and the like. I was wondering if you could sort of maybe touch us bring us up to date on, are you seeing any particular geographies that are maybe a little more active than others, as far as bringing on new business wins, or are there any sort of it seems there’s a lot of green shoots, but wondering if there are any areas that are little greener than others? Marc Baumann: Yes, no, that’s a great point. You know, I’d say it’s fairly broad based. I mean, there’s strong economic activity everywhere and of course, we’re seeing for the most part the hybrid working model has, I think, become the new normal. And so there’s certain days of the week that have a lot of parking demand and there’s other days of the week that have less demand. But certainly as those, as the people that serve people traveling for work have looked at their businesses. They’re saying, where do I bring new technology to drive costs out of my business operation? Do I have technology solutions that are innovative and can deal with the fact that there are fewer monthly parkers now and more daily parkers? And so, interestingly a lot of our growth in new locations is really coming from, you know, commercial office buildings, hotels, retail, mixed use and residential properties. So, I think these are the people that are super excited about how do we drive efficiency with technology, maybe take operating costs out of the business, and how do we ensure that we have optimally priced the parking and of course through our digital tools, our parking.com mobile app, our web scraping tools for and our yield management experts and analysts are able to advise clients on what the optimal parking rates should be and really are able, we are able to drive through our digital marketing programs, to creative solutions to drive demand to the parking facilities that we operate. And in these economic times that’s a major focal point for our client base or our prospective client base. Obviously, many markets are experiencing more congestion because of migration. The Southeast and the Southwest have a lot, had a big uptick in people. But even in some of our legacy markets, we’re seeing places like New York and others we’re seeing nice same store growth taking place across our portfolio. And I think, it’s just reflection of the fact that people are out and about and are, have pretty much returned to normal now that the pandemic is behind us. Marc Riddick: And then last one for me, I think, the announcement of the Roker acquisition I think was like the day after we did our preview notes. So I did want to sort of ask though, if you could sort of bring us up to date as to kind of what you’re seeing as far as the potential acquisition pipeline out there. It’s certainly technology is certainly one of the key priority areas, but I wonder if you talk a little bit about what the pipeline kind of looks like and valuations and it seems as though there’s more room to grow there, but maybe you sort of bring us up to date on what you’re seeing out there. Marc Baumann: Yes. Well, I think we’re definitely — I’ll comment on the technology space, and Chris can maybe comment more broadly. But certainly, what we are seeing is that there have been a number of early-stage technology companies that have developed some functionality that actually is useful in the marketplace. But what they’re finding is that it’s a long slow slog to go sell clients one at a time. That is the challenge because the ownership or the property management in our industry is very fragmented, and so I think some of them are realizing that in order to get the value out of their innovation, they really need to sell their business to somebody like us that already has a large geographic footprint, and so realistically, we’re seeing quite a bit of inbound activity around technology, and people are saying, “Hey, we’re going to come to market with this. So we’re looking at selling our business, and unfortunately, because we have a tech road map for our business, we have the discipline to say, is this really going to accelerate our growth. We’re not looking to acquire technology for its own sake, but if we can accelerate the deployment of our Sphere platform, the capabilities of the Sphere platform, ensure that it can provide capabilities that other people can’t provide, then an acquisition makes sense, provide that we can get it at a good value. That doesn’t mean we’re not interested in operating businesses as well. But I think Certainly, we’ve seen because of this changing market dynamic opportunities over the past year to acquire technology businesses at valuations that enable us to really create value for our shareholders by making that acquisition, and on the operating business side, I would say we continue to keep our eyes and ears open in terms of opportunities that are out there. I think we’ve mentioned this on prior calls that what we don’t want to do is acquire an operating business that is kind of a slow-growing version of who we are. What we really want to find as opportunities where we can speed up or continue to grow our business at that high single-digit basis, and maybe that could be through the deployment of our technology solutions into that operating business that maybe hasn’t leveraged the technology that is there or available, and so I think there are some opportunities. We continue to look for those, and we continue to keep our eyes and ears open. Operator: We’ll move for our next question. We have a question from Kevin Steinke with Barrington Research Associates. Kevin Steinke: So I think on your first quarter conference call, you talked about expecting gross profit to grow on a quarterly sequential basis throughout 2023, with more significant sequential growth in the second half of 2023, and so we had a really nice sequential growth in gross profit here in the second quarter of about 13%, and if I just assume pretty modest sequential growth in gross profit here over the next two quarters, it’s led to the high end or a little bit above the high end of your adjusted gross profit guidance range for 2023. So I mean, is there any reason we should think about the sequential comparisons kind of flattening out as we get into the second half of 2023? Or is there may be just a little bit of conservatism and the fact that you maintain that guidance? Kris Roy: Yes, Kevin, this is Chris. I think if you look at our traditional Q2, that’s typically our strongest quarter, and certainly, we have a lot of new robust wins as it relates to the operating business as well as technology. And certainly, we had some strong same-store location growth. So certainly, that is contributing to it. I would say there’s maybe a little bit of pull forward in terms of some new business that we expected in the back part of the year. I think what I mentioned on the Q2 call is that we would expect to see some continued growth in the business that would be over the seasonality would be overshadowed by the growth in the business. I think if you look at — and I mentioned this on the Q1 call, I still think Q4 is going to be our strongest quarter, if you were to look at gross profit. So I think if you look at kind of how we’re going to sequence up the remainder of the year. Q3 is generally a slower quarter for us. Q4 is typically maybe number two and Q2 is always number one. So I think if you think about it in terms of that in terms of a sequence basis, I think that would help. Kevin Steinke: Okay. Great. That’s very helpful, and I wanted to follow up on your comments about adjusted gross profit and revenue for — or excluding reimbursed expenses growing at a similar pace in the first half of the year and that you would expect that trend to continue, I guess, both growing at a similar rate. But does that imply some sort of stabilization in the lease contract base just given the revenue recognition dynamics there, the different contract types, Normally, when you switch from a lease to a management fee contract, revenue will go down just based on the recognition, even though the gross profit might be very similar. So just wondering, if that makes sense or if you’ve seen some sort of stabilization on the lease side. Kris Roy: Yes. I think — Kevin, I think we are. I think if you look at the lease location numbers, that certainly has been somewhat of a static number. It’s kind of been in that 410 to 420 locations in terms of leases for the last few quarters. So I would definitely feel — I definitely feel like that’s kind of static. We certainly have nice momentum on our management contracts, and I think that gives us increased visibility in terms of how we’re seeing the revenue come into the business. I think from time to time, we do get questions around what does the revenue trend look like for SP, and I think what we’re trying to provide here is a little bit of guidance around not necessarily guiding to revenue, but giving some color around how we’re seeing the business evolve and mature in terms of that revenue growth and trying to link that into the gross profit. So I think that’s close correlation from a gross profit perspective to revenue is there, and I think it’s primarily due to the management contracts. — that we have, the technology and the contributions for technology and that our lease portfolio is somewhat static in terms of the number of locations we have. Kevin Steinke: Okay. Great. And you mentioned their visibility and you talked about in your earnings release, how year-to-date new business wins and the robust business development pipeline are supporting your high single-digit long-term gross profit growth outlook. Does that imply that you’re starting to get some decent visibility into what 2024 could look like? Or at what point do you start to get better visibility, I guess, into the next year? Kris Roy: I think if you look at this year, certainly, it’s a really good year for us. I mean I think what we said is we would deliver in the low double digits in terms of gross profit growth and high single digits on a go-forward basis, and I think that’s still the case. I think we feel really good with our business in terms of where we’re at. I think as we look out into the horizon, I would still reiterate we feel really comfortable with that high single-digit gross profit growth in terms of growth in the business. Operator: I’m showing no other questions in the queue. I’d like to turn the call back to Mr. Marc Baumann for closing remarks. Marc Baumann: Thank you, Catherine, and thank you, everyone, for joining us. We’re obviously very excited about our results for Q2 and particularly because they reflect the fastest organic growth rate we’ve ever delivered as a management team. So we’re very excited about that and the prospects for a successful year, and we look forward to talking to you again next quarter. Thank you. Operator: This concludes today’s conference call. 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Business First Bancshares, Inc. (NASDAQ:BFST) Q2 2023 Earnings Call Transcript July 30, 2023 Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Business First Bancshares’ Q2 2023 Earnings Conference Call. I would like to now turn the call over to Matt Sealy, Director of Corporate Strategy and FTNA. [Operator Instructions] Matt […] Business First Bancshares, Inc. (NASDAQ:BFST) Q2 2023 Earnings Call Transcript July 30, 2023 Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Business First Bancshares’ Q2 2023 Earnings Conference Call. I would like to now turn the call over to Matt Sealy, Director of Corporate Strategy and FTNA. [Operator Instructions] Matt Sealy, you may begin your conference. Matt Sealy: Good afternoon and thank you all for joining. Earlier today, we issued our second quarter 2023 earnings press release, a copy of which is available on our website, along with the slide presentation that we will reference during today’s call. Please refer to Slide 3 of our presentation, which includes our safe harbor statements regarding forward-looking statements and the use of non-GAAP financial measures. For those of you joining by phone, please note the slide presentation is available on our website at www.b1bank.com. Please also note our safe harbor statements are available on Page 7 of our earnings press release that we filed with the SEC today. All comments made during today’s call are subject to the safe harbor statements in our slide presentation and earnings release. I’m joined this afternoon by Business First Bancshares’ President and CEO, Jude Melville, Chief Financial Officer, Greg Robertson; Chief Banking Officer, Philip Jordan; and Chief Administrative Officer, Jerry Vascocu. After the presentation, we’ll be happy to address any questions you may have. And with that, I’ll turn the call over to you, Jude. Jude Melville : Okay, thanks, Matt. And thank you, everybody for joining us. I know it’s a busy time and we appreciate you prioritizing this conversation. Last quarter I began by discussing our longer-term objectives to give some context to our near-term results. And while I won’t take as much time to review the specific long term goals on this call, I do want to take a moment to remind us of what those general priorities are. Our management of risk through diversification as geographical, industry, product set, duration and revenue streams among others. Our number two achievement of greater efficiency and optionality through scaling. Number three, an increasing core profitability levels through a focus on capital allocation and management. Finally, a qualitative rather than quantitative goal to continue selective additions when available of key teammates with experience and talent to help us prepare for the opportunities that will present themselves as we gain success from the previous fully mentioned three more numerical priorities. We’ve been through enough periods of uncertainty to know we have a responsibility to continue preparing for the future even in a time of caution. I’m pleased to congratulate our team on another quarter of progress in each of these areas. Our management of risks through diversification, we continue to diversify our asset exposure even in a time of lower growth. Our loan growth was again led by our Dallas region which generated over 50% of the net increase, with the runner up this quarter being our North Louisiana region, two very different regions, both of which we are gaining significant brand recognition within. On the type of loan front, growth was again led by increase C&I exposure, accounting for roughly two thirds of our increase balances. Also mentioned encouraging progress in diversifying revenue streams through some model, positive movement in our SBA line of business. Last year, we had about $200,000 in income from SBA, and this year, we expect to average more than that number on a quarterly basis. So it’s not yet the needle mover we eventually expect it will be but we do like the trajectory. On scale, we slowed down our growth to match the current economic and rate environments, it’s a reflection of the optionality our current size offers. This size, we should be able to operate it at solid levels of efficiency without relying on the significant levels of growth we booked over the past few years. So we have the opportunity to be increasingly selective, which will pay off in asset quality, loan pricing and capital usage. Our growth, while slowed is still healthy at about 8% annualized level that’s manageable, fundable and capitalizable within the limits of our retained earnings. I’m excluding the impact from our serv debt redemption, we were capital accretive on all regulatory ratios. And if we were to back out the impact of AOCI, we would have been capital accretive on all of our capital ratios, including TCE levels. We expect this to continue to be the case in future quarters as we remain selective on loan growth, likely in the 4% to 5% range. On earnings, we’re very pleased with the results and while we aren’t yet where we want to be, we have taken a significant step forward. We booked the 1.18 ROA, 14% ROE and $0.73 earnings per share. These are GAAP numbers. Three main drivers, our financial results were good NIM projection, good expense control and continued solid asset quality. Greg will dive deeper into these into each of these fronts in a few minutes. Now, these GAAP results did include some net positive non-run rate income and expenses. But even backing out those items, our results would still have performed at solid levels producing non- GAAP results of 1.04 ROA, 12.4% ROE, and we $0.64 EPS. Couple points I want to note. First non-run rate does not mean accidental or not real, our additional income came primarily from investments we’ve made over the years and small business investment companies or SPICs, which returned at a higher level than normal this quarter, and through a decision to retire some holding company that early. Second, what we believe is fundamentally change your earnings profile is that roughly 1.0 ROA over the past year or two would have been where we expected to land assuming everything went right. Now we view a 1.0 ROA as a baseline from which we have the opportunity to outperform when things fall our way has happened this quarter. That doesn’t make us a high performer yet, but it’s a concrete step in the right direction and in line with the goals we’ve been articulating for you over the past few quarters. Finally on the topic of people, while we do not believe we need to add significant numbers of producers at this time, as our most recent hires still have capacity to grow their individual books. We did add two impactful back office hires that are providing immediate impact. Zach Smith joined us Treasurer. Zach was one of the leaders in the Treasury Department at Bank OZK, a larger regional bank, and also has experienced with Comerica. We were also joined by a new Chief HR officer, Mike Pelletier. Mike was CHRO for IBERIABANK Iberia for many years prior to their merger with First Horizons. Both of these individuals, each of them has been with our [inaudible] banks as they have grown well through their experiences and relationships contributed materially to our journey, both navigating the current uncertain times, and in a time of opportunity that will surely follow. I’m going to turn it over now to Greg and Matt to cover these results in detail. But I’d like to reiterate my thanks to our team. We’ve navigated a number of crises and perceived crises together, beginning with the great financial crisis, while we were a de novo bank, we’ve navigated not always perfectly, but always with one eye towards the immediate needs of our current customers, shareholders and regulatory partners, and one eye mindful for the long term opportunity we believe our franchise has before us. This quarter is another demonstration of our capacity on both fronts. That concludes my remarks and I’ll turn it over to Greg for more detail on the financials. Greg Robertson : Thank you, Jude. Good afternoon, everyone. I’ll spend a few minutes just reviewing our Q2 highlights some of which is Jude already mentioned, including some balance sheet and income statement trends and will include some updated thoughts on our current outlook. Second quarter, core net income number was $17.7 million or $0.70 earnings per share. That equated to a 1.13% ROA and 13.50% ROE. That was really driven by strong noninterest income, lower loan loss provision expense, from our continued stable credit trends and the slightly lower loan growth. Slightly higher than expected loan discount accretion as Jude mentioned, these results were partially offset by slightly elevated noninterest expense during the quarter. Before I dive into more of the specifics on the quarter like to take a moment to call out a few items that might not be readily identifiable, but are important to for the context to consider. Our core noninterest income, as Jude mentioned, included $2.8 million in equity investment from SBIC revenue, which 2.6 or about was more than what we would expect it we had modeled about $200,000 for the core, record net interest expense included a $715,000 really one time bill from our core provider for some services that were rendered in the past. And that won’t be reoccurring in the future. Our loan loss provision $500,000 was really a consequence of the lower loan growth and really contain continued strength of our credit book. With all those adjustments, as Jude mentioned, I think it’s important to consider really a baseline for what we look at going forward from an earnings standpoint. And that so called adjusted run rate for the quarter would have been $16.2 million or diluted EPS of $0.64, and ROA of 1.04 with ROE of 12.14%. That’s very strong for us for the quarter. And we’re really proud of those results. That was highlighted by a few things. We’ll start with the balance sheet first and then work our way through some other income statement items. The loan growth for the quarter was 7.9% really highlighted by our Dallas Group with $55 million or 59% of that loan growth for the quarter. That loan growth from our Dallas Group remained our Texas exposure to 37% exposure rates for the portfolio as a whole. As far as loan type for the quarter C&I was a headline again for the second quarter, $69.9 million of that growth was in C&I loans with $67 million in C&D loans that actually migrated over, because of completion, in projects into owner occupied CRE and income producing CRE, with the other piece of the loan growth to actual growth in CRE for the quarter was $9.5 million for the quarter. As far as deposits go, deposits increased about $208 million for the quarter, $211 million of that were brokered deposits. Really, there’s some nuance and we’re very proud of the fact that the work that our branches have done, the branch growth for the quarter was relatively flat with a little bit of extra story or a script around that. In the beginning of the quarter in April, the backup0 of our portfolio from deposit standpoint, being commercially focused, we experienced a little over $100 million in run out during April for tax related payments from clients. During the remainder of the quarter, branches did an excellent job of really in the production staff as a whole going out and really drawing net back to zero. And that’s been a really important part of the nuance of the quarter. So we feel like those wins in the second half of the second quarter, it really started to show positive results. And we’re seeing early results in the first month this quarter with that continued deposit generation profile. Noninterest bearing deposits as important topic right now, our portfolio sits at about 28% of the portfolio being in noninterest bearing deposits is down about 3%. We feel like that migrations started to wane in the recent months. So we are very optimistic about that we have been generating about $5 million to $7 million in new noninterest bearing deposits every month so far this year. So really, really still optimistic about that. As far as capital goes Jude mentioned, capital increase not nicely in the second quarter from a bank level perspective with Tier 1 leverage and tier total risk base, increasing about 15 basis points and 13 basis points respectively. TCA, TCE to TA in total risk base had a consolidated level, both, this could decrease about 12 basis points. However, if you back out the AOCI swing which we had about $13.3 million in AOCI, negative swing this quarter that would have been an increase in TCE to TA ratio about 9 basis points for the quarter. Furthermore, if you think about it from a tangible book value perspective, looking at it, when you strip out its AOCI tangible book value xx AOCI, we had about 10% growth year-to-date in that, and about 13.56% for the quarter, and that tangible book value number tax 4AOCI would have been slightly above $20. So really happy about that performance and creating the value for the shareholder. As far as margin goes, margin was down slightly five basis points. That is right in line with where we projected our expectation on pricing going forward really proud of the efforts of our production staff, the bank, the loans generated for the quarter are really coming, the average way yield is about 8.45% for the quarter, the majority of our loans now are being priced or renewals. And that renewal rate is slightly higher than that closer 8.80. And with average, our new production being at about 8.60, on average. For deposit pricing, I’ll let Matt get into details on the betas here in a minute. We are really happy with our continued deposit generations, although, as everyone knows the cost of those deposits is very competitive in this market right now Our total deposit beta cycle-to-date is about 36%. And we expect that to be closer to 40% by year end. And with that, really, I’ll turn it over to Matt to really kind of cover the deposit betas in more detail right now. Matt Sealy: sure. Thanks, Greg. So as Greg mentioned, total cycle-to-date, deposit beta is 36% during the quarter, interest beta cycle-to-date betas during the quarter were about 50%. We see those trending up about five percentage points each quarter. So ending the year at around 60% for Q4. And on taking a step back kind of thinking about total interest bearing liabilities. Those betas were 53%. So tracking pretty close to our interest bearing deposit betas and again, see those going up about five percentage points each quarter. So ending the year keep forward around 63%. And the quarterly snapshot betas, those were just a little bit above 100% for just Q2 interest bearing beta, and that snapshot. And I think that’s relatively in line with some of the other releases, and peers that we’ve seen. But thinking about things more on a cycle-to-date basis, I think 5% increase over the next few quarters is roughly what we’ll see. And with that, I’ll turn it back over to Jude for any closing remarks before we take Q&A. Jude Melville: No, nothing that. I’m happy to jump into questions now. Thank you. Q&A Session Follow Business First Bancshares Inc. (NASDAQ:BFST) Follow Business First Bancshares Inc. (NASDAQ:BFST) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: [Operator Instructions] Your first question comes from the line of Michael Rose from Raymond James. Michael Rose: Hey, good morning, or good afternoon, guys. Thanks for taking my questions. Maybe we can just start on the beta commentary that you just kind of laid out. Thanks everyone for that. What does that assume in terms of where kind of NID mix stabilize, I think you guys are about 29% at the end of the second quarter, just trying to get a sense for where you think that stabilizes. And what the expectations are for kind of ex brokered growth, which is down a little bit this year. I know you guys have several initiatives in place. We just love some thoughts. Thanks. Jude Melville: Yes, I think that we’ll see the noninterest bearing composition kind of bottomed out towards the end of the year. And we’d see that down another couple percentage points. Between now and yearend. So bottoming out around maybe 26% or so, just as percentage of the overall mix, our appetite for brokered, I think that will just continue to be kind of opportunistic, with the pricing mix between brokered and other borrowing sources. But there’s still a little bit of room that we have, certainly to rely on brokered. And that said, and I can let Greg give a little bit more specifics around what we’re seeing early on in the third quarter, but we’re encouraged that, on just a excluding brokered basis deposits were flat during the second quarter. And one important thing to consider there is, we did have some municipality and tax funds that rolled out during the quarter. So when you strip out brokered, and you factor in the tax funds that had moved out, being effectively flat from Q1 was, in our eyes, a stabilization theme or trend that’s starting to occur. I think we’re nearing or turning a corner now, but maybe another quarter or two, a little bit further kind of decline in that mix of noninterest bearing. So I’d say it’s conservatively maybe a 50:50 split in terms of funding between more wholesale and core deposits. But again, we’re optimistic about some of the core funding generation that we’ve seen early on here in the third quarter, but I’ll let Greg kind of hit on maybe some of the more wins and trends we’re seeing on the core side of the funding base. Greg Robertson : Hey, Michael, I think there’s a little bit of nuance, I think, first of all, we have seen and do feel like in the industry, not only a specific within an industry, the outflow is starting to wane. The question for noninterest bearing depends on how many more rate increases, we see if we hold flat from here on out, we think maybe we might have seen as much of the movement that we’ve experienced, like I mentioned, we are consistently producing $5 million to $7 million in new deposit noninterest bearing generation per month. Now, we have had some recent wins that I expect that number in the first part, especially July and August to be higher than that. Put into context, the average cost, we’ve been generating in noninterest bearing a rate bearing accounts, deposit accounts open per month, about $100 million in new originations each month this year. And then most recently, weighted average is about 4.38. So as we continue to manage the balance sheet from a loan growth perspective, and weigh that against the cost of brokered, which today, for one year brokered is going to be in the 5.35 range. So we continue to be successful. And I think we will on the deposit generation front at that lower cost. It’s materially different for us. We’ve seen some, like I said, some wins. So we expect that to continue to happen. But the brokered would be kind of plan B, obviously. Michael Rose: Very comprehensive question. And that gets into the follow up, which is, the core margin was down kind of, I think about five basis points, you said single digits. So, looks like that was good just kind of balancing, what you’re expecting, in terms of deposit beta expectations NID mix. And what you’re seeing on the loan repricing side? Is that a good kind of way to think about the quarter margin, down kind of mid-single digits when you put it all together? Am I missing something? Greg Robertson : Yes, I would say about breakeven from where we are today, maybe with a basis point or two improvements would be what we’re expect to going forward. Matt Sealy: Yes, Michael, I’ll give you a little bit more context around that. So the beta assumption that I’ve mentioned previously, that translates to roughly 35 basis point pickup in just interest bearing deposits in the third quarter. And when we look at our new and renewed loan yields coming on, like Greg had mentioned, in the 8.60 to 8.80 range, we’ve been executing pretty nicely on pulling through from a cycle-to-date loan beta perspective, holding it around 85%. We expect that to continue and pick up about 30 basis points in core loan yield expansion in the third quarter. So when we kind of net all of that, the funding side and the earning asset and loan repricing side, I think we feel pretty good that the margin should hold, core margin should hold flat here. Maybe a little bit too early to claim success. And we’re turning the quarter to be accretive. But I think we feel really good that flat in Q3 is where we’ll be. Michael Rose: That’s very helpful. Maybe just, one follow-up question for me, just credit is exceptionally good. And, I say across the industry, we’re seeing kind of, more signs of normalization, and definitely a pickup in kind of idiosyncratic one off credit that you guys are doing, really, really well. Anything that you’re seeing kind of, on the horizon that you guys are worried about, or is it just the strengthened market and kind of, hopefully, we don’t have a recession or anything like that, but just above some general thoughts. Thanks. Jude Melville: Yes, I don’t think we’ve seen any evidence anywhere. Great thing to say. But this time last quarter and the quarter before, we’re all sensitive to see what will happen. We haven’t seen any degradation in our portfolio. And Phil or Jerry, if you want to add anything there that you’re seeing, but I don’t think any of us would say it would have an area that we would point to is showing signs of stress. Philip Jordan : No, Jude. So I can add to that. I would agree. Like you said, it feels strange to say that out loud. But now right now, we feel very comfortable where we are. And like you said strengthened markets and the bankers. We do always stress credit for sure. Michael Rose: All right, guys. Thanks a lot. Jude Melville: Better not to have good roadmap for you on that front. But I guess I’m not that [inaudible]. Operator: Your next question comes from the line of Matt O’Neil from Stevens Inc. Unidentified Analyst : Hey, thanks, guys. Good afternoon. On just following up on Michael’s question around loan yields, and those renewals, I think you mentioned that there could be about 30 bps of low yield expansion core in the third quarter, should have a more color on that. The newer yield you think, are coming out on around 8.80? I think you said, what’s the color on what yield those loans are rolling off at? Like, what’s the differential? And then as you think about the loan maturities and renewals are coming up, is this a pretty steady level that you’re going to see the next few quarters or could there be some time period where it’s a higher number back? Thanks. Greg Robertson : Yes, I think the loan the average weighted between new and renewed now fortunately for us, the loan growth is slowed down on purpose by us not been more strategic than it has been for the lack of pipeline. That renewable pace has been greater than the new loan. So we’ve been seeing renewables come through, like I mentioned about 8.80. With the new stuff being priced slightly less than that, for an average between the two about 8.60. Pickup, we’re seeing on the renewals towards creating the expansion is in some cases as much as 1%. And that’s a pretty steady stream of those renewals over the next three or four quarters, approaching probably $1 billion with a portfolio that will continue to do that. Now, as we get quarters into the future, maybe that is in 1% through 4%, 1% difference in the pricing. But some of them will be leaning toward that in the early parts of it because of the difference in the origination to maturity. Matt Sealy: Yes, Matt, and I’ll direct you to page 21 in the investor deck to kind of answer your question on where the loans are sitting now and the repricing opportunity. We’ve got over the next 12 months, about $2.2 billion that to reprice between fixed maturity in the next 12 months and floating rate. And those are sitting on the books at about a 7.67 weighted average yield. So when you think about the 8.60 to 8.80, new and renewed or guess renewed and new, that’s about a 90 plus basis point pickup in those loans. So that translates to if you just apply that 90 basis point pickup in the actual renewal of that portfolio, which is about 45% of the book, you’ve got 20 plus million in annual revenue pick up there. So that’s I hope that kind of draws the line or connects the dots between the 30 bps in the overall total portfolio pickup and the actual pickup and just the repricing opportunity. Unidentified Analyst : That’s perfect, Matt. Thanks for flagging that slide in there. I missed that initially. Perfect. And on the loan growth front. I think I heard you’d say, the back half the year between 4% to 5%. I assume is the annualized number for the back half, just want to confirm that. And then as far as the mix, you mentioned it was a C&I portion that led the way in 2Q, as you think about pipelines and pay downs. Is it going to be similar we saw in 2Q where it’s mostly C&I growth, whereas some of the construction projects are completed and they move on to a different category? Jude Melville: Yes, I would, first part is I didn’t intend for that to be an annualized number. And then second part is that I would think that we would see a similar mix going forward. And not really just this quarter but the past couple quarters, we’ve had that mix as we’ve kind of downshifted construction production to recalibrate the portfolio. So we’ll still see CRE as construction turns over or completes, associate CRE growth, but not at the rate of new production that we have seen historically, and we definitely are not doing as much construction, as we didn’t have done in the past. So I would anticipate C&I would continue to be the most significant contributor to any kind of net increase. Unidentified Analyst : Okay, thanks for that Jude. And then just lastly, I think the accretion levels were a little bit higher this quarter, any color on expected accretion in the next few quarters? Greg Robertson : Yes. Matt, I would think we would expect, we’re expecting similar levels of accretion in the next couple of quarters just by the pace of the deals that we have kind of working through the process right now. Operator: Your next question comes from the line of Brett Rabatin from Hovde Group. Brett Rabatin: Hey, good afternoon, guys. Thanks for the question. I wanted to first ask, you talked about the brokered TDs and the market and your strength for gathering deposits. Some banks in your market area and in the southeast in general have indicated that maybe the landscape has gotten a little less competitive with one larger regional that was super aggressive with the deposit campaign during May in particular, have you guys seen that? maybe in some of your markets in Louisiana where maybe it’s the competitive landscape is ebbed a little bit or just still seem as ferocious or everyone put it as it has been for the past few months. Greg Robertson : Yes, I don’t think we’d describe it as ferocious. I do think it’s that at one point, but I think it has calmed down a little bit. I would say that some of our peers have raised, it bothers a little greater clip, but I think they also have been a little more willing to pay out a little bit. So we’ve tried to strike a balance between deposit growth and protecting them now. But I do think that, as we talked about, we’re starting to see some signs of deposits coming in. And that’s not because we’ve materially adjusted strategy we have on rate that we paid, it’s because it is probably becoming a little bit lousier, but still tough, but not quite ferocious, I would say. But anybody else want to add to that. Jude Melville: I would say part of the added talent, and skill sets that you have been pull down and giving us better visibility into our how we manage our deposits on a great scale, kind of a really good look at the deposit portfolio as a whole. So I think it’s allowed us better technology, allowed us to make really good decisions on deposit pricing. It’s good to see. Brett Rabatin: Okay. That’s helpful. And then I didn’t if you gave it, I missed it. But the securities that are maturing here in the back half of the year, how much is that? And will that be partially a fund loan growth? Or how do you think about the balance sheet management? Greg Robertson : Yes, Brett. As far as securities go, we think we’ve only purchased two securities this year, the portfolio is about 13.5% minus AOCI of assets right now. We haven’t, as far as cash flows go or maturities go, we have about an average of about $131 million per year for the next three years in maturities that are scheduled pretty systematically out. So we’re really from a balance sheet standpoint, we would expect to plough that back in and not really be very selective on securities, if and when we do purchase them to maybe extend some duration, strategically to pick up some good yield, now that the rates seem like they’re getting toward the top, but outside of that, we expect to put that money as maturity back to work in the form of paying down debt or put it back into the loan portfolio. Matt Sealy: The only thing that I’d add too is that during the quarter, we did take out a little bit more brokered had some, just some more cash on balance sheet. If we were about 5% cash to assets at the end of the second quarter, typically, we’ve been a little bit lower than that. But that was just kind of a re- mixing of liquidity, so we comfortable letting some of those securities run off and just remix into loans so their standard securities might come down just a little bit. But we’ve already got, more liquid interest bearing cash balances on the book. Brett Rabatin: Okay, that’s helpful. And then if I could sneak in one last one, just around strategy, when you guys raise capital, in the fourth quarter, you’re basically kind of a year ahead of your five year plan. And so Jude, I’m curious to hear if in this environment in terms of either interest rates or some uncertainty on the economy, if maybe you’ve changed what you want to accomplish, or if you’re still kind of full steam ahead in Texas or what’s changed, maybe relative to the environment last year? Jude Melville: Sure. So that’s kind of why I started the call was kind of going over what our general priorities are, and talked about it last time a little bit too. But we were ahead of the game in terms of size, where we wanted to be size wise, which of course required use some of the capital that we raised last year, or led to that. Also ahead of the game in diversity, diversification by geography a little bit. Not ahead, really, as in the last year on earnings. So what we wanted to do this year, even pre- proceed crisis was to continue to grow, continue to diversify, but put more emphasis on earnings simply out of the three main categories than we have in the past. So I wouldn’t say that we have changed our strategy, I’d say that we’re going to take advantage of the fact that we’re a little ahead of pace on the first two components so that we can prioritize little more on the third to make sure that we achieve all three. And I think this quarter is really good example of us pivoting in that way. So we slowed down the loan growth, which, but we’re still able to continue to focus on growth in in the Dallas area. And that slowed loan growth ensured that we were capital accretive which is something I know when we raised capital in the fall, that was a question or when, that was a question was when would that enable us to be capital accretive? And I think we’ve probably felt like that was possible now. But there was some hesitancy to accept that, I suppose. But so I’m pleased that we were able to do it. And we do plan on continuing that mode of operation. So our growth will be governed by the retained earnings, its growth. But that still leaves us well within range of our targeted five year plan growth that we’ve outlined. So long winded way to say we haven’t changed our goals, we’re just managing the process by which we achieve them. But we still remain in our minds on target to accomplish all three in the direction that we want it to and should be able to do so within our current capital structure, supplemented by the retained earnings. Operator: Your next question comes from the line of Kevin Fitzsimmons from D.A. Davidson. Kevin Fitzsimmons: Hey, good afternoon, everyone. Greg, I missed in your prepared remarks you were talking about like a core ex non run rate type piece of earnings per share. And I was wanting to, if that’s what you said, if you could repeat it, and then also, how I should be looking or how we should be looking at a run rate going forward for core fee revenues and core expenses. Is it really or just we just kind of pulling out that additional civic revenue and pulling out that extra that processing charge, if you can kind of guide us on those fronts? Thanks. Greg Robertson : Absolutely. Yes, I was talking about the way we’ve been thinking, our core, or published core net income 17, 7, $0.70 EPS, if you were going to take out those two items that we considered to be non-reoccurring, but not intentional, like you said, so one would be the EIC income of 2.6. And the other would be the core IT costs of $715,000. So if you did that, you would get an adjusted $16.291 million exactly. And that would equal a diluted EPS of $0.64. Kevin Fitzsimmons: Got it. Okay. Greg Robertson : As far as the noninterest income run rate, I think $8.5 million is probably the way we want to think about that going forward. And noninterest expense, right about $39 million, or slightly higher than $39 million for the quarter. Kevin Fitzsimmons: And is it fair to say? I’m sorry, go ahead. Matt Sealy: Oh, sorry. Yes, if you take the what we reported core noninterest expense of $39.6-ish about the $700,000 kind of one off data processing invoice that we received, and then just baking some just natural course of business expansion. Maybe mid $39 million number, good run rate going forward, which that reflects about a 5% annualized increase in expenses. Kevin Fitzsimmons: Great, that’s what I was going to ask next. Thank you, Matt. And as far as the bond portfolio, you mentioned the cash flows, albeit some banks have had pulled the trigger or are evaluating doing a larger transaction to accelerate that opportunity to get proceeds out at higher rates or whichever alternative you want? Is that something even on the table for you all or is it more? Is that something we’re in the near term that can put pressure on [inaudible] but you might want not to do. Thanks. Greg Robertson : Yes, I think it’s something we talk about. And then we run an analysis every quarter on, if we needed to execute on liquidating part of the portfolio immediately, we could do about $135 million of that overnight, but with less than a $3 million loss. But as far as, we feel like the AOCI is going to unwind fairly quickly. So, a strategy to your point that would put pressure on capital right now, now that we’re going to do anything like that. Jude Melville: Well, not just for pressure on capital, but just a business decision, I think is the way I would describe it, we have a fairly short duration of our investment portfolio. And we’re comfortable that our projections enable us to accomplish our goals without giving up money. And so we’ll keep doing that unless for some reason, some changes. And we have to we do analyze it, though, and it certainly is on the table, we need to always look at options, but making the best business decision for us would indicate to me right now that that’s not a necessary move. Kevin Fitzsimmons: Right. No, good point about the short duration. And then one last one for me. We’ve had a few deals announced here in recent days, one in the mid-Atlantic. Curious if, I know you all are still digesting the Houston deal. But as you look out, later stage of the cycle and exit in the cycle. Just curious are there conversations going on and new regions or new markets you might have your eye on in terms of looking to expand? Thanks. Jude Melville: Sure. we’re always like your prior question is it something on the table? I think everything’s most things are on the table. But certainly the equation has to make sense for us. And the equation is a little different today than it was a couple of years ago. One of the differences is that we are comfortable that we have a strong geography that we can build out. That doesn’t mean we wouldn’t look at other geographies over time. But we don’t need to. I think given the markets that we’re in, there’s plenty of opportunity here. So the bar would be pretty high in terms of embarking upon an expansion of that geography after an M&A deal. Not saying that it couldn’t happen. But it’s not something that we’re necessarily aggressively looking forward, I would guess that the more likely outcome would be expansion through are at some point when we’re ready would be expansion through a team was down, or something incremental that nature, but there definitely are more conversations that were either a part of our hearing that they’re happening, but I don’t know if that necessarily makes it more likely to happen. A lot of things have to fall in place. We’ve developed the organic capacity to be able to grow without M&A. So M&A needs to really fit our needs. And the financial equation needs to work for us. And hopefully our partner as well. And that’s kind of the goal was to get a win-win. But the hurdle is the bar is a little higher than it might have been earlier on just because we do have, that’s what I’ve started my comments with about the one of the values of scale is the optionality. It gives you on future growth. And so like we’re in a good spot to be able to partner with who we really want to and not necessarily seeking growth for growth’s sake and/or new markets for new market sake. I just think over the long run, there’s plenty of, there are plenty of other markets across the Southeast that we want to be in. But it’s, there’s no rush, is the way that I would put it. We have a team that’s positioned to be around for a long time, and we need to take things, opportunities when they make a lot of sense for us. That’s where we are today. Kevin Fitzsimmons: Yes, and a good point about the lift up because that’s really what you’ve accomplished in Dallas Fort Worth. Right. Correct. That was just all organic lift down strategy. Jude Melville: That’s right. And New Orleans, we’ve had really good success with team lift up, as well. That’s right. Operator: Your next question comes from the line of Feddie Strickland from Janney Montgomery Scott. Feddie Strickland: Hey, good afternoon, everybody. Just given all the repricing opportunity that you’ve talked off the on the one side and, we got potential for a Fed pause maybe this year, could we see the margin start to rise in 2024, just given the amount of, where you’re putting on loans at new rates and the amount of turnover you’ve got coming online? Jude Melville: I think it’s not beyond comprehension to think that might happen. But we certainly want to be conservative and how we think about it, just given the challenges and the environment. We have definitely still had some work to do and some fighting to do. But while we’re projecting kind of a neutral NIM for the rest of the year, I think we do believe that there could be some opportunities for expansion next year, even without a rate decrease. Greg, do you want to speak more? Greg Robertson : I agree. I think the wildcard in that is the deposit liability side. And from a competitive standpoint, that would be my only caveat, I think we’re doing a good job to manage the top end. And our production staff is really focused on C&I account type accounts, which are noninterest bearing deposit accounts with Treasury built in there, really that’s the highest incentive brought up. So that’s the biggest focus. But really, the interest bearing size, and the speed at which those rates continue to go up is where that’s really going to play. Matt Sealy: Yes, I would say that, we kind of like you said, the core margin flat for the foreseeable future is where we’re comfortable. Right now, conservatively, but I would say that there’s probably more upside. Not significantly, but there’s probably more upside in that than there is more downside. If that make sense. Feddie Strickland: No, that’s very fair. I get it. And it’s hard to predict exactly what the Fed’s going to do what’s going to happen in 2024. And it’s one of the earlier callers mentioned, you never know what competitors are going to do either. One other piece. Forgive me, if I missed this earlier, but has the loan growth guidance really changed? I mean, should we have sort of upper single digit annualized growth rate for the next couple quarters? Is that reasonable? Should it be lower higher, just trying to figure out where we should peg growth going forward? Jude Melville: I think we’ll continue to kind of downshift a little bit. So I mean, I would say more on the 4% to 6% annualized range, as opposed to upper single digits. A lot of advantages to this environment growing at that rate, including capital appreciation and benefits that it provides to the margin being able to not have to fund that last dollar with highest cost funding. So we feel like we’ll benefit the most economically, with a kind of 4% – 6% annualized rate. Maybe we are behind just a little less demand. Last quarter, I would say that most of the slowdown in growth in a quarter for that slowdown, was our decision for the most part. But I would say that we would expect the second half of the year. And we’re starting to hear that a little more maybe it’s closer to 50:50 decisioning versus demand or and might even flip into more demand based deceleration of growth from what we’re hearing anyway. Obviously, due to the increasing interest rates. Feddie Strickland: Got it. Just one final one for me. Jude, it sounds I think I heard you earlier say you feel like a 1% ROA is kind of a base from here from what you think you can achieve? Do you think that that’s I guess, just to clarify, do you think a 1% ROA is achievable for the year? And then it’s if you take out the uncertainty provision, do you feel like a 1.50 PPNR ROA that you’d love to get pegged at 1.58 this quarter? Just wondering what your thoughts are on that overall profitability? Jude Melville: Yes, I do feel like a quarter 1% ROA is achievable for the year. My guys now are crunching the numbers really quick to see a bunch of other questions. I don’t usually think in terms of that ratio, but yes, I do believe that we have evolved enough that we’ve kind of shifted from, as Matt put it earlier, the upside risk versus downside risk. We’ve gone from downside risk of one being turning against other I think there’s more upside opportunity to be one. Yes, we do have variability within the different quarters, the different seasons, and the first quarter tends to be lower. But I do expect it will be 1% at least for the year and then build upon that next year, a great job. Does that, got the answers to the other question? Matt Sealy: Yes, so the 1.50, you quoted there as a pretax pre-provision ROA, that’s exactly in line with if we had the 1% or just over 1% core for the year. That translates to exactly 1.50. Operator: Your final question comes from the line of Graham Dick from Piper Sandler. Graham Dick: Hey, good evening, guys. I just wanted to circle back to one of Kevin’s questions on M&A. I k now you said that, it’s a pretty high bar right now, and would have to be attractive on a lot of fronts. But I guess, as you look out a few quarters, maybe a calmer environment, multiples return, what criteria achieves that bar for you? What makes a deal look good and something you would really consider financially? And then I guess also, like, strategically? Jude Melville: Okay, well, I’ll start with probably an answer you don’t want because it’s not necessarily quantifiable or better than a model that I do, I shouldn’t say that, you might still want it. But it’s not as easy to model visit. From my experience and we’ve done a number of mergers now. I think the first thing that I look for is a good partner, right? We want to make sure that our culture is, cultures match, it doesn’t mean our business models have to match. But our culture’s need to match, the winning spirit, and a good person at the top and the exec team has value that they can add. So the first thing that I personally look forward would be how does that cultural fit, work and we’ve been blessed with our deals too, so we’ve done thus far to be able to partner with good people. And for every deal that we’ve done, we’ve grown the footprint that we inherited, and that was because we were able to bring some larger balance sheet strength to a team that already had capability. So we’ll continue to look for that. As I’ve kind of talked about before, I think our first priority would be end market, something that brings some density to one of our markets and which would imply also kind of lower operational risk. Ideally, that’s lower loan to deposit ratio, which helps with liquidity questions. Now, I would say anything. I would say our sweet spots, probably $0.5 billion to $1.5 billion I think in the market $1.5 billion makes a lot of sense. I think we, the model that we used in Houston, where we did about a $0.5 billion works well for a new market, should we choose to do that that’s kind of big enough that you have something real. But it’s also not so big, that it’s a bet to franchise on a movement in a new market when that time comes. As far as the financial metrics, clearly, we want to have a limited as possible payback period. For something that’s really strong. And when times were normalized, I think we would look 2.5, 3 year payback is kind of the outsize. That would just be in kind of a special case of that workforce. But today’s environment, if something did happen to happen, price wise, I would expect it to be something closer to a year in terms of payback. So I think once things normalize a little bit, you can obviously consider expanding that out how we build that. But again, since we don’t have to do M&A, we probably will be a bit conservative on that. The question everybody wants to know about dilution. And, these things all kind of balance each other out. And so the payback period is really more important than the dilution necessarily, but, yes, obviously, at a normal time, we want to keep that probably in the 3% to 5% range, but that all depends also on the size of the bank. So if it’s $0.5 billion bank is going to be a mass facility that’s going to be easier to have a lower dilution than if it’s $1.5 billion opportunity. So that’s been our historic kind of markers. Not necessarily good or bad pricing, but more just how big is the bank, relative to our current balance sheet. One other metric might I be missing out on that, Greg. Greg Robertson : I think you covered it. Jude Melville: Yes, so most important thing to me is, is does it have the chance, a, culture, b, do we have an opportunity to be accretive from an earnings standpoint on a per share basis in a reasonable period of time? And ideally, within the first six months, I would hope that we could, or at least ideally, within the first six months of enacting the changes that lead to the cost savings, they get you the earnings accretion so. A – Jude Melville: Thank you, Graham. Thanks, everybody for your coverage. End of Q&A: That concludes our questions. I would like to now turn the call over to Jude Melville for closing remarks. Jude Melville: Very well, just to reiterate, really proud of our team’s efforts, and I wouldn’t even say this quarter is in banking, it doesn’t move that quickly. Right. You have some action that you have to deal with in the current environment. But the real, most important moments occur over a period of time and kind of transition in our strategy and achievements from our longer term goals is something that we’ve been working on for quite some time, and will continue to work on and this was a good quarter of progress towards attainment of those goals and look forward to get more done next quarter. Thank you, all. That concludes our remarks. Thanks. Follow Business First Bancshares Inc. (NASDAQ:BFST) Follow Business First Bancshares Inc. (NASDAQ:BFST) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

4K TVs vary in sizing, pricing, performance, and features. Here are the best 4K TVs you can buy in 2023. When you buy through our links, Insider may earn an affiliate commission. Learn more.The S95C is one of the best 4K TVs you can buy in 2023.Steven Cohen/InsiderThe best 4K TVs are sharp, colorful, smart, and reliable, enabling them to serve as the entertainment center of any room for movies, shows, sports, and video games. But, while all 4K TVs deliver an Ultra HD resolution of 3,840 x 2,160 pixels, overall picture quality can vary wildly between different models.In general, shoppers looking for the best 4K TV in 2023 have two display types to choose from: OLED and QLED. OLEDs have exceptional contrast, while QLEDs can typically get brighter. And though practically any 4K TV will let you access all of the best streaming services, different models use different smart TV systems that have their own pros and cons. There are tons of great 4K TVs out there from LG, Samsung, Sony, Hisense, and more. Which 4K TV is best for you, really comes down to what features you need and how much you want to spend. And that's where we're here to help. With image performance and general usability in mind, we picked the best 4K TVs you can buy in 2023 for a variety of needs and budgets. And for more display recommendations, check out our guides to the best OLED TVs and best Samsung TVs. Note: Since 65 inches is the industry's standard flagship size, we've focused on highlighting 65-inch models in our picks. But, all of the TVs listed below are also available in other sizes.Our top picks for the best 4K TVsBest overall: Samsung S95B 4K TV - See at Best BuyThe Samsung S95B delivers some of the best 4K TV image performance on the market, and it does so for less money than its direct competitors. Best midrange OLED: LG C2 4K TV - See at AmazonLG's C2 can't get as bright as more expensive OLED displays, but it offers exceptional contrast and robust smart TV features. Best high-end OLED: Sony A95K 4K TV - See at AmazonThough expensive, the Sony A95K is the current OLED TV champ when it comes to picture accuracy for a high-end home theater experience. Best midrange QLED: Hisense U7H 4K TV - See at WalmartHisense's U7H provides impressive performance for the money, with brightness and local dimming that rival TVs that cost a lot more. Best high-QLED: Samsung QN90B 4K TV - See at AmazonThe QN90B is one of the brightest TVs you can buy for exceptional HDR punch and great performance in any living room. Best budget: Hisense U6H 4K TV - See at AmazonHisense's U6H has advanced features, like quantum dots and local dimming, that you don't typically find in a budget-friendly TV like this.Best for gaming: Samsung S95C 4K TV - See at AmazonThe Samsung S95C is one of the first OLED TVs to officially support a 144Hz refresh rate for high-end PC gaming, and it also lets you stream games through Xbox Game Pass.Best for wall mounting: LG G2 4K TV - See at Best BuyLG's G2 has a uniformly thin "Gallery Design" that makes it look stunning when hanging on your wall.Best overall: Samsung S95BThe Samsung S95B delivers impressive color and contrast peformance.Best BuyPanel type: QD-OLED, 120HzSizes: 55 and 65 inchesHDR formats: HDR10, HDR10+, HLGSmart TV platform: Tizen OSVoice control: Bixby, Alexa, Google AssistantCheck out our Samsung S95B reviewPros: Stunning contrast and colors with quantum dots, deep black levels, wide viewing angles, extensive gaming supportCons: Doesn't support Dolby Vision, interface can be a little sluggishSamsung's S95B delivers the best balance between picture performance and price of any 4K TV on the market. The display uses an OLED panel with quantum dots, which enables an infinite contrast ratio, a wide range of colors, and a brighter image than most competing TVs of this type. And best of all, it does this for less money than comparable models from LG and Sony. The OLED tech gives the TV inky black levels and wide viewing angles, while the display's use of quantum dots allows it to produce brighter colors than a regular OLED. This makes the TV a great fit for average living rooms and dark home theaters alike. HDR movies and shows from 4K Blu-rays or streaming services like Prime Video, Netflix, and Disney Plus look especially stunning using the HDR10 and HDR10+ formats.Smart TV features are also robust, with access to every popular app there is, along with Alexa, Google Assistant, and Bixby voice control. Though we do wish navigation was a little smoother, the interface is solid and it even includes a Gaming Hub that lets you access cloud services like Xbox Game Pass to stream games without a console. The only notable con here is the TV's lack of Dolby Vision support. Dolby Vision is an advanced HDR format that tells a display how to properly render colors and brightness. Dolby Vision content will instead play in standard HDR10, which isn't quite as precise, but the TV's HDR10 performance is so strong that most people won't notice a difference. Though this is a 2022 model, the S95B delivers exceptional value. There are better looking 2023 TVs on the market, including Samsung's own S95C, but they cost considerably more. At a typical street price of $1,800, the 65-inch S95B is easily one of the best 4K TVs you can get for the money.Best midrange OLED: LG C2LGPanel type: OLED Evo, 120 HzSizes: 42, 48, 55, 65, 77, and 83 inchesHDR formats: HDR10, Dolby Vision, HLGSmart TV platform: LG webOSVoice control: Alexa, Google AssistantCheck out our LG C2 impressionsPros: Excellent contrast and black levels, Dolby Vision HDR support, Alexa and Google voice control, tons of size optionsCons: Not as bright as more expensive OLED models, color isn't as good as OLEDs with quantum dotsThe C2 is a truly impressive TV, and if it wasn't for the Samsung S95B's competitive price, it might even earn the top spot on this list. Though it lacks the quantum dot tech that gives Samsung's OLED a boost in brightness and color volume, the C2 still delivers great picture quality and reliable smart TV performance.Like all OLED displays, the C2 has an infinite contrast ratio with deep black levels that look fantastic when watching movies in a dark room. It also has wide viewing angles so the image doesn't distort or fade if you're sitting toward the side of the TV. Peak brightness is also solid for a mid-range OLED, at around 800 nits, but it can't match the 1,000+ nits that more expensive OLED models can achieve.On the plus side, the C2 does have one picture quality perk that our top pick lacks: Dolby Vision support. Dolby Vision is regarded as the best HDR format since it can more precisely tell your TV how to display contrast and colors, and Dolby Vision is supported on tons of streaming services and 4K Blu-ray discs.  LG's webOS platform also works well to provide easy access to popular apps and the TV's unique Magic Remote allows you to navigate menus by pointing at the screen. Though LG is selling a new 2023 version of this TV, called the C3, it only offers minor improvements and costs a lot more. At a current street price of around $1,600, the C2 remains a better value.Best high-end OLED: Sony A95KSonyPanel type: QD-OLED, 120 HzSizes: 55 and 65 inchesHDR formats: HDR10, Dolby Vision, HLGSmart TV platform: Google TVVoice control: Google AssistantCheck out our Sony A95K impressionsPros: OLED contrast with quantum dot color, advanced picture processing for top-of-the-line accuracy and upscaling, Dolby Vision supportCons: Expensive compared to direct competitorsIf you want the best high-end OLED TV for a home theater, the Sony A95K is the current champ. Like our best overall pick, it uses an advanced OLED panel with quantum dots to achieve a brighter picture with better color volume than a typical OLED display. But unlike Samsung's S95B, Sony's top-of-the-line TV also supports Dolby Vision and benefits from the company's proprietary picture processing to optimize the image and upscale lower quality sources. Samsung's high-end OLED TVs can get a bit brighter in peak highlights, but Sony is the leader when it comes to delivering a truly accurate picture for the best movie-watching experience.The A95K also boasts solid smart TV capabilities powered by the Google TV operating system, so you can stream all your favorite services. A handy voice remote is included with Google Assistant as well, but unlike LG  TVs it doesn't also have Alexa built-in. Though the A95K is our current pick for the best high-end OLED, buyers should keep in mind that Sony has a 2023 version of this TV, called the A95L, set to hit stores later this year. Sony claims that the new model will deliver a whopping 200% increase in brightness. If the A95L lives up to that promise, it could easily take this spot when it launches. The A95L will likely cost more than the already pricey A95K, but if budget isn't a concern, we recommend waiting to see if the 2023 model delivers a worthwhile upgrade.Best midrange QLED: Hisense U7HAmazonPanel type: QLED, 120 HzSizes: 55, 65, 75, and 85 inchesHDR formats: HDR10, HDR10+, Dolby Vision, HLGSmart TV platform: Google TVVoice control: Google AssistantPros: Great bang-for-your-buck performance, quantum dot color and full-array local dimming, extensive HDR supportCons: Mediocre viewing angles, some blooming visibleThe Hisense U7H delivers performance that's on par with many displays that cost quite a bit more, making it one of the best 4K TVs you can get for under $800. The QLED panel delivers up to 1,000 nits of peak brightness, and it has full-array local dimming to control contrast in specific zones across the screen.Of course, there are tradeoffs you get when going with a midrange set, but the U7H impresses for the money. Though brightness can't match the more expensive Samsung QN90B, the U7H has good HDR performance, and it supports all of the major formats, including Dolby Vision.On top of all that, the TV even has a 120Hz panel with HDMI 2.1, so it can support advanced gaming features when paired with a PS5 or Xbox Series X. The display's Google TV platform isn't our favorite interface, but you still get access to every app you could want, along with Google Assistant voice control. For a typical street price of $750, the U7H offers exceptional value. You'll need to pay more if you need something brighter and with wider viewing angles, but if you want a solid home theater display that has good gaming performance on a budget, the U7H should be high on your list.Best high-end QLED: Samsung QN90BAmazonPanel type: Neo QLED (Mini LED), 120 HzSizes: 43, 50, 55, 65, 75, 85, and 98 inchesHDR formats: HDR10, HDR10+, HLGSmart TV platform: Samsung TizenVoice control: Alexa, Google Assistant, BixbyPros: Incredibly bright image, high color volume with quantum dots, Mini LED panel with full-array local dimming, wide viewing angles for a QLEDCons: Contrast can't match an OLED, doesn't support Dolby VisionThe Samsung QN90B is an impressive QLED TV, and it provides one of the brightest images you can get. With a peak of around 2,000 nits, the display is able to make high dynamic range highlights really pop, making it an excellent choice to show off HDR movies and shows using the HDR10 and HDR10+ formats.The TV also makes use of quantum dots to enable excellent color volume, and a Mini LED backlight with full-array local dimming to produce deep black levels. The backlight's dimming isn't as precise as an OLED panel, however, so you might see some minor blooming and haloing around bright objects. But, compared to cheaper QLED models, the QN90B gets remarkably close to OLED-level contrast while delivering nearly double the peak brightness of a typical OLED.The TV's high brightness capabilities also make it a good choice for living rooms that let in a lot of ambient light. And it has some of the widest viewing angles we've seen on a TV of this type. Smart TV capabilities are also solid, with access to plenty of apps and Samsung's Gaming Hub.When it comes to high-end TVs, we still prefer models with OLED technology thanks to their superior contrast handling, but the QN90B is an excellent QLED TV for buyers who want an extra-bright display and don't want to ever think twice about burn-in.Best budget: Hisense U6HHisensePanel type: QLED, 60HzSizes: 50, 55, 65, and 75 inchesHDR formats: HDR10, HDR10+, Dolby Vision, HLGSmart TV platform: Google TVVoice control: Google Assistant Voice ControlPros: Budget-friendly price, quantum dot display with local dimming, comprehensive HDR format supportCons: HDR brightness and contrast are limited compared to more expensive TVs, 60Hz panel doesn't support advanced gaming features, mediocre viewing anglesThough we previously had the TCL 5-Series as our pick for the best 4K TV on a budget, that model has become difficult to find in stock. With that in mind, we think the Hisense U6H is an excellent alternative for anyone who wants an affordable 4K TV that doesn't skimp on picture quality. The TV uses quantum dots and full-array local dimming, which are features typically reserved for midrange and high-end display models. At a typical sale price of just $500, the U6H delivers incredible value for what you get. The TV's contrast performance isn't on par with more expensive sets that have more dimming zones, like the U7H or Samsung QN90B, but that's understandable given the difference in price. You still get a wide color gamut and up to 600 nits of brightness, which is enough to start seeing the benefits of HDR content. You even get Dolby Vision support to produce the most accurate HDR image the TV is capable of.On the downside, the display is limited to a 60Hz panel so you can't get 120Hz support with a PS5 of Xbox Series X. Viewing angles aren't the best either, but they're on par with what you can expect in this price range. And though we prefer Roku's interface for its simplicity, the U6H's Google TV operating system works well, and the set supports Google Assistant voice search.If you're looking to dip your toes into the 4K HDR market, the Hisense U6H is a great entry-level choice. It's affordable without sacrificing features that really make a 4K HDR TV worth owning.Best for gaming: Samsung S95CSteven Cohen/InsiderPanel type: QD-OLED, 144Hz with compatible PCSizes: 55, 65, and 77 inchesHDR formats: HDR10, HDR10+, HLGSmart TV platform: Tizen OSVoice control: Bixby, AlexaCheck out our Samsung S95C reviewPros: One of the brightest OLEDs on the market, impressive quantum dot color, infinite contrast ratio, 144Hz panel for high frame rate PC gaming, support for cloud gaming services Cons: Doesn't support Dolby Vision, pricey compared to the very similar S95BMost of the TVs in this guide will deliver good gaming performance, and a lot of them support advanced features like variable refresh rate (VRR), automatic low latency (ALL), and 120Hz motion. But Samsung's brand-new OLED for 2023, the S95C, has an edge over them all. Not only does this display offer some of the best picture quality on the market, but it also has 144Hz capabilities and built-in support for cloud gaming services like Xbox Game Pass and Nvidia GeForce Now. The cheaper S95B also has cloud gaming but it lacks the higher refresh rate. With a 144Hz panel, you can connect a gaming PC or gaming laptop to the TV to get incredibly smooth gameplay, so long as your computer is powerful enough to output 144 frames per second. And though the PS5 and Xbox Series X don't support 144Hz, they do support 120Hz through the S95C.The S95C also has very low input lag, so there's little delay between button presses and their corresponding actions on screen. AMD FreeSync and Nvidia G-Sync are both supported as well to reduce screen tearing. And on top of all that, this is one of the brightest OLEDs we've ever seen, with a peak of about 1,360 nits.Though our pick for best 4K TV overall, the S95B, delivers similar performance for a lot less money, the S95C's higher refresh rate and brighter image makes it an even better TV for high-end gaming.Best for wall mounting: LG G2AmazonPanel type: OLED Evo, 120 HzSizes: 55, 65, 77, 83, and 97 inchesHDR formats: HDR10, Dolby Vision, HLGSmart TV platform: LG webOSVoice control: Alexa, Google AssistantCheck out our LG G2 reviewPros: OLED Evo panel delivers impressive brightness, Dolby Vision HDR support, uniformly thin design, gorgeous contrastCons: Need to buy a stand separately, doesn't use quantum dots like competing Sony and Samsung OLEDsLG's G2 OLED is specifically designed to hang flush on your wall with virtually no gap. It features a uniformly thin design that measures just one inch, and it looks simply beautiful when wall mounted.Though there are OLED TVs with thinner profiles, like the Samsung S95C, that display requires a separate connection box to house its ports and processing components. The G2 manages to maintain a slim design while keeping everything within the TV's cabinet.   And thankfully, the display's picture performance is just as impressive as its elegant styling. The panel doesn't use quantum dots, but its peak brightness is almost as high as QD-OLED models like the S95B or A95K. It supports Dolby Vision for fantastic HDR quality, and it has all the high-end bells and whistles you could want in a flagship OLED TV. Keep in mind, however, the G2 really is built with wall mounting in mind. So much so that it doesn't even come with a traditional TV stand. You can buy one separately, but that adds to the cost, so we recommend going with a different model if you want something to rest on an entertainment console.  It's also important to note that LG just released a 2023 version of this display, called the G3, that promises a nice jump in peak brightness while maintaining the G2's gorgeous design. However, the G3 costs about $1,000 more than the G2. If you're looking for a stylish display to wall mount, the G2 remains one of the best 4K TVs to hang in your living room.How we test 4K TVsSteven Cohen/InsiderTo test TV models for consideration in our best 4K TVs guide, we evaluate a series of key factors, including picture clarity, high dynamic range (HDR) performance, color gamut, contrast, viewing angles, smart TV capabilities, navigation speed, and value. To measure a TV's brightness and color capabilities we use an X-Rite iDisplay Plus colorimeter with test patterns found on the Spears & UHD HDR Benchmark 4K Blu-ray. We also use a series of demo scenes and real-world content to evaluate each TV's overall picture quality, with a specific focus on scenes that emphasize black levels, specular highlights, color fidelity, and sharpness with native 4K, high definition (HD), and standard definition (SD) material via streaming services, cable, and Blu-ray players. Smart TV functionality is also considered, with tests to measure how long apps take to launch and how smooth menu navigation is. We also evaluate voice search responsiveness and digital assistant capabilities.4K TV FAQsSteven Cohen/InsiderWhat are the best TV brands?LG, Samsung, and Sony are among the top TV brands. Though typically more expensive than other options, these companies' TVs are known for delivering cutting-edge technology, modern designs, and great quality control. If you're in the market for a premium TV, you can't go wrong with flagship models from these manufacturers.Meanwhile, brands like TCL, Hisense, and Vizio are top players in the midrange and value-priced TV market. Though build quality isn't always on par with more expensive brands, these companies offer advanced features, like quantum dots and Mini LED dimming, for less than the competition. If you want the best bang-for-your buck in a midrange TV, these are the brands you should consider first. Companies like Amazon and Roku have also started to manufacture their own entry-level and midrange TVs with mixed results. Their flagship offerings are decent options when on sale, but you can typically find better displays for less money from TCL, Hisense, or Vizio.Finally, there are budget brands like Toshiba and Insignia that are known for selling entry-level LED displays that use Amazon's Fire TV operating system. Though inexpensive, these sets are about as basic as TVs get. We typically recommend paying a bit more to get one of our picks for the best 4K TVs listed above, but these displays are decent enough if you just want a cheap TV for casual viewing, especially in a smaller screen size.     What size TV should I get?What size TV you should buy really comes down to how much space you have, how far you're going to sit from your display, and what your budget is. In general, bigger TVs cost more than smaller ones with comparable features, and you'll need to have enough wall space or a large enough TV stand to accommodate whatever display you get.TV sizes typically start as small as 24 inches and can go up to 98 inches. A few manufacturers have premium models that are even larger. A lot of companies reserve their best picture quality and design features for their bigger sizes. Though not a hard rule, midrange features are often reserved for models that are 50 inches or larger, and high-end features tend to start in 55-inch models. Most companies use 65 inches as their flagship size to highlight their best 4K TVs, and for many people, 65 inches hits just the right sweet spot to offer a solid home theater experience without taking up too much real estate or totally breaking the bank. If space and budget aren't a concern, what size 4K TV you should get can be best determined by how far you plan to sit from your display. This is because the benefits of 4K resolution become most noticeable when you sit at a distance of about one to 1.5 times the size of your TV. For instance, to get the most out of a 65-inch 4K TV, you should sit between 5.4 and 8.1 feet from your TV. Crutchfield has a handy chart that provides recommended 4K TV sizes based on your seating distance.    What are the best smart TV interfaces?Practically any new 4K TV you buy will be a smart TV, which means it features built-in support for accessing popular apps and streaming services. However, different companies use different smart TV interfaces, and some people may prefer one platform over the other. Here's a rundown of different smart TV interfaces with details on which TV manufacturers use them:Tizen: SamsungwebOS: LGSmartCast: VizioGoogle TV: Sony, TCL, HisenseRoku TV: Roku, TCL, HisenseFire TV: Amazon, Toshiba, Insignia, Pioneer, HisenseThough a few services may be missing here and there, all of the major streaming players are supported across every platform. Navigation style, personalization options, and extra features differ across each system, however.We prefer Roku's interface for being the simplest, most user-friendly, and reliable of the bunch, but its visual style is a bit outdated compared to other operating systems that present a more content-focused approach. Ultimately, every system has its own pros and cons, and they all get the job done. But if you are unhappy with your TV's built-in interface, you can always purchase a separate streaming device with the interface you prefer. Roku and Fire TV options are often on sale for as low as $20. What's the difference between OLED and QLED?OLED and QLED TVs are two of the most popular display types on the market, and they each have their own pros and cons. OLEDs have self-illuminating screens. This means they can precisely dim and brighten each pixel to create an infinite contrast ratio. This makes OLED the ideal choice for people who want the absolute best image quality, especially if you like to watch movies in a dark home theater.QLED TVs, meanwhile, are a type of LED TV that rely on older LCD panel technology that requires a backlight to illuminate their pixels. These backlights can include multiple zones to brighten and dim specific areas, but even the most advanced QLED models can't match the pixel-level contrast of an OLED. This can cause an uneven look in dark scenes where you can see halos around bright objects, or washed out black levels that look gray.Where QLED TVs have an edge, however, is with max brightness. Midrange and high-end QLED TVs can get brighter than most OLEDs. This makes a QLED TV a better fit for rooms that let in a lot of light. QLED models also tend to be less expensive than OLED TVs and they present no risk for burn-in.What is burn-in?OLED TVs are technically susceptible to an issue called burn-in. If a static image is left on the screen for hours on end — the CNN or ESPN logo in the corner, for example — a faint, ghostly image can get left stuck on the TV.Though OLED owners should be aware of this risk, OLED TVs have specific measures built-in to prevent burn-in, including pixel-refreshers and pixel-shift modes. Publications like Rtings have conducted long-term tests with OLEDs, and while their results do show that burn-in is possible, their tests show that people with regular viewing habits don't need to worry about it. I've personally owned an LG CX OLED TV for almost two years now, and the display has no signs of burn-in. Though burn-in is something that QLED TV owners don't have to think twice about, in my experience, as long as you don't plan on watching CNN all day long, burn-in shouldn't be a factor when deciding whether or not to buy an OLED. Read the original article on Business Insider.....»»

NIKE, Inc. (NYSE:NKE) Q4 2023 Earnings Call Transcript June 29, 2023 NIKE, Inc. misses on earnings expectations. Reported EPS is $0.66 EPS, expectations were $0.67. Operator: Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2023 Fourth Quarter Conference Call. For those who want to reference today’s press release, you’ll find it at investors.nike.com. Leading today’s […] NIKE, Inc. (NYSE:NKE) Q4 2023 Earnings Call Transcript June 29, 2023 NIKE, Inc. misses on earnings expectations. Reported EPS is $0.66 EPS, expectations were $0.67. Operator: Good afternoon, everyone. Welcome to NIKE, Inc.’s Fiscal 2023 Fourth Quarter Conference Call. For those who want to reference today’s press release, you’ll find it at investors.nike.com. Leading today’s call is Paul Trussell, VP of Investor Relations and Strategic Finance. Now, I would like to turn the call over to Mr. Paul Trussell. Please go ahead. Paul Trussell: Thank you, operator. Hello everyone, and thank you for joining today to discuss NIKE, Inc.’s fiscal 2023 fourth quarter results. Joining us on today’s call will be NIKE, Inc. President and CEO, John Donahoe; and our Chief Financial Officer, Matt Friend. Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE’s reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and non-public financial and statistical information. Please refer to NIKE’s earnings press release or NIKE’s website investors.nike.com for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and our currency neutral unless otherwise noted. We will start with prepared remarks and then open up for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thanks for your cooperation on this. I will now turn the call over to NIKE, Inc., President and CEO, John Donahoe. John Donahoe: Thank you, Paul, and hello to everyone on today’s call. Fiscal 2023 was a milestone year for NIKE as we set new records while delivering on our operational and financial goals. It’s clear that our strategy is working, and that NIKE’s unique advantages continue to drive competitive separation. Looking at our results, we exceeded $50 billion in revenue, with growth of 16% on the year. This growth is broad based across our consumer construct of men’s, women’s, and kids, across performance and lifestyle and across all geographies. North America, EMEA, and APLA all saw full-year double-digit growth and Greater China returned to double-digit growth in Q4. We’re also driving strength through our interesting-leading brand portfolio with NIKE, Jordan, and Converse, all of which achieved strong growth in fiscal 2023. In particular, I want to highlight Jordan’s brand’s record year. Jordan grew mid-30s with impressive growth across men’s, women’s, and kids, footwear and apparel and in both North America and International. In fact, Jordan is well on its way to becoming the second largest footwear brand in North America. And last but not least, we return to healthy inventory ahead of our competition. Our inventory is flat year-over-year in value and down in units versus 12 months ago. The actions we’ve taken position us for more profitable growth moving forward. Across our business, we continue to build a marketplace that addresses how consumers want to be served giving them what they want, when they want it, and how they want it. NIKE creates distinction across the marketplace by segmenting consumer experiences to drive deep direct connections with consumers and grow the marketplace. Today in the industry with digital and physical growth converging, we’ve accelerated investment to create a truly distinctive digital experience through our own platforms. Every year, we serve traffic in the billions, which delivers strong digital growth as both conversion rate and average order value continue to improve. This success helped increase the digital share of our business to 26% in fiscal 2023 as compared to 10% in fiscal 2019. For the year, we had strong digital growth of 24% and we expect digital to continue to lead our growth. Now, this is all powered by our membership offense. We know our consumers better and are better able to serve them with data driven insights fueling our end-to-end value chain, including product creation, marketing, and merchandising. This is translating into sustainable and profitable growth for NIKE, and we believe this growth will only accelerate as we add new capabilities built to serve consumers at scale. In fiscal 2023, we expanded our membership base, but more importantly, we elevated and deepened these consumer relationships. Our members now engage with us more frequently, buy more, and are more loyal to our brands. Once members join our ecosystem, they are increasing their lifelong sport journeys with us. Now of course, NIKE members also shop across marketplace channels. And so, as we grow, we’re always actively managing our marketplace to serve consumers with expanded choice, access, and convenience. We think about our multi-brand partners in three complementary groups that each serve distinct needs. First, as you know, over the past five years, we’ve created greater focus and differentiation working with fewer large multi-brand partners. These partners have the scale to invest in retail experiences and connected digital membership to drive long-term growth. Second, we’ve also sharpened our commitment to neighborhood, authenticators in both sport and lifestyle to drive energy and validate our brand. This investment in community ensures brand access, as well as deep local consumer connection. And third, we partner with accounts that help us provide access to consumers across different segments and price points. And at the same time, we continue to invest in NIKE store concepts that create new distribution and serve growth opportunities not currently being addressed by our wholesale partners. The recent unveiling of our NIKE Well Collective, which responds to deep insight from our female consumers, [rebrand] [ph] NIKE Live, and creates an elevated approach to retail. NIKE Well Collective brings new energy and sharpens our focus on serving the opportunity we see with women. So, this is how our consumer direct acceleration strategy drives the future of the marketplace, a seamless member led experience that addresses the opportunities as we see them across the consumer landscape. Last month, I was in Shanghai and Beijing, and I was blown away by how the entire marketplace experience comes to live there. Our Greater China team is building a connected and seamless journey across digital and physical, commerce and social, owned and partner doors. And I will tell you the merchandising is best-in-class. You can just feel the energy of our brand and our product. And with our record-breaking performance during this year’s 6/18 shopping holiday, in which we were the number one sports brand on Tmall, I’m even more confident in our playbook and strategy in China. Today, we’re excited and confident with the opportunity we see in front of us. And looking to fiscal 2024 and beyond, we will continue to expand our competitive separation. To that end, this quarter, we made some shifts within our senior leadership team that will further deepen our growth and accelerate our marketplace advantage, elevating Heidi Oneill and Craig Williams to become NIKE Brands’ two Presidents. Heidi and Craig are both incredible leaders with long track records of driving growth and results. And their new roles are designed to drive an even greater focus on innovation and integration for our business. These changes will streamline our efforts across product, brand storytelling, and marketplace. I will tell you, I’m thrilled and I can also tell you that their teams are thrilled as well for the kind of growth we’ll be able to achieve under this new simplified structure. For the remainder of my remarks today, I want to walk you through something that defines everything we do and that’s sport. Sport is who we are. It will always be our differentiator. No brand can grow the world of sport, like NIKE. No brand connects people to sport by putting all of the pieces together like we can. We stay in the lead because we combine innovation, brand, and the culture of sport and do it all at global scale. This is the power of our strategy. We’re able to both unleash athlete potential and create the lifestyle of sport around the globe. Where other brands strive to grow their slice of the pie, we’re able to grow the pie itself. Let me walk through three areas where we have expanded the world of sport and where we see even greater opportunity ahead. First, let’s discuss Global Football. In fiscal 2023, Global Football grew 25%, nearly doubling overall NIKE growth. With women’s and kids’ businesses growing even faster, key boot franchises like Mercurial and Phantom, saw high full price realization as we continue to win share on pitch. We invest in the grassroots of the game, while also partnering with the sports’ greatest. Erling Haaland joined our roster this quarter as his record pace of goal scoring cements his step on the future of the game, and we can’t wait for this summer’s World Cup. NIKE is proud to partner with more federations in the tournament than any other brand, and we’ve matched that energy with our most comprehensive women’s football collection ever. For example, we’ll watch the most innovative woman’s led football boot in our history. After more than two years of testing and designing, the new Phantom Luna boot features a proprietary cleat pattern that provides [peak traction] [ph] and stability for female players. In addition, our World Cup kits will debut significant fit and material innovations mapped to a woman’s specific movements. And last but not least, we’ve created our largest ever football inspired sportswear collection. For both fans and athletes, when they’re off pitch. We’re just weeks out from the tournament and we’re focused and aligned to drive energy like no one else as we connect the next generation of fans to the world’s most popular sport. Next, let’s discuss basketball, where we continue to see significant market leadership. Today, NIKE defines basketball. And as we look at landscape, we see only expanding competitive separation ahead. Our influence in basketball is elevated by the strength of our portfolio of brands, NIKE, Jordan, and Converse. In fact, our roster, which is already the game’s greatest, set a new standard this season. For the first time ever, all three of our brands were represented in the All-NBA first team. With Luca and Jason from Jordan, Giannis from Nike, and Rising Star Shai Gilgeous-Alexander from Converse. This is an unprecedented accomplishment. And speaking of the game’s greatest, fiscal 2023 marked 20 years of LeBron’s signature shoe. We’re excited by the continued potential of the LeBron business as his brand reaches a new dimension by bringing back earlier styles onto the court, igniting new energy for these retro models with consumers. And in addition, the Sabrina 1 is resonating strongly since launch, helping double our WNBA business versus what it was two short years ago. It’s going to be an exciting summer, as we set the stage to relaunch the Kobe brand in advance of Kobe Day on 8/24. And as you know, it’s already been a great few months for basketball. We had a thrilling NBA season, which concluded with Nikola Jokić taking the Denver Nuggets to their first ever title. The WNBA season kicked off with Brittney Griner making her return to the court. And earlier this week, A’ja Wilson was named an All-Star team captain. And in China, 10x Chinese Basketball Association All-Star point guard, Guo Ailun won his third CBA Championship. And earlier this week, in fact, last week in the NBA draft, Victor Wembanyama was selected number 1 overall by the San Antonio Spurs. Leonard Zhukovsky / Shutterstock.com We’re thrilled to have Victor in the NIKE family, and we’re excited for what the future holds in basketball. Now, I want to take a minute to go a little bit deeper into the Jordan brand. Jordan’s greatest advantage is its authenticity and connection to sport, which drives a special bond with generation upon generation. This brand has built a cultural identity that transcends the game, connecting people with deep emotion, and a sense of self belief. If this authenticity that fuels Jordan’s leadership and streetwear, Jordan continues to dictate the conversation by being a premium brand [that drives] [ph] sportswear culture. You’ve seen this come to life through Jordan’s partners across top culture, from product launches like the Women’s Teyana Taylor AJ 1 High, to the brand’s meaningful collaboration with the movie, Spider-Man: Across the Spider-Verse. Today, Jordan is extending its core strength in men’s. In Q4, Jordan launched the Tatum 1, which completes Jordan’s Signature offense along with Luca, Zion, and the Game Shoe. With this foundation in place, Jordan has plans to now scale these four franchises even further. And at the same time, Jordan is building real energy around our biggest growth opportunities. In fiscal 2023, Jordan had over indexing growth in both women’s and kid’s alongside increasing strength in apparel. And today, Jordan’s growth in performance footwear is now outpacing retro footwear, but no discussion of Jordan’s opportunity would be complete with, also looking at its international business. In most of our geos, Jordan’s penetration is about 10 points lower than it is in North America, and this is the growth opportunity we plan to capture moving ahead. Simply put, we continue to see a tremendous amount of potential for the Jordan brand and its differentiated ability to drive culture, connection, and growth like nothing else. Finally, let me comment on our running business. Running’s been a competitive battlefield lately with more and more brands joining the market. And today, we’re more aligned in resource to compete and win. We saw roughly 10% growth for our running footwear business in fiscal 2023, and we’re just getting started. Now, as you know, NIKE’s advantage in innovation is shown as we continue to set the pace in racing and trail running categories led by the new Vaporfly 3 and Peg Trail 4, respectively. And following a recent reset, we’re prioritizing the needs of everyday runners through newness and consistency in the key styles they love most. For example, last quarter, we launched the Invincible 3, which continues to perform well. Since its Q3 launch, Invincible has already doubled its retail sales versus last year. And next quarter, we’re debuting the Infinity Run 4, another major update to a popular franchise. In fact, I’m wearing a pair right now, and I have to say, they feel great. The Infinity 4’s React X is our newest of them. A breakthrough innovation that’s more sustainable and offers runners a smooth and responsive ride following years of women led testing. And this is just the start as we reinvigorate our running footwear line with more to be unveiled as we build momentum heading into the Olympics in Paris next summer. And in addition to innovating four runners, we’re also driving the lifestyle of running as only NIKE can. The Vomero 5, which in fiscal 2023 kicked-off our strategic relaunch into the intersection of running and streetwear, has already become a staple of modern sneaker culture. The Vomero 5 is coming into the summer with a lot of momentum as we substantially increased its volume all-year. And just last month, we launched the Motiva. A walking shoe with a distinctive design at an attractive price point and one that’s represented of the aggressive approach we’re taking to opportunities we see in the market. In just two months post-launch, Motiva has had strong sell-through. particularly for women, already becoming a top 5 performance footwear style globally, a NIKE Digital. Ultimately, when we look at the full running business, while we know there’s a lot of work ahead, we remain confident in our go forward strategy and firm in our belief that we’re all set to compete with strengths. In the end, our CDA strategy is working. Our brands have strong energy. Our innovation pipeline is as relentless as ever, and we’re executing against what matters most to consumers. And as we look at fiscal 2024, NIKE will occupy the same leadership position that we earned year after year as we usher our industry into the future. And with that, I’ll turn the call over to Matt. Matt Friend: Thanks, John and hello to everyone on the call. NIKE is a growth company and fiscal 2023 demonstrated our ability to deliver strong growth in the midst of rapidly changing market conditions. Throughout the year, we drove competitive separation by doing what NIKE does best. Serve athletes with product innovation, and rich storytelling, amplify our brand voice through key sport and consumer moments, deepen consumer connections across our portfolio, and actively manage the marketplace to drive sustainable profitable growth. For the full-year, we delivered mid-teens revenue growth with accelerating momentum in our performance business and sustained strength and lifestyle. We added $7 billion of revenue in total on a currency neutral basis, which included adding $3 billion to North America, our largest most mature market. In addition, our top franchises drove strong full price sales with mid-single-digit price increases, and we grew units and ASP across both product engines. In Q4, we saw another quarter of strong consumer demand, with traffic growing online and in our stores and total retail sales across the marketplace up double-digits versus the prior year. Beyond driving strong top line growth, we finished the year with a significantly improved marketplace position, with total marketplace inventory units, including NIKE and our wholesale partners, down year-over-year. We feel very good about the results driven by our decisive actions over this past year, as well as the sales momentum that we continue to see from NIKE Direct and our top strategic partners, including DICK’S Sporting Goods, JD, Sports Direct, and our city specialty partners. To go a little deeper on inventory, NIKE Inc. inventory dollars are flat versus the prior year, with units down double-digits across both footwear and apparel. Apparel units are down more than 20% versus the prior year. Our mix of in-transit inventory has normalized, and days in inventory show improvement versus the prior quarter and the prior year. Closeout mix is in-line with pre-pandemic levels, with improvements in the average age of our closeout inventory versus the prior year. And from a geography perspective, both North America and Greater China have inventory dollars down high-single-digit versus the prior year, with units being down double-digits. All told, we are entering fiscal 2024 on our front foot, ready to navigate any uncertainty that may be ahead of us, and ready to compete from a position of strength. Now as we move forward, we are building on a strong foundation for future growth. Our confidence is grounded in the power of NIKE’s portfolio. Deeply connected to the consumer, centered in sport and youth culture, fueling authenticity and distinction, unrivaled in breadth and depth. Our strength begins with our scale from our investment in innovation, to our sports marketing portfolio, our digital platforms and membership, and our global reach. We create value for consumers around the world, leveraging NIKE’s scale and competitive advantages, to drive sustainable growth and strong returns to shareholders over the long-term. And today NIKE’s opportunity to grow is as large as it’s ever been. Consumer interest around the world in sport, health, and wellness has never been greater and what excites us most is the potential still ahead. Let me share just a few examples. First, one of NIKE’s greatest competitive advantages is our relentless pace of innovation. We innovate to make athletes better, to serve more athletes, and to make the world better for athletes everywhere. And right now, in our LeBron James Innovation Center, we are creating new concepts, new platforms, and new capabilities to fuel NIKE’s next 50 years of innovation and growth. We will continue to increase investment in innovation to create value for athletes, and this gives me confidence we can drive long-term growth for NIKE. We have some great opportunities over this next fiscal year to showcase our latest innovations on the global sports stage. Second, we’re accelerating direct consumer relationships across our digital platforms. By better knowing and serving the consumers who love our brands, we are also unlocking strategic and financial benefits for NIKE. For example, we have partnered with Adobe to enable 1-to-1 member personalization, driving gains in member retention, click through rates, and conversion, resulting in higher demand per member and returns on digital ad spend. We’re only beginning to operationalize these new capabilities and consumer experiences on our digital platforms and we see even greater opportunity to come. Third, we see meaningful growth potential in our international markets. This includes Korea, one of our most digitally connected markets, Central and South America, a region with a deep love of sport, Southeast Asia and India, with one of the world’s largest youth populations. And, of course, China, where young consumers are seeking our top product innovation, and Gen Z is coming of age as the country’s most active generation ever. Last, we can now see around the corner on the transitory cost headwinds that pressured profitability in fiscal 2022 and 2023. When combined with our structural opportunities to improve profitability as we grow, we are confident that we will deliver above average margin improvement in fiscal 2024 with many of the drivers continuing into fiscal 2025. Now, let me turn into our NIKE, Inc. fourth quarter results. In Q4 NIKE, Inc. revenue grew 5% on a reported basis and 8% on a currency neutral basis. NIKE Direct grew 18% with 14% growth in NIKE Digital, and 24% growth in NIKE Stores. Wholesale grew 2%, moderating as planned, as we tightened supply to normalize marketplace inventory levels. Gross margins declined a 140 basis points to 43.6% on a reported basis, primarily due to higher product input costs and elevated freight and logistics expenses. Higher markdowns, and 100 basis points of unfavorable changes in net foreign currency exchange rates, partially offset by strategic pricing actions and lapping higher inventory obsolescence reserves in Greater China in the prior period. SG&A grew 8% on a reported basis, primarily due to wage related expenses, variable NIKE direct costs, and increased demand creation expenses. Our effective tax rate for the quarter was 17.3%. Diluted earnings per share was $0.66. Now, let me turn to our operating segments. In North America, Q4 revenue grew 5%. NIKE Direct was up 15%, and NIKE Digital grew 17%. Wholesale declined 3%, following reduced spring and summer sell-in to proactively manage marketplace inventory. EBIT declined 6% on a reported basis. For another consecutive quarter, strong consumer demand drove total retail sales up double-digits across the marketplace, enabling us to drive a quicker return to healthy marketplace inventory levels. Member engagement grew on all-digital platforms and buying frequency was at an all-time high. NIKE’s store traffic and revenue grew double-digits surpassing industry trends. We saw strong brand momentum across our portfolio. Performance dimensions delivered strong growth with LeBron and Giannis at double-digits. Free Metcon extended its lead as our top women’s performance franchise. And the Jordan brand delivered another dominant quarter with women’s leading growth. Luka and Tatum highlighting momentum and performance, and iconic franchises inspiring the next generation. In fact, this quarter’s AJ 1’s Spider-Verse launch drove our largest ever kids shock drop on the sneakers app. With a robust product pipeline, a healthy mix of inventory, and a normalizing supply chain, we are confident in NIKE’s ability to set the pace in North America as we look ahead. In EMEA, Q4 revenue grew 7%. NIKE Direct was up 28%, and NIKE Digital grew 24%. EBIT declined 13% on a reported basis. EMEA’s fourth quarter results demonstrated the strength of our complete offense as NIKE increased market share in performance and lifestyle. Digital continues to power growth with traffic up double-digits and conversion rates expanding. Brick-and-mortar traffic in key countries also remain strong. NIKE’s authenticity in sport and culture continues to create separation. Vaporfly and Alphafly top shoe counts, at the Paris and London marathons, while Pegasus and Invincible drove strong sell-through. We channeled the energy of Air Max Day into positive momentum for Air Max Pulse and Air Max 1. And we closed out our biggest football year ever, up double digits with strong full price sales, led by Mercurial and Phantom, and balanced growth across men’s, women’s, and kids. In Greater China, Q4 revenue grew 25%. NIKE Direct grew 19% with NIKE Digital declining 12% as consumer buying continues to over index in brick-and-mortar versus the prior year. EBIT grew 70% on a reported basis. This quarter left no doubt. Sport is back. Consumer confidence is rebounding, and NIKE’s brand momentum is growing. We celebrated the return of sport with full marketing activations around the Chinese high school basketball league, Air Max Day, and Super Brand Day. And we extended that energy into our strongest product sell-through in eight seasons with full price momentum accelerated by our healthy inventory position. Running grew double-digits, fueled by newness in hyperlocal storytelling, including strong express lane executions for Invisible 3 and community activations around Pegasus 40. Basketball grew double-digits, led by the GT Cut. And we saw exceptional sell-through for our GT jump players edition inspired by longtime NIKE athlete, NIKE athlete, Ijen Leon. Earlier this month, our 6/18 results surpassed last year’s record breaking performance with sales up double-digits. And next week, we will build on that momentum as we kick-off NIKE’s first athlete tour in China since the pandemic by welcoming Giannis to Beijing. As we look forward, we are confident in the strength of our consumer connections and confident in NIKE’s ability to drive sustainable long-term growth in China. In APLA, Q4 revenue grew 6%, including approximately 6 percentage points of a headwind due to the impact of our shift to a distributor model in Central and South America. NIKE Direct was up 9% with NIKE Digital growing 9%. EBIT declined 16% on a reported basis. This quarter highlighted our balanced growth in the region. Jordan Brand continued its international expansion with strong double-digit growth as our new world of flight doors in Tokyo and Seoul create local brand energy. We also saw strong growth in women’s lifestyle and men’s performance with positive momentum from Cortez and Vamiro 5 and sustained strength from Pegasus and Invincible 3. In global football, we drove double-digit growth across men’s, women’s, and kids with excitement building ahead of this summer’s women’s world cup. We finished the year in APLA with new milestones and new opportunities in the region. In Southeast Asia and India, we grew our business by over 40% this year, reinforcing the potential that we see in the market. In Korea, our NIKE app launch drove 2.5 million downloads and $100 million in incremental demand within its first quarter, showing how elevated local digital experiences can accelerate consumer demand. And across the region, we continue investing to grow. From launching argentina.com and peru.com to introducing NIKE’s first direct digital footprint in India. Now, let me turn to our fiscal 2024 financial outlook. We enter the new year with clear advantages, strong consumer momentum, a robust product innovation pipeline, healthy inventory, and a normalized flow of supply. That said, we are closely monitoring the macro environment, consumer behavior, and retail trends. Our priority for fiscal 2024 is to drive healthy full price growth, while unlocking speed, agility, and efficiency in our operating model. We are focused on what we can control as we position NIKE to compete at its best. We are taking a balanced approach to planning our business, building on our proactive decisions more than six months ago to [tighten buys] [ph]. We expect this to translate into an improved marginal cost of growth, expanding profitability and higher returns on invested capital. We have also taken into account several non-count factors from the prior year that will impact overall rates of growth, as well as quarterly comparisons. For the full-year, we expect fiscal 2024 reported revenue to grow mid-single-digits, led by NIKE Direct. This includes approximately four points of headwinds from the prior year from wholesale shipment timing and accelerated liquidation activities. In addition, based on current spot rates, we do not expect any material translation impact on revenue in fiscal 2024. We expect gross margins to expand a 140 basis points to a 160 basis points on a reported basis, which translates to approximately 200 basis points of operational gross margin expansion, excluding 50 basis points of negative impact from foreign exchange headwinds. This reflects the beginning of recovery from transitory headwinds, including more favorable ocean freight rates starting halfway through the second quarter and a modest improvement in markdowns versus the prior year. We also expect continued structural gains from our focus on price value, including low-single-digit price increases in fiscal 2024, plus ongoing benefits from our shift to a more direct business. We expect this to be partially offset by higher product costs with inflation causing higher labor and fulfillment expenses in parts of our supply chain. We expect SG&A to grow slightly above revenue as we increase investment in demand creation to support key global sports moments and product launches and invest in capabilities to transform NIKE’s operating model for greater speed and effectiveness. We will continue to manage SG&A to remain below pre-pandemic levels as a percentage of revenue. Our other income and expense, including net interest income, is expected to be 225 million to 275 million of income the year, and we expect our effective tax rate to be similar to fiscal 2023. Now, let me provide a few important insights into our first quarter. We expect first quarter revenue growth to be flat to up low-single-digits, reflecting our decision to tighten first half buys and restrain marketplace inventory. We expect another quarter of sequential improvement in gross margin, down 50 basis points to 75 basis points on a reported basis, which translates to 25 basis points to 50 basis points of operational gross margin expansion, excluding the negative impact of a 100 basis points of foreign exchange headwinds. We expect SG&A to grow low double digits on a reported basis, driven by increased demand creation investments around the women’s World Cup and transformational investments to drive efficiency including the activation of the next stages of our ERP implementation in North America. Looking ahead, we will remain agile and on the offense, leveraging our experience, and the capabilities that we have developed to lead through times of uncertainty, while investing to capture the growth opportunities in front of us. For NIKE, creating the future always starts with serving athletes and sport. As we look to fiscal 2024, we have an incredible year of sport ahead of us from this summer’s World Cup to the road to the Paris Olympic Games, it will be a year to remember, and just like the athletes we serve, NIKE will be ready to bring our best. With that, let’s open up the call for questions. See also 15 Hardest Sports in the World Ranked and 16 Best Places to Live in Upstate New York for Families. Q&A Session Follow Nike Inc. (NYSE:NKE) Follow Nike Inc. (NYSE:NKE) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: Thank you, sir. [Operator Instructions] We’ll take our first question from Tom Nikic with Wedbush Securities. Tom Nikic: Hi everybody. Thank you very much for taking my question. I want to ask about North America and specifically the wholesale channel. And I think, you know, there’s been some news recently about maybe some wholesale partners that you had either exited or deemphasized and now you’re going back into some of those retailers. What drove that decision? And I guess, kind of what changed in your mindset that maybe a year or two ago, you saw – the [SW] [ph] was not somebody you wanted to partner with, but now you do and Macy’s, et cetera? So just any insight or color there would be really helpful. Thanks. John Donahoe: Yes, Tom, I’ll take that. Let me just saw right up front, our marketplace strategy remains the same as it’s been over the last several years. And this is simply a continued evolution of the very same marketplace strategy. And I’ll remind you that our marketplace strategy is driven by the consumer. I mean, at the end of the day, we start with the consumer, and consumers in this day and age want to get what they want, when they want it, how they want it. Consumers want digital and physical access. They shop across both channels, they want a mono-brand and multi-brand. They use different shopping occasions to use different channels. Consumers expect us to know who they are, and consumers have said to us they want a consistent and seamless experience. And so that is what has driven our marketplace strategy. And as you know, it starts with digital or a direct connection with the consumer. Our digital apps, our mobile apps are unmatched in the industry, and that’s our fastest-growing channel that will continue to be our fastest-growing channel because we directly connect with the consumer digitally. We augment that with owned retail, where we are building out stores, NIKE stores in segments that are currently underserved by our wholesale partners, we would say women’s is one of those cases in Jordan being another. So, we’re selectively opening new doors. And then multi-brand wholesale partners play a really important role. And as I said in my remarks, there’s different segments. So, we spent a lot of focus and attention, and we’ve talked a lot over the last couple of years about the larger multi-brand partners like DICK’s and JD and Foot Locker and Sports Direct. We’ve talked some around neighborhood doors where we authenticate, that’s such an important role. And then we have accounts that help us serve distinct segments of consumers or price points. And so what we’ve done over the past quarter is simply an extension of that. Our Direct business will continue to grow the fastest, but we’ll continue to expand our marketplace strategy to enable access to as many consumers as possible and drive growth. Operator: And next up is Matthew Boss, JPMorgan. Matthew Boss: Great. Thanks. So John, with the expanded definition of sport and greater awareness of health and wellness that you cited, could you elaborate on how you believe the NIKE brand is positioned to capture market share globally? And then, Matt, on the revenue guide for this year, could you just help bridge 1Q relative to the full-year? Maybe some of the puts and takes, I think, would be really helpful in terms of getting from the first quarter to the full-year......»»

GitLab Inc. (NASDAQ:GTLB) Q1 2024 Earnings Call Transcript June 5, 2023 GitLab Inc. misses on earnings expectations. Reported EPS is $-0.3 EPS, expectations were $-0.14. Darci Tadich: Thank you for joining us today for GitLab’s First Quarter of Fiscal Year 2024 Financial Results Presentation. GitLab’s Co-Founder and CEO, Sid Sijbrandij; and GitLab’s Chief Financial Officer, […] GitLab Inc. (NASDAQ:GTLB) Q1 2024 Earnings Call Transcript June 5, 2023 GitLab Inc. misses on earnings expectations. Reported EPS is $-0.3 EPS, expectations were $-0.14. Darci Tadich: Thank you for joining us today for GitLab’s First Quarter of Fiscal Year 2024 Financial Results Presentation. GitLab’s Co-Founder and CEO, Sid Sijbrandij; and GitLab’s Chief Financial Officer, Brian Robins will provide commentary on the quarter and fiscal year. Please note, we will be opening up the call for panelist questions. [Operator Instructions] Before we begin, I’ll cover the Safe Harbor statement. During this conference call, we may make forward-looking statements within the meaning of the federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For a complete discussion of risks associated with these forward-looking statements in our business, please refer to our earnings release distributed today in our SEC filings, including our most recent quarterly report on Form 10-Q and our most recent annual report on Form 10-K. Our forward-looking statements are based upon information currently available to us. We caution you to not place undue reliance on forward-looking statements, and we undertake no duty or obligation to update or revise any forward-looking statement or to report any future events, or circumstances, or to reflect the occurrence of unanticipated events. We may also discuss financial performance measures that differ from comparable measures contained in our financial statements prepared in accordance with US GAAP. These non-GAAP measures are not intended to be a substitute for our GAAP results. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release, which along with these reconciliations and additional supplemental information are available at ir.gitlab.com. A replay of today’s call will also be posted on ir.gitlab.com. I will now turn the call over to GitLab’s Co-Founder and Chief Executive Officer, Sid Sijbrandij. Sid Sijbrandij: Thank you for joining us today. I want to start off by thanking so many of you for the well-wishes I’ve received regarding my health. I’m doing well and I remain committed as ever to GitLab success. I’m pleased with how our business performed in the first quarter of FY’24. We exceeded our own guidance for both revenue growth and non-GAAP profitability. We executed well towards our goal of making our customers successful on our AI-powered DevSecOps platform. This quarter we generated revenue of $126.9 million. This represents growth of 45% year-over-year. Our dollar based net retention rate was 128%. Our first quarter results continued to demonstrate improving operating leverage in our business. Our non-GAAP operating margin improved by almost 1700 basis points year-over-year and we remain committed to growing in a responsible manner. I want to start this call with one of the most exciting technology developments of our time. AI and ML. AI represents a major shift for our industry. It fundamentally changes the way that software is developed, and we believe it will accelerate our ability to help organizations make software faster. I’m excited about this new wave of technology innovation, and we continue to focus on incorporating AI throughout our DevSecOps platform. We’re innovating at a fast pace. In 1Q, we delivered five new AI features and in the first half of May alone, we delivered five additional features. All of these are available to customers now and we continue to iterate on Code Suggestions. This feature allows developers to write code more efficiently by receiving Code Suggestions as they type. Code Suggestions is available on gitlab.com for all users, while in beta, we expect Code Suggestions will be generally available later this year. One of the guiding principles with Code Suggestions is to make it available and accessible to all developers everywhere. We also extended language support, so that more developers can realize the benefits of AI on our platform. In 1Q, we increased language support from the initial six languages to now 13 languages. Code Suggestions is uniquely built with privacy first as a critical foundation. Our customers proprietary source code never leaves GitLab’s cloud infrastructure. This means that their source code stays secure. In addition, model output is not stored and not used as training data. AI is not only changing how software is developed, it’s also amplifying the value of having a DevSecOps platform. DevSecOps is a category that we created and we’re seeing it enter a mainstream adoption phase. We are seeing industry analysts recognizing this. I’m pleased to share that GitLab was recently recognized as the only leader in the Forrester Wave for integrated software delivery platforms 2023. We are excited to see the market mature and recognize the value of an integrated software delivery platform, a strategy that GitLab has followed from the start. This quarter we had many conversations with senior level customers, but one with a CTO from a top five European bank really stands out. At first, we focused on many of our differentiated features that only a DevSecOps platform can provide. For example, we talked about the benefits of value stream dashboards, DORA metrics and compliance on a single platform. When the conversation moved into AI, the CTO said something extremely interesting. He said, cogeneration is only one aspect of the development cycle. If we only optimize cogeneration, everything else downstream from the development team, including QA security and operations breaks, breaks because these other teams involved in software development can’t keep up. This point, incorporating AI throughout the software development life cycle is at the core of our AI strategy. Today, our customers have the ability to use Code Suggestions for co-creation, suggested reviewers for code review. Explain this vulnerability for vulnerability remediation, value stream forecasting for predicting future team efficiency and much more. We’re proud to have ten AI features available to customers today, almost three times more than the competition. Applying AI to a single data store for the full software development lifecycle also creates compelling business outcomes. We believe that this is something that can only be done with GitLab. We see a lot of excitement surrounding AI at the executive level. We are hearing from customers that AI is motivating them to assess how they develop, secure and operate software through a new lens. Enterprise level companies who may not have been in a market until 2024, 2025, 2026 are re-evaluating their strategies. On top of that, there’s new personas entering the mix. As chief information security officers navigate these new AI powered world, they are working to empower their teams to benefit from AI and apply appropriate governance, security compliance and auditability. In all, we believe that AI will increase the total addressable market for several reasons. First, AI will make writing code easier, which we believe will expand the audience of people such as junior and citizen developers who build software. Second, as these developers become more productive, we see software becoming less expensive to create. We believe this will fuel demand for even more software. More developers will be needed to meet this additional demand. And third, we expect customers will increasingly turn to GitLab as they build machine learning models and AI into their applications. As we add ModelOps capabilities to our DevSecOps platform, this will invite data science teams as new personas and will allow these teams to work alongside their DevSecOps counterparts. We see ModelOps as a big opportunity for GitLab. Expanding the addressable market will also create an opportunity to capture greater value. Later this year, we plan to introduce an AI add-on focused on supporting development teams. This new add-on will include Code Suggestions functionality. We anticipate this will be priced at $9 per user per month billed annually. This add-on will be available later this year across all our tiers. All of this innovation accentuates a broader theme for our business. The differentiation between a Dev and a DevSecOps platform. We believe that an AI-powered platform focused solely on the developer persona is incomplete. It is missing essential security operations and enterprise functionality. Remember, developers spend only a small fraction of their time developing code. The real promise of AI extends far beyond code creation. And this is where GitLab has a structural advantage. We are the most comprehensive DevSecOps platform in the market. Features like Code Suggestions and Remote Development are important accelerants for developer efficiency. And today, GitLab has more AI features geared towards developers than our competitors. However, that isn’t enough. In order to achieve a ten times faster cycle time on projects, enterprises need an end-to-end platform that works across the entire software development life cycle. Let me describe some of GitLab’s key security operations and enterprise differentiators. For security only GitLab has dynamic application security testing, container scanning, API, security, compliance management and security policy management. In operations, only GitLab has feature flags, infrastructure as code, error tracking, service desk and incident management. And for enterprises only GitLab has portfolio management, OKR management, value stream Management, DORA metrics and design management. Let me illustrate the value of a DevSecOps platform with one of our customers, Lockheed Martin. Lockheed Martin’s customers depend on them to help them overcome their most complex challenges and to stay ahead of emerging threats. Their customers need the most technologically advanced solutions. Lockheed Martin’s engineering teams require speed and flexibility to meet the specific mission needs of each customers. They also require shared expertise and infrastructure to ensure affordability. Lockheed Martin has a history of using a wide variety of DevOps tools and needed to improve automation, standardize security practices and collaboration. They choose to go big with GitLab, greatly reducing their tool chain and cutting complexity while reducing costs and workload. Lockheed Martin team has reported eighty times faster CI Pipeline builds 90% less time spent on system maintenance. They’ve retired thousands of Jenkins servers. Lockheed Martin continues to grow with GitLab and is looking to migrate even more projects to their DevSecOps platform. One of their software strategy executives said by switching to GitLab and automating deployment teams have moved from monthly or weekly deliveries to daily or multiple daily deliveries. Lockheed is a great example of the power of a DevSecOps platform and we see this in other use cases as well, such as compliance. In the quarter, a large health care provider purchased GitLab Ultimate for a platform features. They needed to meet specific compliance requirements from their auditors. They determined that GitLab is the best way to achieve their objectives. Another customer we expanded business with in Q1 is NatWest Group, a relationship bank for the digital world. NatWest Group is focused on delivering sustainable growth and results of fostering a better, simpler banking experience. Last year, NatWest Group chose GitLab dedicated. He wanted to enable their engineers to use a common cloud engineering platform to deliver a better experience for customers and colleagues. Five months into the program, we are pleased that NatWest has reported shorter onboarding times and productivity gains. This led to NatWest choosing GitLab professional services to accelerate their transformation by supporting training certifications and developer days. In summary, we’re confident in a strong value proposition that GitLab provides to customers. GitLab is the most comprehensive AI-powered DevSecOps enterprise platform. The significant return on investment, quick payback period and well-documented positive business outcomes are resonating globally. We’re trusted by more than 50% of the Fortune 100 to secure and protect their most valuable assets. We also believe we’re in the early stages of capturing an estimated $40 billion addressable market, a market that we’ve seen evolve from point solutions to a platform from DIY DevOps to a DevSecOps platform. And AI will speed up different aspects of software creation and development. This in turn creates the need for a more robust security compliance and planning capabilities. In today’s era of rapid innovation, the power of a platform like GitLab to enable faster cycle times truly shines. I’ll now turn it over to Brian Robins, GitLab’s Chief Financial Officer. Brian Robins: Thank you, Sid, and thank you again for everyone joining us today. I’d like to spend a moment discussing the macro environment, the financial impact of our recently implemented premium pricing change and provide some insights into the financial impact of our AI products. Then I will quickly recap our first quarter financial results and key operating metrics and conclude with our guidance. Let me first touch on some of the watch points I discussed on prior calls. We continue to see sales cycles remaining at 4Q levels due to more people involved in deal approvals. Contraction improved over 4Q, but is higher than prior quarters. Like 4Q, contraction is driven almost entirely by lower seat counts with minimal down tearing. I was pleased with the bookings predictability in 1Q. It was much better than 4Q. As we mentioned on the prior call, we raised the price of our premium skew for the first time in five years. Over that time frame, we added over 400 new features, transitioned from a Dev platform to a DevSecOps platform. We shared that we expected the premium price increase of minimum impact in FY’24 with greater impact in FY’25 and beyond. The price increase which took effect on April 3rd is going as planned. We only had one month of renewals impacted by the price increase in the quarter. To-date, customer churn is unchanged for the premium customers who renewed in April and our average ARR per customer increased in line with our expectations. Now on to the way we are thinking about the financials and the impact of our AI products. We continue to invest in people and infrastructure to support AI. While we have had some teams working on AI features, we recently shifted additional engineers from other teams to support the work on AI. As a result, this has not led to significant incremental expenses on engineering talent. Additionally, we have made investments in our cloud provider spend to support our AI and R&D efforts. In addition, we also continue to leverage partners help drive our AI vision. This has included partnership announcements with Google Cloud and Oracle. The Google Partnership allows us to use Google Cloud AI functionality to make our own AI offerings better by leveraging their toolset. The partnership with Oracle makes it easier for our customers to deploy their own AI and machine learning workloads using Oracle’s cloud infrastructure. Both of these partnerships help create strategic differentiation for our customers in a financially responsible manner. Now turning to the quarter. Revenue of 126.9 million this quarter represents an increase of 45% organically from the prior year. We ended 1Q with over 7400 customers with ARR of at least $5,000 compared to over 7000 customers in the fourth quarter of FY’23 and over 5100 customers in the prior year. This represents a year-over-year growth rate of approximately 43%. Currently, customers with greater than 5000 ARR represent approximately 95% of our total ARR. We also measure the performance and growth of our larger customers who we define as those spending more than 100,000 in ARR with us. At the end of the first quarter of FY’24, we had 760 customers with ARR of at least $100,000 compared to 697 customers in 4Q of FY’23 and 545 customers in the first quarter of FY’23. This represents a year-over-year growth rate of approximately 39%. As many of you know, we do not believe calculated billings to be a good indicator of our business. Given that prior period, comparisons can be impacted by a number of factors, most notably our history of large prepaid multiyear deals. This quarter, total RPO grew 37% year-over-year to 460 million and cRPO grew 44% to 324 million for the same time frame. We ended our first quarter with a dollar based net retention rate of 128%. As a reminder, this is a trailing 12 month metric that compares expansion activity of customers over the last 12 months with the same cohort of customers during the prior 12 month period. The dollar based net retention of 128% was driven by lower seat expansion and contraction due to seats. The ultimate tier continues to be our fastest growing tier, representing 42% of ARR for the first quarter of FY’24, compared with 39% of ARR in the first quarter of FY’23. Non-GAAP gross margins were 91% for the quarter, which is slightly improved from both the immediate preceding quarter for the first quarter of FY’23. SaaS represents over 25% of total ARR, and we’ve been able to maintain non-GAAP gross margins despite the higher cost of delivery. This is another example of how we continue to drive efficiencies in the business. We saw improved operating leverage this quarter, largely driven by realizing greater efficiencies as we continue to scale the business. Non-GAAP operating loss of 15 million or negative 12% of revenue compared to a loss of 24.8 million or negative 28% of revenue in 1Q of last year. 1Q FY’24 includes 5.6 million of expenses related to our JV and majority owned subsidiary compared to 3.7 million in 1Q FY’23. Operating cash use was 11 million in the first quarter of FY’24 compared to 28.2 million use in the same quarter of last year. Now let’s turn to guidance. We are assuming the macroeconomic headwinds and trends in the business we have seen over the last few quarters continue. There has been no change to our overall guidance philosophy. For the second quarter of FY’24, we expect total revenue of 129 million to 130 million, representing a growth rate of 28% to 29% year-over-year. We expect non-GAAP operating loss of 11 million to 10 million and we expect a non-GAAP net loss per share of negative $0.03 to negative $0.02, assuming a 153 million weighted average shares outstanding. For the full year FY’24, we now expect total revenue of 541 million to 543 million, representing a growth rate of approximately 28% year-over-year. We expect non-GAAP operating loss of 47 million to 43 million and we expect non-GAAP net loss per share of negative $0.18 to negative $0.14 assuming a 153 million weighted average shares outstanding. On a percentage basis, our new annual FY’24 guidance implies a non-GAAP operating improvement of approximately 1200 basis points year-over-year at the midpoint of our guidance. Over a longer term, we believe that a continued targeted focus on growth initiatives and scaling the business will yield further improvements in unit economics. The guidance has us on track to achieve cash flow breakeven for FY’25. For modeling purposes, we estimate that our fully diluted share count is 173 million. Separately, I would like to provide an update on JiHu, our China joint venture. Our goal remains to deconsolidate JiHu. However, we cannot predict the likelihood or timing of when this may potentially occur. Thus, for modeling purposes for FY’24, we now forecast approximately 29 million of expenses related to JiHu compared with 19 million in FY’23. These JiHu expenses represent approximately negative 5% of our total implied negative 8% non-GAAP operating loss for FY’24. Our number one priority as a management team is to drive revenue growth, but we’ll do that responsibly. There has been no philosophical change in how we run the business to maximize shareholder value over the long-term. Before we take questions, I’d like to thank our customers for trusting GitLab to help them achieve their business objectives. Also want to thank our team members, partners and the wider GitLab community for their contributions this quarter. With that, we’ll now move to Q&A. To ask a question, please use the chat feature and post your question directly to IR questions. We’re ready for the first question. Operator: A – Darci Tadich: Our first question comes from Rob with Piper Sandler. Q&A Session Follow Gitlab Inc. Follow Gitlab Inc. We may use your email to send marketing emails about our services. Click here to read our privacy policy. Rob Owens: All right. I think I did that correctly after three years of using Zoom. Good afternoon, guys. Sid Sijbrandij: Hey, Rob. Good afternoon. Rob Owens: Curious to hear an update on customer conversations. Obviously a stronger than expected quarter, but we are seeing this deceleration, I think, across all high-growth tech companies. So both Gen AI — in the macro, how should we think about pressure on net retention rates, customer acquisition that’s coming from customers taking a more prudent approach in the current budgetary environment versus, I guess, rethinking needs for Dev headcount and re-evaluating which Dev tools to purchase just given all the Gen AI innovations lately? Sid Sijbrandij: Yeah. Thanks, Rob. And before I answer that question, maybe an update on my health. I just completed my last round of systemic chemotherapy. So happy about that. Rob Owens: Congratulations. Sid Sijbrandij: Thanks. And also no sign of detectable disease, and I’m excited about GitLab’s future and continuing my role as CEO and Chair. Yes, lots of things to unpack in your question. We see the macro trends continuing, and that’s putting pressure on seat count. That was the same last quarter, and we anticipate that trend to continue. At the same time, we’re super excited of what the macro is doing to the mindset of customers, because they say, hey, now we — it’s time to consolidate. And at the same time, we see that the analysts are seeing that, hey, this is consolidating as a market. So we believe that DevOps platform is going to be the way that people will consolidate. And we have the most comprehensive DevSecOps platform, which is also great if you look at the application of AI. We’re able to apply AI not just for Code Suggestions, but apply it across the entire spectrum. We have more than 10 features that we were able to ship. And those 10 features, they drive value at every part along the stage. And as for how that influences the TAM, which you alluded to, we think AI is going to make it easier for more people to enter the fray. So we think it was a supply of more people using the product. At the same time, when you see that software development becomes easier, we believe there’s going to be more demand for it. Software development used to be very expensive. AI makes it more affordable. There’s going to be more demand. And more demand, again, means more people entering the fray. And last but certainly not least, it’s an opportunity for us to manage not just the code that companies have, but also their models. And that’s what we do with our MLOps functionality. We already allow you to run experiments with GitLab. We want to extend to a full MLOps managed platform where we add the data engineers to the constituents that use GitLab. Rob Owens: Great. And if I can sneak a quick one in for Brian. Just regarding DBOs in the linearity of the quarter, was that either large deals at the end? Or was it very back-end weighted? And if I look at that receivable base and assume collections on it, looks like you could turn the corner from a cash flow perspective relatively soon. So any commentary on turning free cash flow positive? Thanks. Brian Robins: Yeah, I’ll touch on DSOs, and I’ll touch on free cash flow breakeven. And so from a DSO perspective, we were more weighted towards the end of the quarter. But the good news is that we — our amount of bad debt over the last three years has not exceeded 1%, and our age receivables has been very, very consistent. And so some of our European customers have requested Net 45, Net 60. And so we’ve accommodated that just because of the macro and the bad debt expense being so low. From a free cash flow breakeven perspective, we committed to be free cash flow breakeven in FY 2025. And we’ve also stated some of the actions that we’ve taken previously will accelerate our path to profitability, but haven’t given a specific time line on that. Rob Owens: All right. Thanks, guys. Brian Robins: Thanks, Rob. Darci, you’re muted. Darci Tadich: Up next, we have Joel with Truist. Joel Fishbein: Thank you. And Sid, I’m sending prayers to you, and congrats on making it through the treatment. Sid Sijbrandij: Thank you. Joel Fishbein: Brian, just a quick follow-up for you on Rob’s question. Congrats on the margin improvement. I think that’s — you’ve done a really good job. Can you give us a little bit more color on some of the things that you’re doing to continue to drive towards cash flow breakeven while still investing in some of these new initiatives that you’re doing, which obviously you’ve spent a lot of time talking about some of these AI programs that are coming out. And then just as a follow-up to that, have you like tested this $9 increased — license increase to your customer base and whether or not that they’ll — there’s going to be any pushback there? Thank you. Brian Robins: Yes, Joel, absolutely. Thanks for the question. As Sid and I have always stated since we went public is the number one objective at GitLab is to grow, but we’ll do that responsibly. And we’ve tried to demonstrate that every quarter. And so nothing has changed in that front. Our non-GAAP gross margin percent went up to 91%, even though we continue to have really high SaaS growth and SaaS is greater than 25% of our overall revenue. And so we’re continuing to look at all areas within the business where we can optimize, but we aren’t doing that at the expense of growth because that’s the number one objective at the company. I think we demonstrated that across all cost categories and we’ll continue to look at that quarter-over-quarter. On the $9 increase, we haven’t tested that yet. From a guidance perspective, most of the cost for that is in headcount and cloud costs, and that’s included in the guidance that we gave. And so we don’t expect any changes from a guidance perspective. Joel Fishbein: Thank you. Darci Tadich: Next, we have Sterling with MoffettNathanson. Sterling Auty: Thanks. Hi, guys. Sid, congratulations as well on the completion of the treatments. Hopefully, you got a chance to actually ring the bell. Brian just — and Sid just another follow-up question just on the pricing. So you touched upon it, but I want to make sure to put a fine point here. Did it have any impact on win rates or length of deals where maybe customers were asking and negotiating a little bit harder because of the price increase? Or anything in terms of size of initial lands that may have been impacted because of the price increase? And if not, does that actually change when you think some of the benefits of the pricing increase will actually flow through the revenue line? Brian Robins: Yes. Thanks, Sterling. I guess for everyone on the call, let me just briefly touch on the price increase. We haven’t raised prices in five years. And over that time period, we added 400 new features to the platform. And so that was the genesis of the price increase. The guidance we gave last quarter and today include the price increase. As you know, the price was effective in early April. And so we really only had a short period of less than a month for that. But I am happy to say that the renewal rates and the churn and the land of new customers have been better than expected. And so we’re happy with the results that we’ve seen in just that one month time period. Sterling Auty: All right. Great. Thank you. Darci Tadich: Our next question comes from Matt with RBC. Matthew Hedberg: Hey, guys. Great. Thanks for taking my questions and I’ll offer my congrats, Sid. That’s the best news of the call, really good to hear you doing well. I noticed Ultimate ticked up. I believe, Brian, you said it was 42%, which, last year, was kind of flattish, really the whole year. I was curious what was driving that? Is that sort of AI showing up some of those migrations? Is it more of the not security? Or perhaps is it — is there any of the price increase on premium that’s maybe driving folks to Ultimate? Brian Robins: Yes. Thanks, Matt. When we talk about Ultimate, as we said before, is we don’t set the sales compensation to basically compensate on Ultimate versus Premium. We want to try to take as much friction out of the process. For the consumer as well, we do the same on SaaS and self-managed as well. And so Ultimate, the strength in Ultimate is really based on the underlying value that we’re driving to our customers. The ROI on Ultimate, Forrester did a study, it was 427% over three years, and payback was around six months. And so when I looked at the quarter and looked at sort of Premium, Ultimate and sort of the breakout between contraction, churn, first order and expansion, Ultimate had — churn was consistent with a bunch of prior quarters. Contraction was very consistent. Our growth was just as good as prior quarters, and we had a really strong first order quarter as well. And so Ultimate continues to do well. It’s our fastest-growing tier, and we’re happy with the results. Matthew Hedberg: That’s fantastic. And then maybe just if I could follow up with one with Sid. One of the questions that we get from developer — from investors the most is, does Gen AI put pressure on Dev, developer seat count. I think you talked about a little bit in your prepared remarks, but maybe could you put a finer point on sort of the question of P times Q. And does the number of seats go down in the future? Or do you think it stays consistent or maybe even goes up? Sid Sijbrandij: Yes. We believe that generative AI will expand the market. So first of all, you make the product easier. Like coding today is hard, and AI makes it easier. So we expect the citizen developers, these junior developers to start coding. That code needs to be managed somewhere. And that is in GitLab. The second thing is you make it — you — when a developer can do more, you bring down the price, and that should increase demand for development and software development activities. Third, what you have is today is a DevSecOps platform, but we’ve already articulated that we want to be a place where you manage not just code, but also MLOps. MLOps is the management of data and the management of models. Models are harder to manage than code. They change over time, and they have a lot of risks, security risks, discrimination risks, risks that you’re doing the wrong thing, risk that they are outdated. So it’s a really interesting space to expand the product to. And for example, today, if you have an experiment in MLFlow, you can link it to the experiment in GitLab. And in the future, we’ll plan to come out with a model registry in GitLab. So those are all reasons why we think the market will expand. One other way to look at it is you have generative AI. It produces more code. All that codes also needs to be secured, also need to put in operations. So if you don’t have a good DevSecOps platform, you create a bottleneck at the beginning. That bottleneck is solved with the DevSecOps platform. Matthew Hedberg: Thank you Darci Tadich: We will now hear from Koji with Bank of America. Koji Ikeda: Hey, guys. Thanks for taking the questions. Maybe a question for Sid or Brian here. I wanted to ask you a question about how you plan on attacking the other 50% of the Fortune 500 or I’m sorry, the Fortune 100 that you don’t have. Is it still a primary land-and-expand strategy? Or is it going to be more of a higher level sale for these customers? I was just kind of hoping you could dig into that a little bit more, please. Sid Sijbrandij: Yes. I think it’s certainly that it is both the bottoms-up sale but also the top-down sales. So we have a direct sales motion, but also a channel sales motion that’s getting more important. Channel sales, think of our partners, AWS and GCP, where we work with them to go to customers. And we’re talking to CTOs, CSOs, CIOs, and we help them see the picture. What we commonly do as a value stream analysis. We point out all the different tools they use throughout the cycle and how that adds up in cycle time. And with GitLab, they’re going to save on tooling costs, they can save on the cost of integrating that tooling. They can make their people more productive, and they can go faster through that cycle and get initiatives out. So it’s certainly something we’re going to market with. And as you said, our goal is 100% of the Fortune 100. Koji Ikeda: Got it. And maybe a follow-up here for Brian on kind of going back to free cash flow. This quarter, free cash flow is higher than non-GAAP operating income. And I recall there’s some cash flow mechanics around contract duration that should be mostly be out of the model by this point. So is that right with the cash flow mechanics? And does free cash flow trend higher than non-GAAP operating income from here on an annual basis? Just could you just dig into that just a little bit more for me, please? Brian Robins: Yes, absolutely. When we joined — when I first joined the company, we were not incentivizing the sales force to do multiyear deals because we had such a high gross retention rate. And so we really pushed for one year deals in this. That’s why you saw billings and RPO is — go down and wouldn’t grow at the same rate as cRPO or short-term calculated billings. But we still continue to have prepaid multiyear deals within our existing book of business. And so as those contracts renew, you’ll see some lumpiness in our billings and collections, and Q1 was one of those quarters. Koji Ikeda: Got it. Thank you. Brian Robins: Thank you. Darci Tadich: Next, we have Michael with KeyBank. Michael Turits: Hey, guys. Brian Robins: Hey, Michael. Michael Turits: Can you hear me? Sorry about that. Brian Robins: We can. Go ahead. Michael Turits: So can you talk again you know Brian you said about how competition has gone. Microsoft, obviously, they have been very visible around Copilot. You announced a lot of features. But how has the sort of day in and day out competition gone. As you said, Brian, sales cycles have not extended, but are people sizing you up against each other and differently. How are they entering this discussion about whether or not [Technical Difficulty] Brian Robins: Yes. I think I got most of it, Michael. And I think I’ll repeat the question was how has the sales cycle changed with between us and Microsoft, and what — if you had noticed any change — noticeable things within the quarter. So one thing to note this quarter is on last earnings call, I talked about how the first month of the quarter was very different than the second and third month of the quarter. This quarter is really predictable. And so I was happy with the predictability of the quarter. Week Three, we called the quarter and landed really close to that. The sales cycles in first quarter remained at fourth quarter levels. And so there wasn’t a lot of change there. As I talked about earlier, Ultimate being greater than 50% of the bookings and continue to do well. I think that shows some of the differentiation between us and Microsoft. The hyperscalers as well had a great quarter as well. They grew over 200% year-over-year from a bookings perspective. And also this quarter, we had lower discounting than the previous quarter. And so the trends with Microsoft remain pretty consistent where we still don’t see any competition at about 50% of the deals. We see them in very little deals, but there is more discussion around OpenAI, ChatGPT and Copilot. All right. Darci, we’ll go into the next one. Darci Tadich: Derrick with Cowen is next. Derrick Wood: Great. Thanks. And Sid congrats on the news. I wanted to start, in the press release, you talked about an expanded partnership with Oracle and a new AI/ML offering, enabling customers to speed up model train and inference. Can you give us a little more detail around those new partner initiatives? And then just from a broader perspective, how you’re thinking about the Gen AI related revenue opportunities in the quarters ahead? Sid Sijbrandij: Yes, thanks for the question. So we’re really excited about our partnership with Oracle Cloud. They have a great customer base. And what it means is that our customers now can now run AI and ML workloads on DPU-enabled GitLab runners on the Oracle Cloud infrastructure, and that’s a great powerful infrastructure. Additionally, we’re available in Oracle’s marketplace, expanding our distribution. So our strategy, with AI in mind, is to partner closer with the hyperscalers. And the toughest one is Microsoft. We try to partner there too, but with everyone else, we see a lot of momentum, and that’s AWS, GCP and Oracle. We want to get closer. We want to enable our customers to run their normal workloads, their AI workloads there, and where you can expect us to have more announcements going forward. Derrick Wood: Okay. Maybe a quick one for you, Brian. Appreciate getting more exact numbers on net revenue retention rates. Kind of looking forward and with respect to your guidance for the rest of the year, is there any kind of target ranges that you’d guide us towards? Or how we should be thinking about trends around gross retention and expansion factors? Brian Robins: We didn’t give out the specifics of those metrics. What I will say is this quarter — last quarter was more predictable. And so it makes it easier from a modeling perspective. And everything is factored into guidance. And so we didn’t give specific metrics for those. Derrick Wood: Got it. Okay. Thank you. Darci Tadich: Kash with Goldman Sachs. Kash Rangan: Okay. Great. Thanks for taking my question. Sid good to see that you’re recovering very well and congratulations on the quarter. It looks like business stabilized for you guys. I had a question on the generative AI capabilities. At what point are we looking to — is there any need for further differentiation of GitLab versus the competition? This auto code generation feature that has been made much off, right? Is that a real sticking point in conversations? Do you think the customer base really values and appreciates the broader set of AI capabilities that GitLab has to offer? So it looks like there is a bit of a perception issue in the market that you don’t have those kinds of features that the competition appears to have. If you can debunk that mix for us, that will be great. And then one for you, Brian, what does the month of May look like from a linearity standpoint? The net expansion rates that you saw as improving in the March quarter, it does hold up in the month of May as well. Thank you so much. Sid Sijbrandij: Thanks, Kash. Like in AI, you have the code generation. If you just produce a whole bunch more code, then it’s going to get log jammed later down the pipeline. You also need to do more security fixes. You need to deploy more. So we’re really fortunate that we have a single application, a single data store for the entire DevSecOps cycle, and we can apply to AI to all of them. And that’s led us to having three times as many publicly usable AI features as our competition. That is a big advantage. As long as at the beginning that, of course, you also need the code suggestions. But having the whole rest make sure that if you get more effective there, it works, and you get a faster cycle time throughout and that’s a really exciting development. Kash Rangan: And Brian I had one for you. Yeah, thank you. Brian Robins: And just on the second part of the question, as you would expect, we track a number of metrics internally from top of the pipeline to bottom conversion rates, piecing, expansion, churn, contraction and so forth. And I’m happy quarter-to-date, things are as expected. And so like I’ve mentioned last quarter, it was more predictable in fourth quarter and quarter-to-date and we’ll see how the quarter finishes out, but it’s as expected on all those metrics that we track internally. Kash Rangan: Great. Good to see the quarter and the results. Thank you so much. Sid Sijbrandij: Thanks, Kash. Darci Tadich: Next is Karl with UBS. Karl Keirstead: Thank you. Maybe, Brian, I’ll point this to you. So as all of us try to run back of the envelope math about what the $9 per seat monetization plan might mean for fiscal ’25, can you offer any guardrails as to things we should keep in mind so we’re — maybe we’re a little bit tight on what it could mean. And I guess maybe as two quick follow-ups. Is there any reason to believe that it wouldn’t be applicable to all of your paying users? Or does it feel like it would be relevant only for a subset? And then on top of that, do you think this could actually accelerate the conversion of the free user base to the paid user base such that the opportunity set is beyond our estimate of what you’re paying user base looks like? Thank you. Brian Robins: Lots in there to unpack. Just on FY 2025, we haven’t given out guidance for next year yet. And so I really can’t comment on that. The $9 that Sid talked about in the script is baked into our guidance for this year. Karl Keirstead: Okay. But Brian does it — could it accelerate a free-to-paid conversion? I’m not asking you for fiscal ’25 guidance, just kind of framework as we try to model out what it could mean. Anything you’d offer up as we take our best shot? Brian Robins: I think that all that we’re doing is to make the developer, the security and operations persona is more efficient and to allow and make better, faster, cheaper, more secure. And so I think anything that you do that enables that should help out on all the metrics that you track and model. Karl Keirstead: Okay. Great. Congrats on the quarter. Brian Robins: Appreciate it, Karl. Darci Tadich: We will now hear from Jason with William Blair. Jason Ader: Yeah. Hi, guys. Can you hear me okay? Brian Robins: We can. Jason Ader: All right. Great. I wanted to ask about whether you’re exploring a consumption element to your pricing model and how that might work, especially on the cloud side. Sid Sijbrandij: Yes, thanks for that. We already have consumptives elements in our model. So for example, for compute and for storage, you pay on a consumption basis. We’re adding features to that consumption, for example, in GitLab 16 released on June 22nd, we released MacOS runners, we released Linux runners, we had the Oracle partnership where we have more AI runners, DPU runners. So that is a small part of our revenue today, but we’re releasing additional features. I think over time, you see that the licensing is going to become more flexible. We have cloud licensing today and that allows us to be more flexible in what you pay for. For example, the add-on we are envisioning for AI, right now, it’s efficient to something if you use it, you pay for it, otherwise not. We’ll see what we end up releasing, but that’s what we’re thinking about. So I think you’re right that the mindset of customers is going more consumption, and we don’t — we want to be meeting the expectations there. Jason Ader: Got you. All right. And then one quick follow-up just on that AI SKU. What is going to be included in that SKU beyond Code Suggestions? Sid Sijbrandij: Right now, we’ve only talked about Code Suggestions being part of it. Jason Ader: Perfect. Thank you. Good to see you looking good, Sid. Sid Sijbrandij: Thanks, Jason. Appreciate it. Darci Tadich: Gregg with Mizuho. Brian Robins: We don’t see him. We can go to the next one. Darci Tadich: Pinjalim with JPMorgan. Pinjalim Bora: Great. Thank you for taking the questions. Sid, good to see you doing well. Sid, maybe one on MLOps. Can you help us understand where are we in the maturity curve for GitLab with respect to MLOps. Is DataOps kind of the gap at this point? I’m trying to understand with the current craze of kind of developing Gen AI application, are you seeing new or existing customers kind of talking about using GitLab as part of their MLOps workflow when they’re thinking about building this Gen AI apps? And then one follow-up. The $9 per user per month add-on is that basically an extension into visual code? Is there a difference between a SaaS user or a self-managed user? Sid Sijbrandij: Yes. Thanks for that. So to answer the last question first, that $9 will be the same $9, whether you’re a SaaS user or a self-managed user. You’ll be able to use the Code Suggestion features in our Web IDE as well as in the usual editors like Visual Studio Code. Regarding ModelOps, we’re really, really early. So I don’t want to oversell this. It’s a vision of where we’re going to the future, of where we see the TAM expanding. Today, we have the functionality to link experiments in MLFlow to GitLab, and the next feature that will come out is a model registry. And when you have a model registry, that’s going to form the basis of new functionality we can do is then you have the model kind of control in GitLab as well, and you can start adding more functionality. We expect that MLOps functionality to come before the DataOps functionality. The model learning looks a lot more like code in many ways than the data. So it’s kind of the logical step is first models and then data. With data, it’s — we don’t have functionality yet and that will come later. I think it’s — the thing to know is that we have the ambition. We have the ambition to go beyond code. We have the ambition to manage your code, your models and your data because we think the application of the future is going to have all three, and all three are going to be governed. All three are going to have security and compliance questions that you want your tool, your DevSecOps platform to figure out for you. And that’s why we are doing this, not because it’s easy, but because it’s super, super useful, and because every application is going to have interactions between the three, if we can bring all those constituents together, that’s going to be super valuable for our customers. Pinjalim Bora: Very helpful. Thank you Darci Tadich: Next is Mike with Needham. Mike Cikos: Hey, guys. You have Mike Cikos on the line here and thank for taking the question. First one for Sid, and Sid, great to hear on the health. That’s tremendous news, and I appreciate you giving us all an update. Wanted to circle up on the AI add-on that we’ve been talking about. And I know the Code Suggestions is the only one that we’re talking to today that’s going to be part of that add-on. Can you help us think through, will GitLab be offering up AI features or certain products, however you want to phrase it, independent of that add-on? Or are you going to have to adopt that AI add-on be able to reap the benefits of the AI technology investments that you guys are making today? And then I have one follow-up for Brian. Sid Sijbrandij: Yes, it’s a great question. Like will every AI, piece of AI functionality be in that add-on? And how does it work? Will there be additional add-ons? Will it be part of Premium or Ultimate? Those are pricing and packaging questions. We’re still looking into today so I can’t comment on that. It’s a valid question though. Mike Cikos: Okay. And to Brian then, if I just look at Q1, obviously, the revenue was well ahead of the guidance and your expectations. Can you help us think through what was better than expected during the quarter? And similarly, what is management embedding in its guidance, if I look at the much more, I guess, modest sequential revenue growth that we’re now looking for in 2Q? Brian Robins: Yes. Thanks for the question, Mike. I was happy with the predictability in the quarter, as I states earlier. When we talked about guidance on the last call, because we had more variability in fourth quarter, the range got higher. And so we looked at the bottom end of the range and selected that. And so if you compare us 1Q to 4Q, sales cycles remained at 4Q levels. I did discuss how the hyperscalers bookings were over 200% year-over-year. We also had the lower discounting, and I touched on the strength of Ultimate in the quarter. And so the guidance approach hasn’t changed. When we look at the history of what we’ve done and we look at the assumptions that we have in the model, we have a very detailed bottoms-up model to come up with guidance. And we use the same guidance approach given the macro conditions, and that’s how we planned. Mike Cikos: I’ll leave it there. Thank you guys. Brian Robins: Appreciate it. Darci Tadich: Let’s try Gregg with Mizuho. He has reconnected. Gregg Moskowitz: All right. Thank you very much. Glad the connection is holding. And Sid very glad to hear the encouraging news regarding your health. I’d like to follow up on ModelOps, and I know it’s really early. I do think the native registry is an interesting enhancement. And just curious to get your expectation with regard to attracting data science teams to the platform going forward as that starts to ramp? And then I have a follow-up for Brian. Sid Sijbrandij: Yes, because it’s really early, we want them to work together hand in hand. You see that many changes need both the change in the code and a change in the models and it’s going to lead to different data being outputted. So these changes that today happen in different platform, different tool chains and sometimes very manual. We expect that it’s going to be more and more important to happen on the same level. You think about the financial industry, what you execute, what you have to prove to your auditors is going to be based on procedural code plus a model you’re running, plus that model you’re changing based on data that you need to prove like what data did you use to train the model that, that was then called from your code, that’s the questions we need to answer, that our customers need to answer, and we want to help them do that in a way that’s friction-free where it’s not up to the developers to document it each and every time but the platform just takes care of it and you only have to point out a transaction and you can immediately see how you did that. And that’s really hard to achieve today without a platform. And that’s what we’re going for. As I said very, very early, but I hope a compelling ambition. Gregg Moskowitz: All right. Very helpful. And then for Brian, in the Q4, you mentioned that your NRR decreased almost equally, I think, across seats, tier upgrades and price yield. Any change to that mix in the Q1? Brian Robins: It’s been relatively the same. And so seats is about 50%. Price increase is about 25%, and the last is 25%. So there really hasn’t been any change whatsoever. Gregg Moskowitz: All right. Perfect. Thank you. Darci Tadich: Next is Nick with Scotiabank. Nick Altmann: Awesome. Thanks, guys for taking the questions and Sid great to hear you’re doing well. Just a follow-up on Matt’s question on the Ultimate mix ticking up. It sounds like some of the strength there was driven from a business that was up for renewal in a smaller price point delta between Premium, Ultimate, and it also sounds like there was some strength there just on net new customers landing at Ultimate. But I’m just curious given there’s more renewal businesses as sort of we progressed through 2Q in the second half, should we expect the Ultimate mix to continue to uptick here? Thanks. Brian Robins: Yes. Thanks for the question, Nick. As we said before, and I think it’s worth saying again, we don’t compensate the sales team to sell Ultimate versus Premium. And so that is an output and not something that we’re solving for. We want to deliver the best solution for the customer and get them a quick time to value and a positive business outcome. And so Ultimate had strength in the quarter. It’s really driven by compliance, security and all the additional product features that Ultimate has. When you go through and look at Ultimate and look at expansion, first orders and so forth, Ultimate performed well in a lot of the categories as expected. And so where we saw some pockets of weakness was really in Premium on expansion of our existing clients as well as the contraction. Churn was relatively low, but we still saw some contraction as well. And so like I said, Ultimate had a good quarter. There was some pockets of weakness in premium, I’ll call them watch points that we continue to watch. But overall, happy with what we delivered. Nick Altmann: Great. Thank you. Darci Tadich: Our final question comes from Ryan with Barclays. Ryan MacWilliams: Thanks for squeezing me in. Sid, how are enterprises evaluating adopting AI for their code development today? So like what are some of the key items that they would grade you on? And would this happen via something like an RFP process? Or would this be something that they handle internally? Thanks. Sid Sijbrandij: Thanks. I believe it’s more organic today. They’re trying different things. I think what is really important to a lot of customers is the privacy of their code. And what they’re looking for is a provider who can guarantee that, for example, the output of the models that they ask questions to isn’t used for other models. So that’s something that’s top of mind for us as we build our features. Other than that, it also has to be kind of accessible to everyone in the company. It has to work on the most popular editors. And we have a lot of revenue from self-managed. So we want to make sure that, over time, functionality also is available to self-manage customers where they can connect to the Internet to offer that functionality. Ryan MacWilliams: So are you seeing a lot of questions from customers around securing the output of code from large language models? Sid Sijbrandij: I think it’s top of mind for customers is that the — with some of the third-party services today, you don’t get a guarantee that the output isn’t used to train the Code Suggestions for another organization. And that’s certainly top of mind for them. Ryan MacWilliams: Appreciate that. And one for Brian. Do you see any pull forward of demand or early contract negotiations from customers looking to take advantage of that $24 transition price in the quarter? Brian Robins: I’ll answer this, but this is the last one, Ryan. We got to close out and get back on the call backs. We did not allow early renewals. Your contract had to be up renewal two weeks prior to expiration. And so there was no pull forward in the quarter related to that. Ryan MacWilliams: Okay. Thanks, guys. Darci Tadich: That concludes our 1Q FY’24 earnings presentation. Thanks again, once more, for joining us. Have a great day. Follow Gitlab Inc. Follow Gitlab Inc. 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In this article, we will look at the 10 cheapest fast-food chains right now. If you are not interested in reading the details, head straight to the 5 Cheapest Fast Food Chains Right Now. The magnitude of fast food consumption in the United States is substantial. Fast food plays a significant role in American spending […] In this article, we will look at the 10 cheapest fast-food chains right now. If you are not interested in reading the details, head straight to the 5 Cheapest Fast Food Chains Right Now. The magnitude of fast food consumption in the United States is substantial. Fast food plays a significant role in American spending habits, as consumers allocate a massive portion of their budgets to these establishments. Billpin reports that Americans contribute over $275 billion to the global fast-food industry, representing 18% of total expenditure. On an individual level, the average American spends approximately $1,200 annually on fast food. Collectively, the total expenditure on fast food in 2021 exceeded $200 billion. When considering a lifetime, the cumulative spending on fast food accumulates to around $70,000. The popularity of fast food is evident, with an estimated 50 million Americans consuming it daily. The global fast food market is valued at $931.7 billion. Notably, 80% of Americans visit a fast-food restaurant monthly, while 20% indulge weekly, and 23% of US adults consume it three or more times a week. Disturbingly, 34% of children aged 2 to 19 consume fast food daily. Factors Influencing Fast Food Pricing Considering the vast fast food consumption in the United States, it becomes essential to understand the factors that influence fast food pricing. These factors shape the cost structure and profitability of fast-food chains and provide insights into the pricing decisions made by these establishments. Here are several key factors that affect fast food pricing: Ingredient Sourcing and Cost: The cost of ingredients influences pricing, and fast food chains prioritize affordable and readily available options. Economies of Scale and Supply Chain Efficiency: Large chains negotiate bulk deals, optimize supply chains, and centralize purchasing to reduce costs. Operational Optimization and Cost Reduction: Streamlined processes, technology integration, and labor management help lower expenses. Rent and Location: High rent and prime locations can increase operating costs and impact pricing. Marketing and Branding: Investments in advertising and promotions play a significant role in shaping overall costs and influencing pricing decisions. Competition: Intense competition leads to price wars and promotional offers to attract customers. Menu Development and Complexity: Menu variety and complex recipes may increase production costs and affect pricing. Seasonal Factors: Specific menu items are impacted by ingredient cost fluctuations, which can be attributed to seasonality or changes in commodity prices. Regulatory Compliance and Costs: The adherence to regulations incurs additional expenses that directly impact pricing decisions. Overhead Expenses: Employee wages, utilities, equipment maintenance, and administrative costs contribute to pricing considerations. By considering these factors, fast food chains can balance customer affordability and maintain profitability. It’s important to note that the relative importance of these factors may vary depending on the specific chain, location, and market conditions. Assessing Affordability: Beyond Menu Prices When evaluating the affordability of fast food chains, it’s essential to consider food prices, menu options, and the overall value offered. While some chains may have lower base costs, they might compensate by offering smaller portion sizes or fewer menu options. On the other hand, higher-priced chains may provide more generous portions or include additional items in their meals, making them a better value proposition. Over the past two decades, fast-food prices have seen a significant shift. As reported by GoBankingRates, in 2002, a Big Mac from McDonald’s cost a reasonable $2.39, but today, the price has surged by nearly 50%, approaching the $5 mark. It’s essential to remember that this price only includes the burger, excluding the accompanying fries and beverages. Similarly, the price of a Grilled Steak Taco at Taco Bell was $1.49 in 2002. However, if you were to order the same taco now, it would cost an additional $1. On the other hand, The Wendy’s Company (NASDAQ:WEN) and Chick-fil-A caused a buzz in 2022 as their meal prices significantly increased, capturing the attention of fast-food enthusiasts, as reported by CNET. Chick-fil-A saw a substantial surge of 15.6%, resulting in an average meal cost of $4.65. In contrast, The Wendy’s Company (NASDAQ:WEN) took it a step further, with prices skyrocketing by 35% compared to 2021. These price adjustments by Chick-fil-A and The Wendy’s Company (NASDAQ:WEN) made waves and sparked discussions among consumers and industry observers alike. According to the USDA, the Consumer Price Index (CPI) for restaurant purchases showed a 0.6 percent increase in March 2023 compared to February 2023. Additionally, when compared to March 2022, the CPI was 8.8 percent higher. According to projections, food prices are expected to continue rising in 2023, though at a slower pace compared to the previous year. The expected overall increase for all food prices in 2023 is 6.5 percent, falling within a prediction interval of 4.9 to 8.2 percent. These figures indicate that food prices are still expected to grow at rates higher than the historical average. Copyright: bhofack2 / 123RF Stock Photo Our Methodology  To determine the 10 cheapest fast-food chains right now, we followed a rigorous methodology. Firstly, we conducted a comprehensive evaluation of the top 50 fast-food chains featured in QSR Magazine. To guarantee the reliability of our findings, we relied on Pricelisto, a reputable online resource acclaimed for its accurate and up-to-date restaurant pricing information. This is where the data for food items’ prices comes from. Finally, we ranked the fast-food chains based on their average item pricing in descending order, unveiling the 10 most affordable fast-food options. Here is our list of the 10 cheapest fast-food chains right now.   10. Starbucks Corporation (NASDAQ:SBUX) Average Item Price: $5.41 Starbucks Corporation (NASDAQ:SBUX), headquartered in Seattle, Washington, is the largest global chain of coffee shops and roasteries. With a staggering 33,833 locations as of November 2021, including 15,444 locations in the United States, Starbucks has established itself as a dominant force in the fast food and coffee industry. In 2022, the company recorded an annual revenue of $32.25 billion, reflecting a 10.98% increase from 2021. Offering a range of beverages, Starbucks Corporation (NASDAQ:SBUX) provides customers with a starting price of $ 1.17 and a variety of options, with prices up to $23.40.   9. White Castle  Average Item Price: $5.21 White Castle, the pioneering regional burger restaurant, has an extensive presence with 345 locations spanning 13 states, primarily in the Midwest and the New York metropolitan area. Established on September 13, 1921, in Wichita, Kansas, the company is the world’s first fast-food hamburger franchise. When exploring the White Castle menu, the Crave Case – 30 Cheese Sliders is the most indulgent offering, priced at $27.76. On the other end of the spectrum, the Cheese Cup is the most budget-friendly choice, costing a mere $0.60. In terms of financial success, White Castle achieved remarkable peak revenue of $720.6 million in 2022. 8. McDonald’s Corporation (NYSE:MCD) Average Item Price: $4.92 McDonald’s Corporation (NYSE:MCD), the renowned global fast-food giant, is celebrated for its convenience, affordability, and iconic offerings like the Big Mac and fries. Within the McDonald’s menu, the most indulgent choice is the Favorites for 6, priced at $42.69, while the most economical option is the Creamer Packet, priced at a mere $0.10. In 2022, the franchise achieved a substantial total revenue of $23.18 billion. With an extensive network of over 38,000 locations worldwide, McDonald’s Corporation (NYSE:MCD) remains a cultural and culinary icon, consistently serving millions of customers and driving innovation. 7. Taco Bell Average Item Price: $4.83 Taco Bell, a beloved fast-food chain, has gained recognition for its distinctive fusion of Mexican flavors and inventive menu choices. With a global presence of over 55,000 locations, Taco Bell caters to millions of customers seeking affordable and convenient options such as the Crunch Wrap Supreme and Doritos Locos Tacos. In 2022, the franchise reached remarkable peak revenue of $2.0 billion. Starting as low as $0.29, Taco Bell offers a range of delectable options, with the priciest being the $25.89 meal for four. 6. Del Taco  Average Item Price: $4.72 Del Taco Restaurants, an American fast food chain, specializes in a fusion of Americanized Mexican cuisine and traditional American favorites like burgers, fries, and shakes. Led by CEO John D. Cappasola, Jr., the company is headquartered in Lake Forest, California. In the 2022 fiscal year, Del Taco generated approximately $316.9 million in revenue, experiencing a decline from 2021. Notably, the company was acquired by Jack in the Box Inc. in March 2022. Del Taco’s menu offers a diverse range of items, starting at just $0.87, with the most expensive being The Del Taco Fiesta Pack, priced at $19.93. Click to see and continue reading the 5 Cheapest Fast-Food Chains Right Now. Suggested Articles: 10 Best Fast Food Stocks To Invest In.  16 Biggest Fast Food Companies in the World. 16 Largest Grocery Chains in the World. Disclosure. None: The 10 Cheapest Fast Food Chains Right Now is originally published on Insider Monkey......»»

Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 of the best online flower delivery services. When you buy through our links, Insider may earn an affiliate commission. Learn more.Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions.Lauren Savoie/InsiderWhen it comes to the best online flower delivery services, there are a few that stand out from the rest. Sending fresh flowers is a thoughtful way to show someone you care, and there are now dozens of online flower delivery services offering unique bouquets, trendy arrangements, and even subscriptions.We ordered 39 arrangements from 16 popular brands to find the best service for delivering fresh, attractive flowers that arrive on time. Discover the top flower delivery services for Mother's Day and give your mom the timeless gift of fresh and beautiful blooms.Our top picks for online flower delivery servicesBest overall: UrbanStemsUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.Best farm-fresh: Farmgirl FlowersFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Best custom arrangements: FloracracyFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Best same-day delivery: FTDFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Best subscription: BloomsyBoxBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.Best preserved roses: RoseBoxPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Best fresh roses: Roses OnlyAs the name implies, Roses Only sells just one product, but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Best dried bouquets: East OliviaFresh flowers have a short lifespan, but dried florals from East Olivia can last for years with proper care — and feature inventive colors and textures not found in traditional fresh bouquets.Best overall: UrbanStemsLauren Savoie/Maria Del Russo/Rachael Shultz/InsiderPrice range: $45 to $185Delivery area: Lower 48 statesSame-day delivery: Yes, in New York City and Washington, D.C. onlyNext-day delivery: YesShipping: $10 to $15, depending on delivery date and methodShop all flowers on UrbanStemsPros: Lots of options to choose from, including dried bouquets and plants; attractive floral designs in a range of styles, sizes, and pricesCons: Some testers noted flowers lasted a few days less than other brandsIf you're searching for the perfect Mother's Day gift, look no further than UrbanStems. They offer a robust selection of modern, fresh bouquets, along with dried flowers, plants, candles, chocolate, and subscriptions, making it a one-stop-shop for all your Mother's Day needs. Their diverse selection ensures that you can find something unique and personalized to your recipient's taste.We tried the Juliet, Luna, and Double the Pink Champagne fresh bouquets, along with the Aspen dried bouquet and Claude plant. Everything arrived on time and in excellent condition. The arrangements were some of the freshest, most attractive bouquets we tested and were filled with lively, creative blooms in a range of colors.Read our full review of UrbanStems.Worth a look:Best for farm-fresh flowers: Farmgirl FlowersLauren Savoie/Connie Chen/InsiderPrice range: $50 to $250Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: Possible, but not guaranteedShipping: $25Shop all bouquets from Farmgirl FlowersPros: Whimsical, in-season blooms; each bouquet is unique; moderately priced; offers some rare flowers; some florals are grown in the US Cons: Surprise bouquets are not ideal if you have specific flowers you want to include or avoid; some customers report wilting or short-lived bloomsIf you're after an arrangement that looks like it was recently plucked from the garden, Farmgirl Flowers offers inventive and playful bouquets based on what's in season. Farmgirl's flagship offerings are the Fun Size, Just Right, and Big Love bouquets (formerly Mini, Midi, and Maxi). You don't get to choose what you receive; instead, Farmgirl puts together a bouquet based on what's available and in season. The company's website and social media give you an idea of what to expect, but every bouquet is slightly different, giving it a special, unique feel. We received a Just Right and a Big Love, as well as another Just Right sent to a tester in California. We loved that the arrangements had a whimsical, wild shape to them, and they were gorgeous from every angle. The Just Right and Big Love both appeared the same size when we first received them, but after a few hours in water, the Big Love's closed buds opened up to create a fuller bouquet. If you're looking for a unique and personalized touch to your Mother's Day flowers, Farmgirl Flowers is a great choice. Farmgirl also offers a few dozen specialty bouquets, including some rare blooms like flower breeder David Austin's Patience roses.Worth a look:Best for custom arrangements: FloracracyLauren Savoie/Connie Chen/InsiderPrice range: $155 to $350Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: YesShipping: IncludedShop all flowers on FloracracyPros: Completely customizable arrangements, online tool helps you choose the right arrangement, beautiful packaging, thoughtful extras like a petal pressing book and mini shears, letter writing serviceCons: Online tool can be a bit tricky to navigate, lots of packaging (though most options are compostable or recyclable), few budget optionsIf you're looking for a truly unique and personalized gift for Mother's Day flowers, a custom arrangement from Floracracy is an excellent option. You can customize every aspect of the design, from the shape and colors to the blooms used, making it a truly personal and special gift.If you're not sure where to start, the company's design tool walks you through a quiz that lets you select the intended recipient, occasion, and meaning you wish to convey to make a recommendation. Each flower is paired with a meaning from the company's thorough research of historical flower symbolism. You're also given the option to write a letter yourself or have the company write one for you based on the information you provide.The arrangements we received from Floracracy were the lushest and most vibrant we've ever seen from a flower delivery service. Each arrangement comes with a coordinating vase, a handbound book for pressing petals, and an illustrated card with each of the flowers and their meaning. Our blooms lasted almost three weeks — longer than any other arrangement. While this service is pricier and requires some of your time to design, it makes for a truly meaningful and memorable flower gift. Read our full review of Floracracy here.Worth a look:Best for same-day delivery: FTDLauren Savoie/Jenny McGrath/InsiderPrice range: $40 to $225Delivery area: All 50 states, 150 countriesSame-day delivery: YesNext-day delivery: YesShipping: Starts at $17.99 and varies based on delivery date and order totalShop all flowers from FTDPros: Orders filled by local florists; a large selection of bouquets, plants, and giftsCons: Experience can vary based on which florist fills your order, designs are more traditional and less modernWhen you need to send flowers fast, a floral wire service is your best option. Florists' Transworld Delivery Service (FTD) has been in the flower delivery business for more than 100 years and partners with local florists to fulfill and deliver orders in all 50 states and more than 150 countries. In many cases, you'll also have the option of same-day delivery. The arrangements lean toward more traditional colors and flowers instead of more modern or unique designs.Compared to other similar floral wire services, we had a better experience with FTD. The bouquets and plants we received were fuller, fresher, and in better condition than blooms from 1-800-Flowers. Of course, since orders are typically filled by local florists, your experience may vary depending on who ultimately fills your order.If you need to send flowers quickly, for Mother's Day, internationally, or to hard-to-reach places, FTD is the best same-day service we've found.Read our full review of FTD.Worth a look:Best subscription: BloomsyBoxLauren Savoie/InsiderPrice range: $45 to $70Delivery area: Nationwide, except Puerto Rico and HawaiiSame-day delivery: N/A for subscriptionsNext-day delivery: N/A for subscriptionsShipping: Free with subscriptionShop all flower subscriptions on BloomsyBoxPros: Multiple weekly and monthly plans to choose from, offers month-to-month and prepaid plans, bouquets are gorgeous, a la carte bouquets and plants availableCons: Don't get to choose which flowers are in your bouquet, which might not be a good option for those with allergies or petsFlower subscriptions are a great way to brighten someone's day on a more frequent basis — or to liven up your own home with regularly-scheduled blooms. BloomsyBox offers a robust fleet of weekly and monthly subscription options at reasonable prices. You can pay month-to-month or save a few dollars by prepaying for 3-, 6-, or 12-month subscriptions. While the retailer also sells a la carte bouquets and plants, we think its subscriptions offer the best value.We tried BloomsyBox's priciest subscription: Its NYBG Collection. Each bouquet in the subscription is curated by the New York Botanical Garden's floral experts and features blooms that are in season. A portion of the subscription goes to supporting the NYBG's plant science and conservation efforts.We highly recommend BloomsyBox's subscriptions to anyone looking for a bit of floral cheer on a regular basis. It's a nice treat each month to get an e-mail saying a new bouquet is on the way. Worth a look:Best for preserved roses: RoseBoxLauren Savoie/Maliah West/Hannah Freedman/InsiderPrice range: $89 to $1,119Delivery area: All 50 statesSame-day delivery: Yes, in Manhattan onlyNext-day delivery: YesShipping: $0 to $30, depending on delivery date and order totalShop all preserved flowers on RoseBoxPros: More than 20 rose color options, many container types, smell and look like fresh roses, can last a year or longer with proper careCons: Don't have the same feel as real rosesIf you've been on Instagram lately, chances are you've seen these trendy preserved roses somewhere on your feed. Usually packed into boxes or displayed in a classic ball arrangement, these flowers are incredibly popular with influencers and celebrities. We tested three preserved rose brands and found the quality very similar. Ultimately, we chose RoseBox as the best preserved roses for its diverse range of color and display options. We particularly liked that its plentiful display containers had discreet branding or none at all, unlike other preserved rose brands that their cover containers (which can't be separated from the flowers) with logos.  Almost all of RoseBox's 90+ products can be customized with 21 or more different rose color options. One of our testers opted for turquoise, while others chose more classic red and pink varieties. Preserved roses are expensive, no matter what brand you choose. A single preserved rose will cost you anywhere from $44 to $89, which is the same price as a full-sized bouquet from most of our other top picks. Expect a medium-sized array of preserved roses to cost about $300. That said, they can end up being an economical alternative to buying flowers every week. We're eager to see if our arrangements live up to their purported longevity.Worth a look:Best for fresh roses: Roses OnlyLauren Savoie/Katie Decker-Jacoby/InsiderPrice range: $49 to $669Delivery area: All 50 states and internationally to the United Kingdom, Hong Kong, Singapore, and AustraliaSame-day delivery: Yes, in New York City and Los Angeles onlyNext-day delivery: YesShipping: $19.95Shop all roses on Roses OnlyPros: Stunning roses; beautiful presentation; long-lasting flowers; available in quantities from six to 100Cons: Limited product and color choices.Roses are such a big seller that we made sure every arrangement we received as part of this guide included at least some of them. Having seen the spectrum of what's out there, we can confidently say that Roses Only delivers the most pristine, long-lasting roses we've found.So much care is put into the delivery: The cartoonishly perfect long-stemmed roses (which you can order in quantities of 6-100) come packaged in a long, elegant box with a linen ribbon, and every rose has its own water reservoir to ensure it arrives pristine. The roses themselves are flawless, with big velvety petals. They lasted about two weeks and gradually opened up until each bud was about palm-sized.At about $8 per flower, Roses Only sells some of the most expensive roses out there, but if it's just fresh roses you're after, no flower delivery service does it better.Worth a look:Best for dried bouquets: East OliviaLauren Savoie/InsiderPrice range: $60 to $225Delivery area: All 50 statesSame-day delivery: NoNext-day delivery: NoShipping: $12.99Shop all dried flowers at East OliviaPros: Unique and inventive designs, each arrangement comes with a coordinating vase, options change seasonally, arrangements can last a year or longer with proper careCons: Order processing can take up to five business days, limited edition collections can sell out quicklyNo matter how pretty the bouquet, fresh flowers will all eventually wilt. Dried bouquets are a good solution for those who love the look of florals but hate the upkeep. Some of the most creative and beautiful preserved arrangements we've seen come from East Olivia.The offerings change seasonally, but at the time of our testing, the brand featured a winter collection and Mother's Day collection, both featuring ornamental grasses and filler flowers dyed dreamy pastel colors. Each bouquet comes fully arranged and delicately packaged with its own matching ceramic vase. We love knowing that we'll get many, many months of enjoyment out of these.The fact that East Olivia's collections change with the season makes each arrangement feel special. Order processing can take up to five business days, so you'll want to plan ahead if you plan on gifting one of these dried arrangements, especially considering the limited edition collections can sell out quickly.Worth a look:How we tested flower delivery servicesCaitlin Petreycik/Lauren Savoie/InsiderTo find the best flower delivery service, we conducted hands-on testing of every brand in this guide. We ordered two to three arrangements from each brand, evaluating the selection, ordering, and delivery process. We sent bouquets to testers in different parts of the country — including New York City, Boston, Los Angeles, Seattle, rural Colorado, and suburban Connecticut — to see if quality and delivery time varied based on location. In all, we tested 39 bouquets from 16 brands.What to look for in flower delivery servicesLauren Savoie/InsiderHere's what we looked for in the best flower delivery service:Ordering: We scrutinized the ordering process of each service, noting whether the website was simple to navigate, what the product selection was like, and how easy it was to place an order. We also looked at shipping options and estimated delivery times.Delivery: We noted whether the arrangements arrived when they said they would (all did), evaluated packaging, and looked at the condition of the flowers when they first arrived. Testers across the country compared notes; we found delivery times and quality consistent across the country.Quality of flowers: We looked for full bouquets of lively-looking flowers that matched the description and photo of the arrangement we ordered online. We read all care instructions and followed them meticulously, noting how long the flowers remained fresh enough to display. Consistency: A good flower service should deliver quality blooms no matter the location of your recipient. Our testers across the country took photos and detailed notes about delivery and bouquet quality to compare experiences.Budget: When choosing a flower delivery service, it's important to consider your budget. Flower prices can vary widely, and some delivery services charge more than others for their arrangements. To stay within your budget, consider shopping around and comparing prices from different florists. You can also look for seasonal flowers or less expensive options to help keep costs down.Packaging, customization, and extras: Customization options are important, especially if you want to add a personal touch to your gift. Look for a service that offers a variety of vase options and add-ons such as chocolates, balloons, or stuffed animals. Some services even offer personalized messages or cards that can be included with your delivery.How to keep flowers freshTrim the stems: When cutting, it's important to use a sharp, clean tool to prevent damage to the stem. By cutting at an angle, you create a larger surface area for the stem to absorb water, which helps keep the flowers hydrated and fresh. Clean the water: Changing the water every 2-3 days helps prevent bacteria growth and keeps the water fresh, which in turn helps the flowers last longer.Put your flowers in the right location: Keeping your flowers in a cool and shady spot is ideal, but it's important to note that some flowers have different temperature preferences.For example, tropical flowers like orchids and anthuriums prefer warmer temperatures while others, like roses and hydrangeas, prefer cooler temperatures. So it's always a good idea to check the specific care instructions for the flowers you have.Feed your flowers: It's important to use lukewarm water and add floral preservative or a tablespoon of sugar to the water to nourish the flowers. Additionally, make sure to recut the stems at an angle before placing them in the fresh water.FAQsLauren Savoie/InsiderWhen should I order flowers for Valentine's Day, Mother's Day, and other popular holidays?While many flower delivery services offer next-day delivery for most of the year, all bets are off when it comes to major holidays like Valentine's Day and Mother's Day. When ordering around popular holidays, a safe bet is to place your order two weeks in advance of the day you want the flowers delivered. This will ensure you have plenty of arrangements and delivery dates to choose from.Is it safe to have fresh flowers around pets?It depends on the types of flowers. The ASPCA maintains a comprehensive list of flowers and plants and whether they are toxic or safe for dogs and cats. It's important to remember that certain plants can still be toxic to animals even if they are kept out of reach; pollen and other airborne spores can get into the fur of animals and be ingested during grooming. If you're ordering flowers for a household that has pets, it's best to stick with a service that allows you to see the types of flowers in the arrangement before ordering. Some brands, like Fresh Sends or subscription services, don't allow you to preview the bouquet before it's sent, which could land you with a bouquet that isn't pet safe.Our top pick, UrbanStems, lists the type of flowers in each arrangement, so you can check to make sure it's safe for your pet. Some brands, like Floracracy, take it a step further and let you completely customize your bouquet so you can be sure to only include plants and flowers that are safe.  Check out our guides on 11 pet-friendly houseplants and the best pet-friendly plants.How long do fresh flowers last?A lot depends on how recently the flowers were cut before they arrived at your home. Flowers can be cut hours, days, or weeks before shipping to you, greatly varying their lifespan in your home. On average, however, you can expect fresh flowers to last five days to a week in a vase with good care. If you're interested in longer-lasting flowers, preserved roses or a dried bouquet are great options.What's the best way to keep fresh flowers alive longer?Some ways to extend the life of your fresh flowers include cutting the stems before putting them in water, using flower food in the water (often supplied with the bouquet, but can be homemade), and changing the water whenever it gets discolored or cloudy. You can read more tips for keeping flowers fresh here. Remember that you don't have to trash the whole bouquet if a few flowers are dead or wilted; just remove the dead flowers and rearrange or tighten the bouquet as needed (you may need to downsize to a smaller vase). Hardy flowers with woody stems (like roses) can last several weeks with proper care.   What are the best types of flowers to buy?When in doubt, roses are a great pick. They're long-lasting, easy to care for, and largely pet safe. You can get roses in all sorts of colors, shapes, and sizes to suit any recipient. Read the original article on Business Insider.....»»

Twist Bioscience Corporation (NASDAQ:TWST) Q2 2023 Earnings Call Transcript May 5, 2023 Operator: Good morning, ladies and gentlemen, and welcome to Twist Bioscience’s Fiscal 2023 Second Quarter Financial Results Conference Call. I would now like to turn the conference call over to Angela Bitting, Senior Vice President, Corporate Affairs and EGS Officer. Please go ahead. […] Twist Bioscience Corporation (NASDAQ:TWST) Q2 2023 Earnings Call Transcript May 5, 2023 Operator: Good morning, ladies and gentlemen, and welcome to Twist Bioscience’s Fiscal 2023 Second Quarter Financial Results Conference Call. I would now like to turn the conference call over to Angela Bitting, Senior Vice President, Corporate Affairs and EGS Officer. Please go ahead. Angela Bitting: Thank you, operator. Good morning, everyone. I’d like to thank all of you for joining us today for Twist Bioscience’s conference call to review our fiscal 2023 second quarter financial results and business progress. We issued our financial results release this morning, which is available at our website at www.twistbioscience.com. With me on today’s call are Dr. Emily Leproust, CEO and Co-Founder of Twist; and Jim Thorburn, CFO of Twist. Emily will begin with a review of our recent progress on Twist businesses. Jim will report on our financial and operational performance and then Emily will come back to discuss our upcoming milestones and direction. We will then open the call for questions. We would ask that you limit your questions to a maximum of two and then requeue as a courtesy to others on the call. As a reminder, this call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for two weeks. During today’s presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our press release we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. We’ll also discuss financial measures that do not conform with generally accepted accounting principles, including adjusted EBITDA. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents which can be found on our Investor Relations website at www.twistbioscience.com. With that, I’ll now turn the call over to our Chief Executive Officer and Co-Founder, Dr. Emily Leproust. Emily Leproust: Thank you, Angela. And good morning, everyone. This is a busy time for Twist. I’m very pleased with our performance for the first half of the fiscal year, in Q2 we delivered our first quarter $50 million in revenue. In addition, this morning we announced that we have taken strategic actions to accelerate our path to profitability. I am happy to share that we expect to achieve a quarterly run rate that is adjusted EBITDA breakeven for both the core and biopharma businesses as we exit the September of 2024 quarter in about 16 months. Today, I will focus on three main things. First, our confidence in our near term revenue growth. Second, our decisive actions designed to achieve adjusted EBITDA breakeven in the near term. And third the drivers of growth in all businesses moving forward. Beginning with top line growth for our revenue generating businesses, I am pleased to share very strong result for the second quarter of fiscal 2023, with reported record revenue of $60.2 million exceeding our guidance of $56.5 million. Strength in the core business particularly NGS drove the beat order, came in at $64.2 million indicating solid growth moving into the second half of our fiscal year. During the quarter we began commercial shipments at of our Wilsonville Oregon facility the Factory of the Future, which we believe will deliver manufacturing efficiencies, leading to margin improvement going forward. We continue to see increasing enthusiasm for our Gene Fragments, Oligo Pools and elaborate products with our consistent rapid turnaround time driving that demand. I’d like to note that this is for our standout speed genes. We are not yet taking orders for fast genes, which we expect to launch in the fall with premium pricing. We continue to take market share from our peers and remain far ahead of emerging players because of our consistent turnaround time together with our perfect way genes as a scale and price unavailable elsewhere, which continues to resonate with our customers. Our reliable products and exceptional customer service has been key to creating loyalty with our customers, which then facilitates reorders and quarter-over-quarter revenue growth. In addition, our customer surveys continually state that we are their preferred provider because ordering is easy and we overdeliver on turnaround time. For NGS, we see customers advancing development of their test and also gaining traction within the market. Our NGS revenue significantly lean to the commercial ramp of our customer base. And while there can be quarter-to-quarter lumpiness, we have confidence that revenue will grow year-over-year. The point to remember is our business is sticky. We grow with our customer and our customer base continues to expand. In Biopharma, we began integrating the Boston team at the end of the calendar year, following the contractual limitations of the acquisition. We continue to see opportunities ahead, particularly as we now have an integrated team and portfolio of services. What is true that the funding environment for emerging biotech companies has been constrained our share of the buyers’ market services market is small and largely untapped by our commercial team. That said, we are facing some internal headwinds as we retouched on system and integrated commercial territories. We’ve made changes to address these challenges and expect the revenue lift will come within six months. We continue to sign collaborations and agreements with customers and we’re expanding our wallet share with existing partners. As an example, when we had those arguments with Astellas in April, our third collaboration with the pharmaceutical company. We do expect fewer milestone royalties for corporations as we move forward as we are now prioritizing near-term topline revenue growth. Our commercial team for SynBio NGS and Biopharma is now firing on all cylinders and we are seeing a large opportunities ahead. I will now move from top line to operating expenses and our significant actions to accelerate our path to profitability. As you know the factors of the future outside of Portland, Oregon is no shipping products with customers. In fact all of our genes, gene fragments and the vast majority of Oligo Pools have been made in Oregon for more than a month. To accelerate our top line to reach profitability, we conducted a comprehensive review to re-engineer our code base and achieved these goals more quickly. We have made difficult decisions resizing many teams throughout the organization, which will result in the elimination of approximately 270 positions to operate more efficiently while still continuing to support our high growth for these area. It is difficult to say goodbye to the many talented and committed Twisters we’ve been integral in our success to date. We wish them well. We will support them as identify the next opportunity and we look forward to where they will achieve as they bring their experience front Twist to the larger ecosystem. To provide a bit more color on the shape of the organization moving forward, the sales force will remain largely intact to drive topline growth. We remove the duplication of SynBio production across South San Francisco and Portland, significantly lowering our fixed cost structure. In addition we resize the Biopharma team’s focus on revenue generating partnerships, reprioritizing the majority of our internal assets. Throughout the organization we streamline teams including R&D to focus on programs where Twist has a clear competitive advantage and to selectively deploy our platform in areas where we see the greatest potential for long-term value creation. In data storage, we remain integrally involved in market development and continue to advance our technology. We do not see any near-term competitor or close to a commercial launch at this time, and that’s significant. It enables us to substantially reduce our operating expenses for data storage, while continuing our effort at the moment it’s level yet still remains ahead of the competition. We will focus our efforts on the storage as a service business model and plan to delay the distributed on-premise approach until after the service business has proven to be a success. We expect to demonstrate an end-to-end gigabytes Century Archive service by calendar 2023. Following on this in early calendar year of 2025, we expect to launch a terabyte Century Archive solution. Photo by National Cancer Institute on Unsplash With that said, we believe we will deliver on all of this, while reducing the overall cash flow. Moving into our future growth, we’ve seen many opportunities ahead. As we look forward, the planned launch of fast genes in SynBio this fall, we will be targeting the $1.4 billion DNA makers market. These are scientists and researchers and large pharmaceutical companies in academia that currently make their own DNA instead of buying it, as they need it faster and more cost effectively than we believe it can deliver from literally any close today. This is one area that we are confident will increase our SynBio contribution margin, as we believe we’ll be able to command a premium price that leverages dynamic pricing for rapidly delivering this product. Additionally, we do not expect to add commercial head count to pursue this large market, as we believe our e-commerce portal and digital marketing capabilities enable us to acquire customer cost effectively. For NGS, our customers continues to increase, particularly in the oncology space. We have several large commercial customers and then growing mid-tier group of development stage customers with the potential for compounding growth. In both instances, Twist is poised to grow with them. We continue to be included in more and more assets and we believe the growth of our NGS opportunity will be sustainable for the foreseeable future. In the near term, we plan to an RNA workflow tools to our NGS portfolio. Scientists often run RNA assays multiple times for the same sample as RNA translates different time points in different issues in both normal in this state providing a large market opportunity that complements our DNA workflow tools. RNA workflows are just primarily within the research market, an area where we have a significantly smaller footprint to date, but believe we can grow and extend. We expect almost several RNA tools in the near future. In Biopharma, we continue to see opportunities for our competitively priced higher value services even also with the integration of the offerings. We are focused on selling services that drive topline revenue, while we digest the resizing of the organization. The largest shift we’d be aware from R&D on our internal assets until we see some of them zooming out licensing antibody leads, where we have done the most work. For data storage, the very large opportunity remains within our sites, because we’re not seeing direct competitors at this time we are slowing our investment. Therefore, we revised our commercial plans while we advance at a more modest rate with us using our first model best in class competitive advantage. With that, I turn it over to Jim. James Thorburn: All right, thanks, Emily. We had another quarter of robust execution at Twist despite the volatile macroeconomic environment. Revenue for quarter two was $60.2 million, which is year-over-year growth of approximately 25% and a sequential increase of 11% .Orders were $64.2 million for the quarter, an increase of approximately 17% year-over-year and gross margin for the quarters 7.8%. We shipped approximately 2100 customers as compared to quarter two fiscal ’22. And we ended quarter two with cash and investments of approximately $388 million. Our NGS revenue for quarter two was $29 million which is year-over-year growth of 26%. As we noted in our previous earnings call, we had a couple of larger customers pushed shipments from December quarter into January. Our second quarter orders were $28 million, a sequential decline of 10% with growth of 19% year-over-year. As Emily stated, revenue growth in NGS is linked to the ramp of our customer tests which can drive some quarter-to-quarter lumpiness in revenues. The top 10 customers accounted for approximately 38% for NGS revenue and we served approximately 600 NGS customers in fiscal quarter two. Our pipeline for larger opportunities continues to scale and we’re now tracking 270 accounts, up from 264 noted in our last earnings call, 131 have adopted Twist as compared to 130 last quarter. Now turning to SynBio which includes genes, DNA preps, IGG, libraries and Oligo Pools. SynBio revenue for the quarter rose $24.1 million representing sequential growth of 11% and year-over-year increase of approximately 31%. Orders for the quarter were $30.9 million, which represents a 16% sequential increase and a 31% year-over-year growth. Some of the highlights include shipping to approximately 1600 SynBio customers which has grown from approximately 1400 in the second quarter of fiscal ’22. The customer base includes mainly biotech and large pharma companies. Genes revenue increased to $18 million, which is year-over-year growth of approximately 27%. We shipped approximately 152,000 genes in fiscal quarter two, which is an increase of approximately 23% year-over-year. And Oligo Pools had another strong quarter with revenue of $3.3 million with demand primarily coming from the Healthcare segments. Now to Biopharma, our Biopharma revenues for the second quarter of fiscal ’23 was $7 million, down sequentially from $8.2 million orders for the quarter of $5.3 million, down sequentially from $6.9 million in the first quarter, primarily due to integration challenges Emily described. That said, we had 93 active programs at the end of the quarter and added three more milestone and royalty agreements which, brings the total to 66 up sequentially from 63. I’ll now cover our revenue breakdown by industry and our regional progress. Healthcare revenues for the second quarter of fiscal ’23 was $33.8 million as compared to $24.1 million in the same period of fiscal ’22, industrial chemical revenue was $14.4 million in the second quarter of fiscal ’23 as compared to $14.1 million in the second quarter of fiscal ’22. Academic revenue was $11.1 million in the second quarter of fiscal ’23 as compared to $9.5 million in the same periods of fiscal ’22. EMEA revenue rose to $18.8 million in Q2 fiscal ’23 versus $15.2 million in Q2 fiscal ’22. APAC continue to see recovery in China with our revenue in China increasing to approximately $2 million, up from $1.4 million in the prior quarter. For APAC overall revenue increased to $6.5 million compared to $4.5 million for the same period of ’22. U.S. which includes Americas revenue increased to $34.9 million in the second quarter versus $28.5 million for the same period of fiscal ’22. Now moving down to P&L, our gross margin for quarter two was 30.8% with cost of revenue for the quarter of $41.7 million. The change in gross margin was expected as the cost of revenue increased sequentially from $29.4 million primarily due to approximately $5 million associated with the commercialization of SynBio Labs and Factory of the Future. In addition, we had approximately 1 million scrap associated with the Factory of the Future in the quarter. Our operating expenses for the fiscal quarter including R&D, SG&A, change in fair value and mark-to-market adjustments of acquisitions, which crossed the $80.1 million as compared to $79.2 million in Q2 fiscal ’22. To break it down R&D for the fiscal second quarter was $27.4 million, a decline from $31.2 million in the same period of fiscal ’22, primarily due to the conclusion of . This includes DNA storage R&D spend of $5 million and biopharma R&D spend of $4.7 million in the second quarter of fiscal ’23. SG&A in quarter two was approximately $54 million, Factory of the Future pre-commercialization costs included in SG&A were approximately $6 million for the first one for the quarter when the factory was not yet commercial. In addition, we have a number of labs that are still in pre-commercial phase and we’ll transition to COGS as they’re qualified in the second half of fiscal ’23. Stock-based compensation for the quarter was approximately $10 million. Depreciation and amortization for the quarter was $7.1 million, an increase from $5.8 million in the previous quarter and associated with the commercialization of the Factory of the Future. CapEx cash investments in the quarter two was approximately $9 million, which brings total CapEx cash spend for the first six months of fiscal year is $21 million. As we’ve highlighted the launch of the Factory of the Future is going very well, we had a strong quarter of operational performance and as noted, we continue to see year-over-year growth in SynBio and NGS businesses. We’re focused on achieving adjusted EBITDA to breakeven and then profitability as we scale. We are resizing the organization by approximately 25%. The reductions aimed at managing our operation cost structure. Lowering our revenue breakeven point and limiting our investment in data storage as we transition to breakeven. Note the reduction first side of the years maybe delayed as we work through the required regulatory processes. About 60% of the staff reductions effect the cost line and 40% effect our banks. In particular, we have resized the biopharma group to achieve breakeven at $40 million instead of revenue of $80 million and for the core business, we have streamlined our organization across the board in order to achieve breakeven of $285 million instead of $300 million. The cash restructuring costs are estimated to be approximately $9 million to $11 million. We anticipate cash savings approximately $9 million to $11 million per quarter on a go forward basis beginning in the first quarter of fiscal ’24. Savings primarily impacting our operations as we exit gene manufacturing South San Francisco and we’ll ramp up the Factory of the Future, as well as moderate our investments in R&D for the majority of the spend reductions in biopharma and DNA storage. Because we have taken actions to address our cost structure, we do believe it is prudent to revise our revenue for fiscal ’23, as we digest these changes. We are revising this guidance to approximately $235 million to $238 million versus our prior guidance of $261 million to $269 million. SynBio revenue range is $96 million to $98 million and that’s down from $104 million to $106 million. NGS revenue range is $113 million to $114 million, down from $120 million to $123 million. Biopharma revenue is $26 million and that’s down from $37 million to $40 million. For the second half of fiscal ’23, we anticipate revenue of approximately $60 million to $61 million in quarter three, and $62 million to $63 million in quarter four. And gross margin to be approximately 30% in Q3 and 36% in Q4. For the full fiscal year, we’re projecting gross margins to approximately 35% to 36%. We are decreasing operating expense guidance for the year to approximately $313 million to $319 million, as compared to our previous guidance of $330 million. We’re now projecting R&D expense of $112 million to $114 million as compared to our previous guidance of $130 million. We expect SG&A to be $197 million to $200 million and that’s a decrease from our previous guidance of $204 million. Mark-to-market is projected to be a credit of $5 million, one-time separation costs from a reduction in force are projected to be $9 million to $11 million. Depreciation and amortization is projected to be approximately $29 million, our projection for stock-based compensation decline to approximately $43 million from $50 million. Operating expense for DNA storage is expected to be approximately $40 million, compared to the previous guidance of $46 million. And for fiscal ’24, we also expect $40 million operating expense for data storage compared to previous guidance of $57 million. Net operating loss for the year is projected to be approximately $230 million to $234 million, which includes one-time charges of approximately $9 million to $11 million for separation costs. CapEx for the year is projected to be $40 million a decrease from the previous guidance of $50 million ending cash projected to be $320 million compared to previous guidance of $300 million. In summary, we had record revenue in quarter two we’re — commercially shipping from the Factory of the Future. We’re focused on managing the business and our cost structure as we scale. Importantly, we expect to exit fiscal ’24 for the fourth quarter adjusted EBITDA to breakeven for the core and biopharma business. We define adjusted EBITDA as EBITDA plus add back for stock-based compensation. And we’re also projecting ending cash balance of $220 million at September 30, 2024 and that’s up from our previous guidance of $170 million. With that, I’ll now turn the call back to Emily. Emily Leproust: Thank you, Jim. We continue to have aggressive goals, and we have aligned the business because we simplified opportunities. As importantly, we announced decisive and proactive actions to accelerate our past ability preserving cash and mitigating risks, all the while leveraging our outside opportunities in the marketplace. We always evaluate the business from every lens and we remain laser focused on achieving adjusted EBITDA breakeven for the core and biopharma businesses while maintaining optionality on investments for the incredible upside we see in data storage. Our core business in SynBio and NGS continue to scale and we have near-term opportunities for each season energized commercial team to be deployed. We are resizing and refocusing the biopharma organizations from an integrated service offering that we believe will drive top-line revenue growth. And we have moderated our stand for data storage while ensuring we maintain our competitive edge. We revised our guidance to a cautious level with potential for upside. We have been strategic in our action this quarter positioning us as a leaner, meaner organization specifically focused on disruptive market opportunities for profitable and scalable growth. With these substantive changes, we believe we are operating from a position of strength in the current environment, accelerating our projecting timeline to adjusted EBITDA breakeven for both the core and biopharma businesses as we exited the September 2024 quarter, about 16 months from now. We remain extremely excited about pricing the future. And with that, let’s open the call for questions. Operator? See also 10 Best Brewery and Distillery Stocks To Buy Now and 12 Best Performing Dividend ETFs in 2023. Q&A Session Follow Twist Bioscience Corp (NASDAQ:TWST) Follow Twist Bioscience Corp (NASDAQ:TWST) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: And now first question coming from the line of Vijay Kumar with Evercore ISI. Your line is open. Vijay Kumar: Hi, guys, congrats on the revenue beat in the quarter and thanks for taking my question. I guess my first question is on the guidance here. It makes sense for the guidance to be reset given the environment. The back half here I think implied is high single digits, and it looks like all segments were cut, but perhaps Biopharma little bit more than the others. Can you just talk about the macro environment, is this – what has changed versus three months ago from a macro perspective, and how much of this is Twist specific versus stuff, the general environment that you’re seeing and how comfortable are you in this high single digit growth for the back half? James Thorburn: Thanks, Vijay. Thanks for the question. So we step back as a number of things going on. One is in terms of Biopharma, we feel very good about where we’re at. The challenges we’ve had in Biopharma is just purely inspirational. So that’s an execution issue. We acquired various last year we had been as important that we supported Abveris to be positioned to achieve that our NIM. And consequently we had this independence between Twist and Abveris. And then as we started to integrate, we realized we had some integration challenges. We are launching the — the new offering and we feel good about where we’re positioned and because of the internal challenges there, we reduced the revenue outlook for Biopharma. As a large market, we get great service offering. So we feel very well positioned. In terms of the other two areas, SynBio and NGS we have just reduced the organization by approximately 25%. We believe it’s going to take some time to digest that reduction. The overall order growth rate is solid. We continue to see in NGS growth in large customers. We’re launching new products. In the same time 20%, 25% of the organization, we believe we need to be prudent in terms of our outlook in terms of top line. I think the advantages that we’re positioned with company to get to adjusted EBITDA breakeven earlier and come out with a stronger balance sheet. So this is internal, but we really believe that we’re well-positioned from the platform. We’re seeing large customer growth. So it is more prudent on our part. Vijay Kumar: Understood. And just, sorry, Jim. On just to clarify that point, what you’re saying is 25% headcount reduction and did that come from the commercial side because I think what you’re saying is orders and customers, the market seems to be healthy. But this is more a function of the restructuring actions you’ve taken and hence the guide cuts here in the back half. James Thorburn: That’s correct. Yes, the market is strong. We’re up as we highlighted year-over-year. We’re growing faster than the market. We’re focused on launching new products. So this, this is just about pure internal issue in terms of digesting such a large change. I mean, we’ve done a great job in terms of launching Factory of the Future, it’s going exceptionally well. Turnaround times are excellent. Customer feedbacks, great. And at the same time, we believe for the next six months, we’re going to be prudent in terms of our outlook, due to the reduction of the organization by 25%. Vijay Kumar: Understood. And then one on the gross margins, Jim. If I look at your third quarter and fourth quarter commentary here, fourth quarter revenues up a couple of million, but I think the implied gross profit dollars were up $4 million. What drives that gross margin that 36% gross margin strength in Q4, and is that the right jump off point for next year? How should we think about gross margins for FY ’24?.....»»

The Allstate Corporation (NYSE:ALL) Q1 2023 Earnings Call Transcript May 4, 2023 Operator: Thank you for standing by, and welcome to Allstate’s First Quarter 2023 Earnings Conference Call. As a reminder, today’s program is being recorded. And now, I’d like to introduce your host for today’s program, Mr. Mark Nogal, Head of Investor Relations. Please […] The Allstate Corporation (NYSE:ALL) Q1 2023 Earnings Call Transcript May 4, 2023 Operator: Thank you for standing by, and welcome to Allstate’s First Quarter 2023 Earnings Conference Call. As a reminder, today’s program is being recorded. And now, I’d like to introduce your host for today’s program, Mr. Mark Nogal, Head of Investor Relations. Please go ahead, sir. Mark Nogal: Thank you, Jonathan. Good morning. Welcome to Allstate’s first quarter 2023 earnings conference call. After prepared remarks, we’ll have a question-and-answer session. Yesterday, following the close of the market, we issued our news release and investor supplement, filed our 10-Q and posted related material on our website at allstateinvestors.com. Our management team is here to provide perspective on these results. As noted on the first slide of the presentation, our discussion will contain non-GAAP measures for which there are reconciliations in the news release and investor supplement, and forward-looking statements about Allstate’s operations. Allstate’s results may differ materially from these statements, so please refer to our 10-K for 2022 and other public documents for information on potential risks. As some of you know, this will be my final earnings call as the leader of our Investor Relations team, and I will be transitioning to a new role in our P&C finance area supporting National General. I’m leaving Investor Relations in the capable hands of Brent Vandermause, who will be a great partner for all of you going forward. And now, I’ll turn it over to Tom. Tom Wilson: Good morning. We’re excited for Mark, and we’re completely confident that Brent is going to give you everything you need to help you decide how and why you want to invest in Allstate. So good morning. We appreciate the investment of your time in Allstate today. Let’s start with an overview results, and then Mario and Jess are going to walk through the operating results and the actions that we’re taking to increase shareholder value. So let’s start on Slide 2. Allstate’s strategy, as you know, has two components, increased personal property-liability market share and expand protection services. Those are shown in the two ovals on the left. If you go to the right-hand side of the slide, you can see a summary of the results for the first quarter. We had a net loss of $346 million in the first quarter, which reflects a property liability underwriting loss which was only partially offset by strong investment income and profits from protection services and health and benefits. We’re making good progress on executing the comprehensive plans to improve auto insurance profitability, and of course, we’ll have a substantive discussion on that today. Not to be overlooked, we also continue to advance Transformative Growth plan, which is to execute the top oval there, which is to increase Property-Liability market share. At the same time, Allstate Protection Plans in the lower oval continues to expand its product offering and geographic footprint. Let’s review the financial results on Slide 3. Revenues of $13.8 billion in the first quarter increased 11.8% or nearly $1.5 billion as compared to the prior year quarter. The increase was driven by higher average premiums in auto and homeowners insurance, resulting in Property-Liability earned premium growth of 10.8%. In the auto insurance line, higher insurance premiums and lower expenses were essentially offset by increased loss costs, so the profit improvement plan has not yet returned margins to historical levels. The auto insurance line had an underwriting loss of $346 million in the quarter. In homeowners, the story is really about $1.7 billion of catastrophes, which led to an underwriting loss of $534 million. The total underwriting loss was just under $1 billion. Net investment income of $575 million benefited from higher yields, which mostly offset an income decline from performance-based investments. Protection Services and Health and Benefits generated adjusted net income of $90 million in the quarter. As a result, the adjusted net loss was $342 million or $1.30 a share. Now let me turn it over to Mario to discuss Property-Liability results. Mario Rizzo: Thanks, Tom, and good morning, everybody. Let’s flip to Slide 4. The chart on the left shows the Property-Liability recorded and underlying combined ratio since 2017. As you can see, Allstate has a long history of generating strong underwriting results though the current operating environment is challenging, with combined ratios over 100 last year and into the first quarter. The underlying combined ratio of 93.3 for the first quarter was slightly below the full year 2022. The second chart compares the full year 2022 recorded combined ratio for all lines of business to the first quarter of this year, which removes the influence of intra-year severity changes that occurred throughout 2022. The first red bar shows the underlying loss ratio was essentially unchanged as higher premiums were offset by increased loss costs. The second red bar on the left shows most of the increase in the combined ratio was driven by higher catastrophe losses, reflecting the widespread severe weather in the first quarter of this year. Expenses were lower by 1.9 points of premiums and minimal non-catastrophe prior year reserve reestimates also had a positive impact. Let’s move to Slide 5 to review Allstate’s auto insurance profitability in more detail. As you can see from the chart on the left, which shows the auto insurance recorded and underlying combined ratios from 2017 through the current quarter, we have a long history of sustained profitability in auto insurance as we successfully leveraged our capabilities and pricing sophistication, underwriting and claims expertise and expense management to generate excellent returns in the auto insurance business. Since mid-2021, loss costs have increased rapidly, driving combined ratios above our mid-90s target. The profit improvement plan is designed to address these significant loss cost increases, and we’re making good progress. The chart on the right compares the recorded combined ratio of 104.4 in the first quarter to full year 2022 results. Starting on the left, higher average earned premiums drove a 5.7 point favorable impact, which is shown in the first green bar. The first red bar reflects a 6.5 point increase in underlying loss cost due to increased accident frequency and severity for the 2023 report year, with severity currently projected in the 9% to 11% range above the full prior report year. A lower expense ratio reflects expense reductions and higher earned premiums. The remaining difference was due to catastrophes and prior year reserve reestimates. All in, both the recorded and underlying combined ratios of 104.4 and 102.6, respectively, improved in the first quarter of 2023 compared to the full year of 2022. Slide 6 provides an update on the execution of our comprehensive approach to increase returns in auto insurance. There are four focus areas, raising rates, reducing expenses, implementing underwriting actions and enhancing claim practices to manage loss costs. Starting with rates. Following increases of 16.9% in 2022, the Allstate brand implemented an additional 1.7% of rate increases in the first quarter. We will continue to pursue rate increases in 2023 to restore auto insurance margins. Reducing operating expenses is core to Transformative Growth. We have also temporarily reduced advertising to reflect a lower appetite for new business. We implemented more restrictive underwriting actions on new business in locations and risk segments where we have not yet achieved adequate prices for the risk. As we move through 2023, it is likely that some of these restrictions will be removed where there are profitable growth opportunities. Enhancing claim practices in a high inflation environment is key to delivering customer value. This includes leveraging strategic partnerships and scale with repair facilities and parts suppliers to mitigate the cost of repairing vehicles. In addition, settlement of pending bodily injury claims has been accelerated to avoid continued increases in costs and settlements. Transitioning to Slide 7. Let’s discuss progress in three large states with a disproportionate impact on auto profitability. The table depicts Allstate brand auto new business production and rate actions for California, New York and New Jersey. As a result of implemented profitability actions, new issued applications from the combination of California, New York and New Jersey declined by 40% compared to the prior year quarter. The decline in these three states meaningfully contributed to the 22% decline countrywide. The right-hand portion of the table provides rate increases either taken or needed to improve margins. In California, we just received approval for a second 6.9% rate increase implemented in April, which will be effective in June. We continue to work closely with the California Department on the best path forward to getting rates to an adequate level and expect to file for an additional increase in the second quarter, which will reflect the balance of our full rate need. In New York, we filed for additional rate in the first quarter that is currently pending with the Department of Financial Services. In New Jersey, we attained a 6.9% rate increase in the first quarter and expect to pursue additional filings in the second quarter. As mentioned earlier, we anticipate implementing additional rates across the country into 2023 to counteract persistent loss cost increases. Slide 8 dives deeper into how we are improving customer value through expense reductions. The chart on the left shows the property liability underwriting expense ratio over time and highlights drivers of the 2.9 points of improvement in the first quarter compared to the prior year quarter. The first green bar on the left shows the 2 point improvement impact from advertising spend, which has been reduced given a limited interest in new business at current rate levels. The last two green bars show a decline in operating and distribution costs mainly driven by lower agent and employee-related costs and the impact of higher premiums. Shifting to our longer-term target on the right, we remain on pace to reducing the adjusted expense ratio to 23 by year-end 2024 as part of transformative growth. This metric starts with our underwriting expense ratio excluding restructuring, coronavirus-related expenses, amortization and impairment of purchased intangibles and advertising. It then adds in our claims expense ratio, excluding costs associated with settling catastrophe claims because catastrophe-related costs tend to fluctuate. Through innovation and strong execution, we’ve driven significant improvement relative to 2018, with first quarter adjusted expense ratio of 24.9. We expect to drive additional improvement, achieving an adjusted expense ratio of approximately 23 by the end of next year by represents a 6-point reduction compared to 2018. The increase in average premiums certainly represents a tailwind, however, our intent in establishing the goal is to become more price competitive. This requires a sustainable reduction in our cost structure, with future focus on three principal areas, including enhancing digitization and automation capabilities, improving operating efficiency through outsourcing, business model rationalization and centralized support, and enabling higher growth distribution at lower costs through changes in agency compensation structure and new agent models. Now let’s move to Slide 9 to review homeowner insurance results, which incurred an underwriting loss in the quarter despite favorable underlying performance due to elevated catastrophe losses. We have a superior business model that includes differentiated product, underwriting, reinsurance and a claims ecosystem that is unique in the industry. As you can see by the chart on the left, this approach consistently generates industry-leading underwriting results despite quarterly or yearly fluctuations in catastrophe losses. The chart on the right shows key Allstate Protection homeowners insurance operating statistics for the first quarter. Net written premium increased 11.1% from the prior year quarter, predominantly driven by higher average gross written premium per policy in both the Allstate and National General brands and a 1.4% increase in policies in force. The first quarter homeowners combined ratio of 119 increased by 35.1 points compared to the prior year quarter, reflecting higher catastrophe losses primarily related to five large wind events in March. These accounted for more than 70% of catastrophe losses in the quarter. The first quarter catastrophe loss ratio was significantly elevated compared to the prior year and 10-year historical average by 36.2 and 30.5 points, respectively. The underlying combined ratio of 67.6 improved 0.4 points compared to the prior year quarter, driven by higher earned premium and a lower expense ratio partially offset by higher claim severity. Slide 10 provides an update on Transformative Growth. Transformative Growth remains a focus and is being executed in parallel with our profit improvement actions. We continue to make good progress on this multiyear initiative that spans five main components: improving customer value, expanding customer access, increasing sophistication and investment in customer acquisition, modernizing the technology ecosystem and driving organizational transformation. The bottom half of the slide highlights recent progress by intended outcome. Providing the lowest cost insurance through expense reductions, broad distribution and pricing sophistication is key to growth. Our Allstate brand relative competitive position has deteriorated recently as rate increases have exceeded some competitors. We expect that those competitors will eventually raise rates, improving our competitive position and growth prospects. Distribution has been expanded by launching middle market and preferred products through independent agents under the National General brand. These products are currently available in approximately 25% of the U.S. market, with a plan to be in nearly every market by the end of next year. Our new affordable, simple and connected auto product creates a differentiated customer experience, which is expected to become available in approximately one-third of the U.S. through the direct distribution channel by the end of this year, deploying a new technology stack, integrating technology across brands and retiring legacy technology applications provides increased agility and lowers costs. This will be reflected in the sunset of the Esurance and Encompass technology platforms next year. We believe transformative growth will lead to increased market share, and hence, higher company valuation multiples. And now, I’ll turn it over to Jess to discuss the remainder of our results. Jess Merten: All right. Thank you, Mario. Let’s start with Slide 11, which covers results for our Protection Services and Health and Benefits businesses. Chart on the left shows Protection Services revenues excluding the impact of net gains and losses on investments and derivatives, which increased 7% to $671 million in the first quarter compared to the prior year quarter. Increase reflects growth in Allstate Protection Plans and Allstate Dealer Services, partially offset by a decline in Arity. By leveraging the Allstate brand, excellent customer service, expanded product offerings and partnerships with leading retailers, Protection Plans continues to generate profitable growth, resulting in a 17% increase in the first quarter compared to the prior year quarter. In the table below the chart, you will see that adjusted net income of $34 million in the first quarter decreased $19 million compared to the prior year, primarily due to higher appliance and furniture claim severity and a higher mix of lower-margin business as we invest in growth at Allstate Protection Plans. We will continue to invest in these businesses which provide an attractive opportunity to meet our customers’ needs and create value for shareholders. Shifting to the chart on the right, Health and Benefits provide stable revenues and is consistently profitable while protecting more than 4 million customers. Revenues of $583 million in the first quarter of 2023 increased by $3 million compared to the prior year quarter as an increase in group health and other revenue was partially offset by a reduction in individual health and employee benefits. Health and Benefits operating systems are being rebuilt to lower costs and support growth, which will leverage the Allstate brand and customer base to generate shareholder value. Adjusted net income of $56 million was in line with the prior year quarter. Effective January 1, 2023, we adopted the FASB guidance, revising the accounting for certain long-duration insurance contracts in the Allstate Health and Benefits segment using the modified retrospective approach to the transition date of January 1, 2021. This had an immaterial impact on our results. Now let’s move to Slide 12, which depicts trends in our investment portfolio allocation. Our active portfolio management includes comprehensive monitoring of markets, sectors and individual names, and we proactively reposition based on our views of economic conditions, market opportunities and the risk return trade-off. Asset class holdings are shown on the left. Our $63.5 billion investment portfolio includes a large allocation to high quality interest bearing assets, which has increased in recent years. In response to increasing recession risks, we defensively position the portfolio in 2022 by reducing our exposure to below investment grade bonds and public equity. We maintain this defensive position in the first quarter with additional reductions in our public equity exposure. Our performance based portfolio shown in green and gray enhances long-term returns and is broadly diversified with more than 400 assets. The portfolio is largely U.S. exposure that span vintage years, sponsors and sectors. Exposure to real estate and commercial mortgage loans is modest at $2.8 billion or 4% of the portfolio and is focused on more resilient sectors such as industrial and multifamily. We hold only $230 million in office properties for mortgages. In addition to real estate, we have selective exposure to the banking sector totaling about $4.5 billion and consists primarily of investment-grade, fixed income securities issued by large financial institutions. We hold $240 million of exposure to regional banks, primarily larger regional banks, and we did not realize significant losses related to recent bank failures. Our high-quality portfolio provides flexibility to take advantage of investment opportunities as economic conditions evolve while providing substantial liquidity to protect our customers. Let’s shift from investment allocation to performance on Slide 13. As shown in the table at the bottom of the chart on the left, total return on our portfolio was 2.4% in the first quarter and 1.2% over the last 12 months. Net investment income, shown in the chart on the left, totaled $575 million in the quarter, which is $19 million below the first quarter of last year. Market-based income of $507 million, shown in blue, was $184 million above the prior year quarter following the proactive decision to reposition the market-based portfolio into higher market yields and an increase in fixed income funded by our reduction in public equity. Performance-based income of $126 million, shown in black, was $180 million below a strong prior year quarter. Volatility from quarter-to-quarter on these assets is expected. Our portfolio management and the allocation of risk capital to investments is highly integrated with the assessment of risk-adjusted return opportunities across the enterprise. As you’ll recall, in response to declines in auto insurance profitability, last year, we defensively positioned the portfolio against rising rates and reduced our exposure to recession sensitive assets. As market rate grows, we began to increase the duration in the fourth quarter and ended the first quarter at four years. This duration extension locks in higher yields and income for longer while positioning the portfolio to benefit from potential future reductions in interest rates. The chart on the right shows the fixed income earned yield continues to rise and was 3.4% at quarter end. Our portfolio yield is still below the current intermediate corporate bond yield of approximately 5.1%, reflecting an additional opportunity to increase yields if rates stay at these levels. To close, let’s turn to Slide 14 to discuss Allstate’s strong financial position and prudent approach to capital management. In light of recent financial events impacting the banking industry, let’s start with an overview of Allstate’s liabilities. As you can see in the chart on the left, our liabilities primarily consist of property casualty claim reserves and unearned premiums that are not subject to unpredictable or immediate demand for repayment. Our sophisticated economic capital framework quantifies enterprise risk to establish capital targets by business, product, geography and investment while also providing additional capital for stress events or contingencies. The framework incorporates regulatory capital standards, proprietary econometric modeling, I struggled with that, rating agency criteria and other external assessments. It’s used through the company from individual product and state-based decisions to establishing the appropriate amount of capital for each company and the overall corporation. Allstate’s capital of $19.2 billion exceeds our target capital based on this framework. Our ratings remain strong, with S&P and Moody’s assigning an issuer credit rating of A minus and A3, respectively, to our recent senior debt offering. Holding company assets of $4.2 billion as of the end of the first quarter represent approximately 2.5x our annual fixed charges. We returned $377 million to shareholders in the quarter through dividends and share repurchases. As a sign of our financial strength and commitment to shareholder returns, the common dividend was increased by 4.7% in the first quarter and paid in early April. With that as context, let’s open up the line for questions. Q&A Session Follow Allstate Corp (NYSE:ALL) Follow Allstate Corp (NYSE:ALL) We may use your email to send marketing emails about our services. Click here to read our privacy policy. Operator: And our first question comes from the line of Gregory Peters from Raymond James. Your question please. Gregory Peters: Well, good morning, everyone. A lot to unpack in your comments. I think what I’d like to do for my question and follow-up would be to focus on, first, Slide 5. And I was interested in your comments about the average underlying loss ratio, I think, up 6.5% in first quarter versus the average earned premium being a good guide for 5.7%. I guess the question would be, is the expectation that 6.5% is going to continue? And when will the average earned premium go beyond where the underlying loss ratio deterioration is? Tom Wilson: I’ll get Mario to dig in on claim expenses. When you look at the 5.7%, I’ll remind you — first, good morning, Greg. I’ll remind you that remember, this is a number that’s been trending up as the rates that we took in ’21 and ’22 start to be earned in. So we would expect that number to continue to increase as we earn in the rates we’ve already implemented, and so we think this. In terms of claims severity, I’ll let Mario give you an update on where we are and what we’re thinking about. Mario Rizzo: Yes. Good morning, Greg. So in terms of claims severity, what we disclosed this quarter was across major coverages. We’re running in the 9% to 11% range in both physical damage and in injury coverages. Really, the drivers of those costs, if you start with physical damage, we continue to see pretty persistent inflation particularly in parts and labor costs to repair cars. Actually, used car prices or total values for used cars actually came down a little bit in the first quarter in our numbers, but we had a higher percentage of total loss frequency which impacted the mix, so those are really the drivers. And on bodily injury, it’s the same things we’ve been talking about. Medical inflation, medical consumption and attorney representation. So I think the drivers of severity continue to persist. In terms of where they’re going forward, it’s really anybody’s guess, but I think our perspective is, and we’ve been pretty consistent on this point, we’re going to continue to take prices up. We’ve been doing that really since the fourth quarter of 2021 throughout last year. That continued into the first quarter. We’re going to continue to, on a forward-looking basis, implement rate increases to first catch up and then outpace loss cost trends. But our perspective on rates as we continue to need to push more price through the system, and we intend to do that throughout the balance of 2023. Gregory Peters: Right. On Slide 7, you — in your comments, you talked about those three states. And I guess a follow-up question would be, where do you think that’s going to go from a rate perspective? I think you said in your comment, Mario, that you expect to file the balance of your full rate need in California, and won’t that trigger a different process causing a delay in potential rate approvals? So give us some color on that slide, please. Mario Rizzo: Sure. So first I’ll start with — as we talked about, we just got approval for a second 6.9% auto rate increase in California, so we’re — going back to the fourth quarter of last year, we’ve got approval for 2 6.9% rates, and we’ve done that by working closely with the department to lay out our data and our loss costs. In those conversations, and I think you’ve seen some of this across the industry, the department is really encouraging carriers to file for the rate need that they have in their book as opposed to going forward with 6.9% rate increase filings, and it’s really based on just the volume of rate filings they’re getting. So as we talk to the commissioner and the department, we got — we’re able to secure approval for the two 6.9% rate increases, and we intend on filing the balance of our rate need going forward. Does that create risk in intervention? It does. But I think we need to get California auto prices back to where they need to be so that we can create the kind of availability for consumers, really, that they deserve in California. So we’re going to work with the department closely, we’re going to make that filing, and then we’ll see where that takes us going forward. Tom Wilson: So Greg, I think embedded in your question is, will you be challenged on something above 6.9%? The strategy that and team put into place was take 6.9% — get 6.9%, don’t have to have a consumer advocate come in and look at it, get another 6.9% and then go for the full rate. So what you’re seeing us do it in three chunks. Other people have tried to do it other ways. We think this is the right way for us. Gregory Peters: Got it. In New York, New Jersey? Mario Rizzo: Yes. We got some rate filings pending with the New York department that hopefully will get resolved soon. And then New Jersey, you see, we were able to implement a rate increase and we’re going to come back and file another rate increase. So we’re working hard to get these three states off of this page. Gregory Peters: Got it. Thank you for the answers. Operator: Thank you. One moment for our next question. And our next question comes from the line of Paul Newsome from Piper Sandler. Your question please. Paul Newsome: Good morning. I was hoping you could give us a little bit more additional color on the risk inflation rate. Is it fair to say that what we saw in the first quarter was an acceleration of frequency or severity trends that was unexpected? And if so, maybe you could talk about a little bit more of the pieces that were that much worse that may have seemed to have caught some people in the industry off guard. Tom Wilson: Paul, you’re breaking up a little bit, so let me just make sure I get it. So we’re talking about auto insurance severity trends first quarter versus — is that a tick up from what you saw last year? Or is it the level on? If that’s the question, I’ll just — Mario can jump into that. Mario Rizzo: Yes. I guess what I would say about severity, again, in that 9% to 11% range is it just remains persistently high, I think, is how I would describe it, and that’s true across coverages. It’s certainly lower than what our expectations were for severity last year, what our ultimate forecast is for 2022. But it still remains at elevated levels, which is why I go back to we’re going to need to continue to push rate through the system through the balance of this year to combat that inflation. Paul Newsome: Is that — should we interpret that as a further acceleration of rate? I mean, I think you were expecting to put rate — more rate anyway, right? I guess the question is do we have a step function up a little bit from where we would have been? Tom Wilson: Yes. Paul, I think there’s a little bit of — I mean, when you’re looking at the percentages, it gets a little confusing when you’re in a high increase environment. So if you looked at the numbers that Mario was talking about, are the percentages up versus the full year of 2022, not versus the first quarter of last year. As you know, the percentages kept going up as we move throughout the year and we adjusted our results, so what we’ve decided to do is to talk about the percentages up versus the full year. And I think, Mario, it is — said it well, which is it continues to be high. And so we’re trying to — if you look at the percentage up versus what we thought it was in the first quarter, it would be higher than 10% to 11%, but it’s not higher than what we thought the first quarter was at the end of last year. So as it relates to pricing, we’re looking at just total loss cost frequency and severity, and we have to — we believe we have to continue to increase prices this year. As Mario talked about, we were up almost 17% in the Allstate brand last year. I don’t know. We don’t have a target for what it will be this year. As Mario said, it’s going to be what it needs to be. Paul Newsome: No, that’s helpful. I always appreciate the help, and I’ll let some other folks ask questions. Thank you very much. Operator: Thank you. One moment for our next question. And our next question comes from the line of Elyse Greenspan from Wells Fargo. Your question please. Elyse Greenspan: Hi, thanks. Good morning. My first question, I just wanted to talk about your RBC ratio. I mean, we see the cat losses and we can see the impact that that would have had on statutory income in the quarter. But you guys also did cut your equity investments in half, which I think could have maybe a 20-point benefit in RBC. Is there a way for you guys to walk through the moving components of RBC in the quarter and give us a sense of where your RBC ratio would be within AIC at the end of the Q1? Tom Wilson: Elyse thanks for the question. Let me provide a little overview and then Jess will jump into the specifics. The headline would be, we don’t just look at RBC. And so as Jess said, so — I mean, if you step back and say, what are the learnings from the recent bank failures? Having a capital problem is not something that just happens to you like an auto accident , right? It’s a result of a series of choices made over time. So in terms of our series of choices, we had this really comprehensive set of processes around those choices that are highly analytical. We look at all kinds of scenarios. We look at it frequently, and as a result of that, we come up with what we think the right amount of capital. It includes things like RBC it includes things, like the rating agencies it includes. In some cases, we are more restrictive in terms of the amount of capital we think we need than other people. So we don’t play the game of RBC arbitrage, so to speak, and fool ourselves. With that, Jess, do you want to talk about how you think about capital and where we’re at? Jess Merten: Yes. Thanks, Tom. I mean I think, as you and I have talked before at least, we try and take a look at our capital position using our sophisticated economic capital I know it’s not just the RBC ratios. We don’t – just to be clear to your specific question. We don’t publish and have not published the RBC ratio for this quarter, and so I’m not in a position to take you through the bits and pieces on this call. I think directionally, you and others have noted what the RBC impacts would be. But I think it’s more important to think about the way that we manage capital and the way that we look at it on a comprehensive basis, not just and RBC basis. And I think you’ve seen reflected in the results that we continue to proactively manage our overall capital position. So again, I go back to our economic capital model, the sophisticated and comprehensive way that we look at capital, including all different sources and uses, and feel confident in our capital position being, as I said in my prepared remarks, above our internal targeted levels. Tom Wilson: But you shouldn’t take the fact that we have less equity as a statement that we thought we needed to save capital. We have less public equity holdings, because we didn’t think it was a good risk return trade-off, which John will be happy to talk about it if somebody wants to go through. But we think we have plenty of capital on this business. Elyse Greenspan: Thanks. And then my second question, your personal auto underlying loss ratio did improve sequentially, right? There are some noise, right, as there were some true-ups in the fourth quarter last year. And also, I thought that seasonally, Q1 for auto tends to be better. But I guess when we put this altogether and you guys you are talking about taking – still earning in some – a good amount of rate increases. Do you think that the personal auto loss ratio peaked in the first quarter and should we expect it to improve from here? Tom Wilson: Well, first, we think the profit improvement plan is working. I would say, Elyse, that if you just summarize the first quarter, I would say we held serve, we held serve in the face of, if you’re a tennis fan, 120-mile an hour serve, which was called continued high increase in severity. How will – we’ll return the ball, and as you point out, it’s about where it was last year. It is improved sequentially in the fourth quarter, but you’re absolutely right. Yes, there were some other things going around in the fourth quarter related to the first, second and third quarter of last year. So it’s not quite fair to say that it improved. I would just say we held serve. We feel good about where we’re going. In our mind, it’s a question of when, not if we will get back to how we make profitability. And that’s, of course, dependent on what happens with inflation and costs. Elyse Greenspan: Thank you. Operator: Thank you. One moment for our next question and our next question comes from the line of Yaron Kinar from Jefferies. Your question please. Yaron Kinar: Thank you. Good morning. May be starting with the current capital position, the reallocation of some of the investments, can you maybe talk about how you see the capital in maybe capital market stress scenarios? And I’m sure you run those internally, any color you can offer around that would be much appreciated? Tom Wilson: Yaron, I’m not exactly sure. Maybe you can give me another layer down in the question so we can get specific for you? Yaron Kinar: Sure. So I think you’re talking about, what, roughly $4 billion of liquidity or access about the holdco and I think, $16 billion of liquidity. What happens to those – we find capital markets stressed? I don’t know if there’s another 25% decrease in the equity market, maybe a credit cycle. I’m not exactly sure what kind of scenario to paint, because I don’t want to put you on the spot with a specific set of declines. But I’m sure you do test, this excess capital availability against stresses in the system? Tom Wilson: Yes. No, it’s a good point. Let me get John to answer that. I’ll give you a little overview . First, I would just say analytics everywhere. It counts for everyone despite. So whether that’s using sophisticated models is that where they toll the car or extending duration or what we’re doing with capital. And so, when we look at the extension of duration, I think John ran like nine different scenarios, how to do it, what to do it, what and – so we’re all over that. When it comes to stress events in the capital markets, we look at all kinds of alternatives there. Everything from — and what do we do with the government defaults to what do we do if there’s more bank failures. And so we have – and John can tell you sort, of how he’s thinking about how we allocate assets in the portfolio relative to stress events in today’s market. I would say from an overall capital standpoint, which is we got plenty of money. Like you saw our liabilities, they’re very predictable, and so nobody is going to run in and say give us back our $10 billion and we don’t have it. At the same time, we have a really highly liquid portfolio, because so much of it’s in investment-grade fixed income. If it’s fixed – investment-grade fixed income market is completely shut down, we would still probably be fine. Right now probably we would be fine, because we’re having cash come in terms of unearned premiums every day, so we don’t really have any overall liquidity issues. But in terms of capital market stress and how you think about that from an investment decisions and where we’re invested today, John can give you some perspective. John Dugenske: Yes, Yaron, thank you so much for the question. Just a piece of data, if we can trade a security, we’ve had $5 billion of cash coming in the next year just by things that are rolling off. It’s highly integrated into the overall data and analytics quantitative framework across the enterprise. So I answered this question, I feel confident that scores of people on the investment team could answer too, because it’s part of the way that we think. We’re not managing an investment portfolio separate from the way that we think about the enterprise. Tom talked a little bit about the duration trade that we did that was highlighted in the materials. That’s not taken in isolation of how all the other securities in the portfolio would perform and it’s not taken in isolation on how we think about the entire enterprise, what happens in underwriting and other areas. We run probably 100 different scenarios on a daily basis that look back at things that have happened in the past, things that could happen in the future, what that means for returns and what that means for capital. And we subscribe to getting the order of ready, aim and fire, right? So we really aim a lot as we think about our investment profile. Yaron Kinar: Thanks. And then maybe shifting back to the auto book, is the piece or the cadence of rate increases that you expect to file in auto kind of similar to where it was when we ended in 2022 or do you see maybe additional rate increases are necessary today relative to the plan at the beginning of the year? Tom Wilson: Where is, the plan at the beginning of the year. So maybe I’ll give an overview, Mario, with an analogy and you can bear. We’re running as fast and as hard as we can on rates everywhere. If we need them, we’re really running fast and hard. If we think, we’re actually adequately priced in some states where we are today, we’re still paying attention. We’re still on the track. We’re so warmed up and ready to run if we need to be. Mario Rizzo: Yes. What I would add Yaron, I’m going to go back to a comment I made earlier, which is we’ve been pretty consistent on this point of the need to take prices up going back to last year, and that hasn’t changed. Now obviously, we react to new data, new information in real-time and the absolute amount of rate we take is going to be dependent on that updated data. As Tom mentioned earlier, we rely on heavy-duty analytics to manage the business and we respond to what’s happening in real time, so the amount of rate we need will be dependent on how loss costs play out over time for us. But we’re going to continue to push rate through the system. We’ve been successful at that. I wouldn’t get too hung up on quarter-to-quarter fluctuations because that quarterly number is going to bounce around in terms of the rates that were approved in a particular state, and the size of those rates. But I think thematically, I’m going to go back to what we’ve been saying now for — over the last year, which is we’re going to continue to take the rate that we need to get auto margins back to where they need to be, which is in the mid-90s targets that we have. Yaron Kinar: Thanks and good luck, Mark, with the new role. Mario Rizzo: Thank you. Operator: Thank you. One moment for our next question, and our next question comes from the line of Andrew Kligerman from Credit Suisse. Your question please. Andrew Kligerman: Thank you and good morning. I’m trying to unpack the earlier comment about used car prices coming down a bit, because the Manheim Index was up about 8.6%, and that’s kind of a forward-looking indicator. So maybe you could kind of give a little color on what your expectation there is for used car prices? Does that kind of fit in your 9% to 11% or could – of projected severity increase or could it be materially higher as we look out in the year? Mario Rizzo: Hi Andrew, it’s Mario. Thanks for the question. I guess what I’d start with, there’s, a number of indices for used car prices. I think you mentioned one with Manheim that tends to focus on wholesale prices. And I think as we all know, that metric was coming down most of last year. Certainly in the back half of last year, and then it started to tick up in the end of the fourth quarter and has continued into this year. What I was referring to earlier is actual total loss severity, which tends to lag the Manheim Index and is more a function of retail used car prices, which have improved, and that’s what I was referring to in the quarter. What we saw was actually used car – or I’m sorry, total loss severity actually improved a little bit year-over-year. In terms of the risk going forward, I think, yes. If you look at what’s happening with the Manheim Index and other indices. Certainly, they’re headed in a different direction than they were headed for much of last year, which adds risk. We’ve tried to factor that into our severity expectations in terms of what we’re recording that 9% to 11% range. But what we actually saw in the first quarter of this year was a modest improvement in total loss severity. Andrew Kligerman: Got it, all right. Thank you on that. And then it was interesting following National General with auto policies in force now of about $4.6 million off pretty significantly from $4.1 million last year. It looks like you’re getting good rate increases. Your combined underlying was 94%, so which is pretty decent. So looking forward, it sounds like you haven’t fully rolled it out. Is this something that could really catapult your policy in force at a very responsible return? I mean, maybe a little color on how that – what your expectations over the next year to — for policy growth and doing so profitably? Tom Wilson: Andrew thanks for focusing in on National General. For summary, we feel really good about the acquisition of National General. If you just start with the math, the numbers, it’s exceeded our expectations and assumptions, because as you’ll remember, we’ve mostly bought that so we could reduce our expenses in the independent agent channel by folding, basically having them reverse acquire Encompass, we just happen to buy them first. And so they’ve – and that’s ahead of plan and the numbers are bigger. So, we’re feeling really good about that, and that’s the way we price the deal. You’re – strategically, which is where you’re after, we’re also getting the benefit of now having a solid plan for an independent agent channel, which we did not before. We’ve been struggling to get a good platform so they have good technology, good relationships, as you point out, mostly in the nonstandard stuffing. Mario, I think in his comments, mentioned how we’re now taking those relationships and that technology platform and we’re putting what we call mid-market, which is basically standard auto and homeowners, on that platform, and that’s going to give us great growth opportunities because we’re using the Allstate expertise in both standard auto and – not to be underestimated, one bit really is our business model and homeowners. We think that’s a great growth opportunity and which is basically icing on the cake relative to the acquisition. So, we feel really good about we’re in that channel. It’s part of Transformative Growth. It’s part of increasing market share and personal profit liability, and we’re pleased with the results. Andrew Kligerman: Awesome, thank you. Operator: Thank you. One moment for our next question and our next question comes from the line of Josh Shanker from Bank of America. Your question please. Josh Shanker: Yes, thank you. I want to talk about segmentation and policy count. Obviously, the net decline in the auto policy count was quite high this quarter. Do you have some sort of advice or thoughts to think about how much policy count will decline over this repricing period? But two, I also note that homeowners policy count was flat which suggests in the segmentation, there’s different policyholders you’re keeping versus different policyholders you’re losing. So I thought you might be able to touch on both things? Tom Wilson: Good. Mario, why don’t you talk about homeowners and what we’re doing there to drive growth? As it relates to auto insurance, we just talked about sort of the Allstate brand, I think, which may be the numbers you’re referring to, which is down versus Andrew’s comment about National General, which is off. On the Allstate piece, there’s, obviously two components. One is, are you selling more new business? And then the second is what’s happening with retention. And as it relates to new business, we’ve taken the approach that a prospective rate increase is like a new business penalty. So as you know, when you sell a business, you’re going to have – you got expenses. It is getting the customers more to get them right in front, and then the loss ratio is typically higher for new business than it is for existing business. If you need 10 points of rate on top of what you’re currently selling it to, we’ve factored that into our growth projections on new business and said, well this — at the very least, it’s an additional 10 points of new business penalty. The worst is that when you raise your prices by 10%, all the money you spent getting the customer is wasted, because they go away and you churn it. So we’ve dialed back new business and advertising not so much, because we’re trying to manage the P&L, but because we’re managing the economic growth. And we think needing rate increases and going out and getting a new customer and saying, it’s great, you bought it for $1,000. And then six months later saying, well, it was really $1,100 is not a good plan. So we’ve dialed back new business, and you see that really across the board. And Mario showed in some places, even more aggressively, like New York, New Jersey, and California have kidded Mario that like, you’ll know every new business customer we get in New York if we keep this up personally. So that’s basically an economic choice. On retention, of course, that’s the customer’s choice and it depends what happens in the marketplace and what other people are doing. Our retention has gone down. We do model that out. It’s really very difficult to take those old models, so — and give yourself any kind of good estimate on the current view because a couple of things have changed. One, these are much bigger increases than those models had in them. So those models are based on 5%, 6%, 7%, not on 10%, 12% or 15% or 14% in Texas. And at the same time, those models don’t have the kind of competitive environment you’re operating in where everybody else is raising rates at the same time. So we’ve shutdown new business, because we think it’s economic and there’s an increased new business penalty associated with being underpriced, and then we’re managing to. What we want to do, of course, is we’re highly focused on improving customer value, because people pay more, you got to do more for them. And so, we’re working hard on making sure we do insurance reviews, get our agents for them homeowners is another great story that I think we’ve kind of – we get so focused on auto. We haven’t really put – it’s a great business model. Mario can talk about what we’re doing to grow that business. Mario Rizzo: Yes. Thanks for the question, Josh. And homeowners, again, as I talked about in the prepared remarks, is a business that we continue to feel really good about in terms of where it’s positioned from a profitable growth perspective. And what you saw in the quarter is that we actually increased policy count by about 1.4%. Retention actually picked up by a temp. And I think there’s a couple of things when you kind of unpack what’s happening with retention in homeowners because much — as Tom talked about, we’re having to take prices up in auto. The way we’re taking price increases is in a highly segmented and targeted way, and that’s helping from a retention perspective on homeowners because those bundled customers tend to be our longest-tenured, most profitable customers. We also bundle about 80% of homeowners’ policies have on supporting auto line and the retention on a bundled customer where a homeowner that has an auto policy is meaningfully higher than a monoline homeowners, and we’re continuing to see the benefit of that. And we’ve put processes in place both in terms of economic incentives for our agents and sales processes in the call centers on the direct side to incent additional bundling. And we’re seeing some nice trends in terms of bundling rates, which is certainly helping homeowner growth through homeowner retention. We’re going to continue to look for ways to grow the homeowner business. We think it provides a really compelling risk and return opportunity for us. The results are going to bounce around because there’s volatility. This quarter is an example of that with catastrophe losses, but we continue to see our underlying combined ratio and loss ratio improve, and both through leveraging the tactics I talked about for retention production, particularly with bundled customers, we think we can continue to grow that line. Josh Shanker: Are the bundlers having the same problem that they get quoted or rate an entire six months later? Or is your pricing such that you can comfortably quote a bundle right now and think that you’re going to retain them for 12 months? Mario Rizzo: Yes, we’re obviously quoting bundled customers right now. And when you look at the business we are writing, we’re seeing really nice improvements in terms of quality and lifetime value, which is indicative of that bundling rate. And so yes, we’re quoting it. And the other thing you got to remember, and this is true both from a retention and a new business perspective. Bundling, it’s an easier experience and a more streamlined experience for customers. There’s discounts associated with bundling as well that can help offset higher auto rates and incent customers to stay with us. Josh Shanker: Thank you for the detailed answers. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brian Meredith from UBS. Your question please. Brian Meredith: Thanks. A couple of questions here for you. First one, I’m just curious, I saw your expense ratio is down about 1 point x ad spend. Where are we in this Transformational Growth as far as the expense ratio reduction? How much can we potentially see here additional going forward? And then maybe on the — an add on to that, what kind of a normalized ad spend as a percentage of earned premium, so we can kind of get a view on what our expense ratio should ultimately end up? Mario Rizzo: Yes, Brian, this is Mario. Thanks for the question. Again, expenses as much as Tom talked earlier about, earned premium and loss ratio, we kind of held serve there. We did see the benefit of a lower expense ratio both in terms of the underwriting expense ratio and the adjusted expense ratio. Where we’re at in the kind of continuum on the adjusted expense ratio, we set a goal to get that adjusted ratio down to about 23 by the end of 2024. And we’re making really good progress on that, you saw continued progress on that this quarter. We certainly are being helped by higher earned premium which leveraged our cost. But we’re continuing to see reductions in both operating costs and distribution-related costs, which are helping the expense ratio. And I talked a little bit earlier about the areas we’re focused on, whether it’s automation, digitization, sourcing and continuing to drive both operating and distribution costs down. We’re going to — those are really going to be the levers we pull to push the expense ratio ultimately to that goal that we set with Transformative Growth. So we’re making good progress, feel really good about that. In terms of the level of marketing spend, certainly, we spent less this quarter on marketing than we did a year ago, and we’ve pulled that back. I think as Tom said earlier, really from an economic risk and return perspective, it doesn’t make a lot of sense for us to invest aggressively in marketing at a time when our prices aren’t adequate. But what we will do over time has more rates and — or, I’m sorry, more states and more markets get to a rate level that we’re comfortable with, we’re going to surgically lean in. And as one of the components of Transformative Growth, we’re going to look to both increase the level and the sophistication of the marketing investment that we make. And that will be commensurate with what we think the opportunity is to grow, so I can’t sit here today and give you a specific dollar amount or our target that we’re focused on. That’s why we gave you the adjusted expense ratio, which excludes marketing costs because we’re going to continue to invest in marketing when it makes economic sense and where it makes economic sense for us to lean in. Tom Wilson: So let me just double click on the Transformative Growth piece. So the third piece of Transformative Growth is to increase the sophistication and investment in customer acquisition. We think we can and should be able to get new customers cheaper than we do today. There’s lots of math we have around that. One of those is telematics, so we were the first out there with continuous telematics. We’ve been at it for over a decade. We’re now taking telematics, and with Arity, we now think we can take telematics into new business, Brian. And actually, not have to have them download our app or put a device in their car to figure out how good a drive they are. We think we can use our sophisticated analytics to price them using telematics ahead of time, which will maybe — to better manage your acquisition cost. So lots of work to go there, so plenty of opportunity to grow. Brian Meredith: Can I just — one quick follow-up here. If I think of kind of going forward here, when you’re looking at putting rate increases through for the remainder of the year, what’s your kind of base case with respect to how you’re thinking about inflation here? Are you assuming that the current inflationary environment in persisting through the remainder of 2023 as you’re filing for rates? Tom Wilson: Let me finish and make sure we respect for people’s time on that question. So first, when you look at overall inflation, the numbers Fed and everybody else sees, that’s one set of numbers. If you look at the inflation in what we do, it’s of course, dramatically higher. And those are subject to different things. So whether the Fed tightens the economy, it doesn’t tighten economy, probably isn’t going to do a lot to keep people from having severe accidents, hurting themselves and needing a lot of medical care or then more lawyers getting involved in the case, nor will it have a huge impact on what the OEs charge on parts. They tend to charge more in parts based on what they’re doing to overall profitability and how many new cars are selling. So if we go into a recession, they sell new cars, I don’t expect they’re going to cut car’s prices. So we think inflation will persist in this business at a higher level than you see from the overall CPI, and that’s why we’re having to raise prices for our customers. Tom Wilson: Thank you all for participating today. Thank you for being generous with your time. We’re going a few minutes over. Our priorities, make sure we’re going to make money in auto insurance and continue to leverage our superior position in homeowners as start to grow and execute Transformative Growth, whether that’s by getting our costs down, rolling out new products, expanding our National General platform. And then we didn’t spend any time today on the great stories we have in the lower oval, which is expanding Protection Services. So a lot of things we’re working on hard to create more value for you. Thank you, and we’ll see you next quarter. Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day. Follow Allstate Corp (NYSE:ALL) Follow Allstate Corp (NYSE:ALL) We may use your email to send marketing emails about our services. Click here to read our privacy policy......»»

Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 of the best online flower delivery services. When you buy through our links, Insider may earn an affiliate commission. Learn more.Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions.Lauren Savoie/InsiderWhen it comes to the best online flower delivery services, there are a few that stand out from the rest. Sending fresh flowers is a thoughtful way to show someone you care, and there are now dozens of online flower delivery services offering unique bouquets, trendy arrangements, and even subscriptions.We ordered 39 arrangements from 16 popular brands to find the best service for delivering fresh, attractive flowers that arrive on time. Whether you're on a tight budget or looking for a guaranteed hit, our guides to the best Mother's Day gifts under $50 or affordable gifts for mom under $25, have you covered. And for those short on time, Amazon offers a wide selection of flowers and Mother's Day gifts that can be quickly delivered.But if you're looking for a gift that's a classic, you can't go wrong with classic Mother's Day flowers. Keep reading to find our editor's picks for the best online flower delivery services that will brighten up your mom's day. Our top picks for online flower delivery servicesBest overall: UrbanStemsUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.Best farm-fresh: Farmgirl FlowersFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Best custom arrangements: FloracracyFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Best same-day delivery: FTDFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Best subscription: BloomsyBoxBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.Best preserved roses: RoseBoxPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Best fresh roses: Roses OnlyAs the name implies, Roses Only sells just one product, but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Best dried bouquets: East OliviaFresh flowers have a short lifespan, but dried florals from East Olivia can last for years with proper care — and feature inventive colors and textures not found in traditional fresh bouquets.Best overall: UrbanStemsLauren Savoie/Maria Del Russo/Rachael Shultz/InsiderPrice range: $45 to $185Delivery area: Lower 48 statesSame-day delivery: Yes, in New York City and Washington, D.C. onlyNext-day delivery: YesShipping: $10 to $15, depending on delivery date and methodShop all flowers on UrbanStemsPros: Lots of options to choose from, including dried bouquets and plants; attractive floral designs in a range of styles, sizes, and pricesCons: Some testers noted flowers lasted a few days less than other brandsIf you're searching for the perfect Mother's Day gift, look no further than UrbanStems. They offer a robust selection of modern, fresh bouquets, along with dried flowers, plants, candles, chocolate, and subscriptions, making it a one-stop-shop for all your Mother's Day needs. Their diverse selection ensures that you can find something unique and personalized to your recipient's taste.We tried the Juliet, Luna, and Double the Pink Champagne fresh bouquets, along with the Aspen dried bouquet and Claude plant. Everything arrived on time and in excellent condition. The arrangements were some of the freshest, most attractive bouquets we tested and were filled with lively, creative blooms in a range of colors.Read our full review of UrbanStems.Worth a look:Best for farm-fresh flowers: Farmgirl FlowersLauren Savoie/Connie Chen/InsiderPrice range: $50 to $250Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: Possible, but not guaranteedShipping: $25Shop all bouquets from Farmgirl FlowersPros: Whimsical, in-season blooms; each bouquet is unique; moderately priced; offers some rare flowers; some florals are grown in the US Cons: Surprise bouquets are not ideal if you have specific flowers you want to include or avoid; some customers report wilting or short-lived bloomsIf you're after an arrangement that looks like it was recently plucked from the garden, Farmgirl Flowers offers inventive and playful bouquets based on what's in season. Farmgirl's flagship offerings are the Fun Size, Just Right, and Big Love bouquets (formerly Mini, Midi, and Maxi). You don't get to choose what you receive; instead, Farmgirl puts together a bouquet based on what's available and in season. The company's website and social media give you an idea of what to expect, but every bouquet is slightly different, giving it a special, unique feel. We received a Just Right and a Big Love, as well as another Just Right sent to a tester in California. We loved that the arrangements had a whimsical, wild shape to them, and they were gorgeous from every angle. The Just Right and Big Love both appeared the same size when we first received them, but after a few hours in water, the Big Love's closed buds opened up to create a fuller bouquet. If you're looking for a unique and personalized touch to your Mother's Day flowers, Farmgirl Flowers is a great choice. Farmgirl also offers a few dozen specialty bouquets, including some rare blooms like flower breeder David Austin's Patience roses.Worth a look:Best for custom arrangements: FloracracyLauren Savoie/Connie Chen/InsiderPrice range: $155 to $350Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: YesShipping: IncludedShop all flowers on FloracracyPros: Completely customizable arrangements, online tool helps you choose the right arrangement, beautiful packaging, thoughtful extras like a petal pressing book and mini shears, letter writing serviceCons: Online tool can be a bit tricky to navigate, lots of packaging (though most options are compostable or recyclable), few budget optionsIf you're looking for a truly unique and personalized gift for Mother's Day flowers, a custom arrangement from Floracracy is an excellent option. You can customize every aspect of the design, from the shape and colors to the blooms used, making it a truly personal and special gift.If you're not sure where to start, the company's design tool walks you through a quiz that lets you select the intended recipient, occasion, and meaning you wish to convey to make a recommendation. Each flower is paired with a meaning from the company's thorough research of historical flower symbolism. You're also given the option to write a letter yourself or have the company write one for you based on the information you provide.The arrangements we received from Floracracy were the lushest and most vibrant we've ever seen from a flower delivery service. Each arrangement comes with a coordinating vase, a handbound book for pressing petals, and an illustrated card with each of the flowers and their meaning. Our blooms lasted almost three weeks — longer than any other arrangement. While this service is pricier and requires some of your time to design, it makes for a truly meaningful and memorable flower gift. Read our full review of Floracracy here.Worth a look:Best for same-day delivery: FTDLauren Savoie/Jenny McGrath/InsiderPrice range: $40 to $225Delivery area: All 50 states, 150 countriesSame-day delivery: YesNext-day delivery: YesShipping: Starts at $17.99 and varies based on delivery date and order totalShop all flowers from FTDPros: Orders filled by local florists; a large selection of bouquets, plants, and giftsCons: Experience can vary based on which florist fills your order, designs are more traditional and less modernWhen you need to send flowers fast, a floral wire service is your best option. Florists' Transworld Delivery Service (FTD) has been in the flower delivery business for more than 100 years and partners with local florists to fulfill and deliver orders in all 50 states and more than 150 countries. In many cases, you'll also have the option of same-day delivery. The arrangements lean toward more traditional colors and flowers instead of more modern or unique designs.Compared to other similar floral wire services, we had a better experience with FTD. The bouquets and plants we received were fuller, fresher, and in better condition than blooms from 1-800-Flowers. Of course, since orders are typically filled by local florists, your experience may vary depending on who ultimately fills your order.If you need to send flowers quickly, for Mother's Day, internationally, or to hard-to-reach places, FTD is the best same-day service we've found.Read our full review of FTD.Worth a look:Best subscription: BloomsyBoxLauren Savoie/InsiderPrice range: $45 to $70Delivery area: Nationwide, except Puerto Rico and HawaiiSame-day delivery: N/A for subscriptionsNext-day delivery: N/A for subscriptionsShipping: Free with subscriptionShop all flower subscriptions on BloomsyBoxPros: Multiple weekly and monthly plans to choose from, offers month-to-month and prepaid plans, bouquets are gorgeous, a la carte bouquets and plants availableCons: Don't get to choose which flowers are in your bouquet, which might not be a good option for those with allergies or petsFlower subscriptions are a great way to brighten someone's day on a more frequent basis — or to liven up your own home with regularly-scheduled blooms. BloomsyBox offers a robust fleet of weekly and monthly subscription options at reasonable prices. You can pay month-to-month or save a few dollars by prepaying for 3-, 6-, or 12-month subscriptions. While the retailer also sells a la carte bouquets and plants, we think its subscriptions offer the best value.We tried BloomsyBox's priciest subscription: Its NYBG Collection. Each bouquet in the subscription is curated by the New York Botanical Garden's floral experts and features blooms that are in season. A portion of the subscription goes to supporting the NYBG's plant science and conservation efforts.We highly recommend BloomsyBox's subscriptions to anyone looking for a bit of floral cheer on a regular basis. It's a nice treat each month to get an e-mail saying a new bouquet is on the way. Worth a look:Best for preserved roses: RoseBoxLauren Savoie/Maliah West/Hannah Freedman/InsiderPrice range: $89 to $1,119Delivery area: All 50 statesSame-day delivery: Yes, in Manhattan onlyNext-day delivery: YesShipping: $0 to $30, depending on delivery date and order totalShop all preserved flowers on RoseBoxPros: More than 20 rose color options, many container types, smell and look like fresh roses, can last a year or longer with proper careCons: Don't have the same feel as real rosesIf you've been on Instagram lately, chances are you've seen these trendy preserved roses somewhere on your feed. Usually packed into boxes or displayed in a classic ball arrangement, these flowers are incredibly popular with influencers and celebrities. We tested three preserved rose brands and found the quality very similar. Ultimately, we chose RoseBox as the best preserved roses for its diverse range of color and display options. We particularly liked that its plentiful display containers had discreet branding or none at all, unlike other preserved rose brands that their cover containers (which can't be separated from the flowers) with logos.  Almost all of RoseBox's 90+ products can be customized with 21 or more different rose color options. One of our testers opted for turquoise, while others chose more classic red and pink varieties. Preserved roses are expensive, no matter what brand you choose. A single preserved rose will cost you anywhere from $44 to $89, which is the same price as a full-sized bouquet from most of our other top picks. Expect a medium-sized array of preserved roses to cost about $300. That said, they can end up being an economical alternative to buying flowers every week. We're eager to see if our arrangements live up to their purported longevity.Worth a look:Best for fresh roses: Roses OnlyLauren Savoie/Katie Decker-Jacoby/InsiderPrice range: $49 to $669Delivery area: All 50 states and internationally to the United Kingdom, Hong Kong, Singapore, and AustraliaSame-day delivery: Yes, in New York City and Los Angeles onlyNext-day delivery: YesShipping: $19.95Shop all roses on Roses OnlyPros: Stunning roses; beautiful presentation; long-lasting flowers; available in quantities from six to 100Cons: Limited product and color choices.Roses are such a big seller that we made sure every arrangement we received as part of this guide included at least some of them. Having seen the spectrum of what's out there, we can confidently say that Roses Only delivers the most pristine, long-lasting roses we've found.So much care is put into the delivery: The cartoonishly perfect long-stemmed roses (which you can order in quantities of 6-100) come packaged in a long, elegant box with a linen ribbon, and every rose has its own water reservoir to ensure it arrives pristine. The roses themselves are flawless, with big velvety petals. They lasted about two weeks and gradually opened up until each bud was about palm-sized.At about $8 per flower, Roses Only sells some of the most expensive roses out there, but if it's just fresh roses you're after, no flower delivery service does it better.Worth a look:Best for dried bouquets: East OliviaLauren Savoie/InsiderPrice range: $60 to $225Delivery area: All 50 statesSame-day delivery: NoNext-day delivery: NoShipping: $12.99Shop all dried flowers at East OliviaPros: Unique and inventive designs, each arrangement comes with a coordinating vase, options change seasonally, arrangements can last a year or longer with proper careCons: Order processing can take up to five business days, limited edition collections can sell out quicklyNo matter how pretty the bouquet, fresh flowers will all eventually wilt. Dried bouquets are a good solution for those who love the look of florals but hate the upkeep. Some of the most creative and beautiful preserved arrangements we've seen come from East Olivia.The offerings change seasonally, but at the time of our testing, the brand featured a winter collection and Mother's Day collection, both featuring ornamental grasses and filler flowers dyed dreamy pastel colors. Each bouquet comes fully arranged and delicately packaged with its own matching ceramic vase. We love knowing that we'll get many, many months of enjoyment out of these.The fact that East Olivia's collections change with the season makes each arrangement feel special. Order processing can take up to five business days, so you'll want to plan ahead if you plan on gifting one of these dried arrangements, especially considering the limited edition collections can sell out quickly.Worth a look:How we tested flower delivery servicesCaitlin Petreycik/Lauren Savoie/InsiderTo find the best flower delivery service, we conducted hands-on testing of every brand in this guide. We ordered two to three arrangements from each brand, evaluating the selection, ordering, and delivery process. We sent bouquets to testers in different parts of the country — including New York City, Boston, Los Angeles, Seattle, rural Colorado, and suburban Connecticut — to see if quality and delivery time varied based on location. In all, we tested 39 bouquets from 16 brands.What to look for in flower delivery servicesLauren Savoie/InsiderHere's what we looked for in the best flower delivery service:Ordering: We scrutinized the ordering process of each service, noting whether the website was simple to navigate, what the product selection was like, and how easy it was to place an order. We also looked at shipping options and estimated delivery times.Delivery: We noted whether the arrangements arrived when they said they would (all did), evaluated packaging, and looked at the condition of the flowers when they first arrived. Testers across the country compared notes; we found delivery times and quality consistent across the country.Quality of flowers: We looked for full bouquets of lively-looking flowers that matched the description and photo of the arrangement we ordered online. We read all care instructions and followed them meticulously, noting how long the flowers remained fresh enough to display. Consistency: A good flower service should deliver quality blooms no matter the location of your recipient. Our testers across the country took photos and detailed notes about delivery and bouquet quality to compare experiences.Budget: When choosing a flower delivery service, it's important to consider your budget. Flower prices can vary widely, and some delivery services charge more than others for their arrangements. To stay within your budget, consider shopping around and comparing prices from different florists. You can also look for seasonal flowers or less expensive options to help keep costs down.Packaging, customization, and extras: Customization options are important, especially if you want to add a personal touch to your gift. Look for a service that offers a variety of vase options and add-ons such as chocolates, balloons, or stuffed animals. Some services even offer personalized messages or cards that can be included with your delivery.How to keep flowers freshTrim the stems: When cutting, it's important to use a sharp, clean tool to prevent damage to the stem. By cutting at an angle, you create a larger surface area for the stem to absorb water, which helps keep the flowers hydrated and fresh. Clean the water: Changing the water every 2-3 days helps prevent bacteria growth and keeps the water fresh, which in turn helps the flowers last longer.Put your flowers in the right location: Keeping your flowers in a cool and shady spot is ideal, but it's important to note that some flowers have different temperature preferences.For example, tropical flowers like orchids and anthuriums prefer warmer temperatures while others, like roses and hydrangeas, prefer cooler temperatures. So it's always a good idea to check the specific care instructions for the flowers you have.Feed your flowers: It's important to use lukewarm water and add floral preservative or a tablespoon of sugar to the water to nourish the flowers. Additionally, make sure to recut the stems at an angle before placing them in the fresh water.FAQsLauren Savoie/InsiderWhen should I order flowers for Valentine's Day, Mother's Day, and other popular holidays?While many flower delivery services offer next-day delivery for most of the year, all bets are off when it comes to major holidays like Valentine's Day and Mother's Day. When ordering around popular holidays, a safe bet is to place your order two weeks in advance of the day you want the flowers delivered. This will ensure you have plenty of arrangements and delivery dates to choose from.Is it safe to have fresh flowers around pets?It depends on the types of flowers. The ASPCA maintains a comprehensive list of flowers and plants and whether they are toxic or safe for dogs and cats. It's important to remember that certain plants can still be toxic to animals even if they are kept out of reach; pollen and other airborne spores can get into the fur of animals and be ingested during grooming. If you're ordering flowers for a household that has pets, it's best to stick with a service that allows you to see the types of flowers in the arrangement before ordering. Some brands, like Fresh Sends or subscription services, don't allow you to preview the bouquet before it's sent, which could land you with a bouquet that isn't pet safe.Our top pick, UrbanStems, lists the type of flowers in each arrangement, so you can check to make sure it's safe for your pet. Some brands, like Floracracy, take it a step further and let you completely customize your bouquet so you can be sure to only include plants and flowers that are safe.  Check out our guides on 11 pet-friendly houseplants and the best pet-friendly plants.How long do fresh flowers last?A lot depends on how recently the flowers were cut before they arrived at your home. Flowers can be cut hours, days, or weeks before shipping to you, greatly varying their lifespan in your home. On average, however, you can expect fresh flowers to last five days to a week in a vase with good care. If you're interested in longer-lasting flowers, preserved roses or a dried bouquet are great options.What's the best way to keep fresh flowers alive longer?Some ways to extend the life of your fresh flowers include cutting the stems before putting them in water, using flower food in the water (often supplied with the bouquet, but can be homemade), and changing the water whenever it gets discolored or cloudy. You can read more tips for keeping flowers fresh here. Remember that you don't have to trash the whole bouquet if a few flowers are dead or wilted; just remove the dead flowers and rearrange or tighten the bouquet as needed (you may need to downsize to a smaller vase). Hardy flowers with woody stems (like roses) can last several weeks with proper care.   What are the best types of flowers to buy?When in doubt, roses are a great pick. They're long-lasting, easy to care for, and largely pet safe. You can get roses in all sorts of colors, shapes, and sizes to suit any recipient. Read the original article on Business Insider.....»»

Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions. When you buy through our links, Insider may earn an affiliate commission. Learn more.Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions.Lauren Savoie/InsiderWhether it's for Mother's Day, a celebration, sympathy, or just because, sending fresh flowers is a thoughtful way to let your mother know you care about her. Plus, it's easier than ever: There are dozens of online flower delivery services out there offering unique fresh bouquets, trendy dried flower arrangements, and even floral subscriptions.While our staff has used nearly every one of these merchants to send our own mothers flowers over the years, we wanted to know exactly how they stack up against one another. We ordered 39 arrangements from 16 popular brands, sending the flowers to Insider Reviews team members' mothers all over the country. Our goal was to find a service that delivers the freshest, most attractive flowers that arrive on time — no matter your location.Our top picks for online flower delivery servicesBest overall: UrbanStemsUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.Best farm-fresh: Farmgirl FlowersFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Best custom arrangements: FloracracyFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Best same-day delivery: FTDFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Best subscription: BloomsyBoxBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.Best preserved roses: RoseBoxPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Best fresh roses: Roses OnlyAs the name implies, Roses Only sells just one product, but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Best dried bouquets: East OliviaFresh flowers have a short lifespan, but dried florals from East Olivia can last for years with proper care — and feature inventive colors and textures not found in traditional fresh bouquets.Best overall: UrbanStemsLauren Savoie/Maria Del Russo/Rachael Shultz/InsiderPrice range: $45 to $185Delivery area: Lower 48 statesSame-day delivery: Yes, in New York City and Washington, D.C. onlyNext-day delivery: YesShipping: $10 to $15, depending on delivery date and methodShop all flowers on UrbanStemsPros: Lots of options to choose from, including dried bouquets and plants; attractive floral designs in a range of styles, sizes, and pricesCons: Some testers noted flowers lasted a few days less than other brandsUrbanStems offers a robust selection of modern, fresh bouquets, along with dried flowers, plants, candles, chocolate, and subscriptions. It's a great one-stop shop to find something that feels unique to your recipient.We tried the Juliet, Luna, and Double the Pink Champagne fresh bouquets, along with the Aspen dried bouquet and Claude plant. Everything arrived on time and in excellent condition. The arrangements were some of the freshest, most attractive bouquets we tested and were filled with lively, creative blooms in a range of colors.The bouquets lasted a little over a week — average for fresh-cut flowers — and the dried bouquet and plant are still going strong. The site is also very easy to navigate and lets you filter by occasion, color, price, and more.Read our full review of UrbanStems.Worth a look:Best for farm-fresh flowers: Farmgirl FlowersLauren Savoie/Connie Chen/InsiderPrice range: $50 to $250Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: Possible, but not guaranteedShipping: $25Shop all bouquets from Farmgirl FlowersPros: Whimsical, in-season blooms; each bouquet is unique; moderately priced; offers some rare flowers; some florals are grown in the US Cons: Surprise bouquets are not ideal if you have specific flowers you want to include or avoid; some customers report wilting or short-lived bloomsIf you're after an arrangement that looks like it was recently plucked from the garden, Farmgirl Flowers offers inventive and playful bouquets based on what's in season. Farmgirl's flagship offerings are the Fun Size, Just Right, and Big Love bouquets (formerly Mini, Midi, and Maxi). You don't get to choose what you receive; instead, Farmgirl puts together a bouquet based on what's available and in season. The company's website and social media give you an idea of what to expect, but every bouquet is slightly different, giving it a special, unique feel. We received a Just Right and a Big Love, as well as another Just Right sent to a tester in California. We loved that the arrangements had a whimsical, wild shape to them, and they were gorgeous from every angle. The Just Right and Big Love both appeared the same size when we first received them, but after a few hours in water, the Big Love's closed buds opened up to create a fuller bouquet. If you want your bouquet to include (or avoid) certain flowers, Farmgirl also offers a few dozen specialty bouquets, including some rare blooms like flower breeder David Austin's Patience roses.Worth a look:Best for custom arrangements: FloracracyLauren Savoie/Connie Chen/InsiderPrice range: $155 to $350Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: YesShipping: IncludedShop all flowers on FloracracyPros: Completely customizable arrangements, online tool helps you choose the right arrangement, beautiful packaging, thoughtful extras like a petal pressing book and mini shears, letter writing serviceCons: Online tool can be a bit tricky to navigate, lots of packaging (though most options are compostable or recyclable), few budget optionsIf you really want to wow your giftee with something special, a custom arrangement from Floracracy is perhaps the most personal flower gift you can buy. Every aspect of the design can be customized, from the shape and the colors to the blooms.If you're not sure where to start, the company's design tool walks you through a quiz that lets you select the intended recipient, occasion, and meaning you wish to convey to make a recommendation. Each flower is paired with a meaning from the company's thorough research of historical flower symbolism. You're also given the option to write a letter yourself or have the company write one for you based on the information you provide.The arrangements we received from Floracracy were the lushest and most vibrant we've ever seen from a flower delivery service. Each arrangement comes with a coordinating vase, a handbound book for pressing petals, and an illustrated card with each of the flowers and their meaning. Our blooms lasted almost three weeks — longer than any other arrangement. While this service is pricier and requires some of your time to design, it makes for a truly meaningful and memorable flower gift. Read our full review of Floracracy here.Worth a look:Best for same-day delivery: FTDLauren Savoie/Jenny McGrath/InsiderPrice range: $40 to $225Delivery area: All 50 states, 150 countriesSame-day delivery: YesNext-day delivery: YesShipping: Starts at $17.99 and varies based on delivery date and order totalShop all flowers from FTDPros: Orders filled by local florists; a large selection of bouquets, plants, and giftsCons: Experience can vary based on which florist fills your order, designs are more traditional and less modernWhen you need to send flowers fast, a floral wire service is your best option. Florists' Transworld Delivery Service (FTD) has been in the flower delivery business for more than 100 years and partners with local florists to fulfill and deliver orders in all 50 states and more than 150 countries. In many cases, you'll also have the option of same-day delivery. The arrangements lean toward more traditional colors and flowers instead of more modern or unique designs.Compared to other similar floral wire services, we had a better experience with FTD. The bouquets and plants we received were fuller, fresher, and in better condition than blooms from 1-800-Flowers. Of course, since orders are typically filled by local florists, your experience may vary depending on who ultimately fills your order.If you need to send flowers quickly, internationally, or to hard-to-reach places, FTD is the best same-day service we've found.Read our full review of FTD.Worth a look:Best subscription: BloomsyBoxLauren Savoie/InsiderPrice range: $45 to $70Delivery area: Nationwide, except Puerto Rico and HawaiiSame-day delivery: N/A for subscriptionsNext-day delivery: N/A for subscriptionsShipping: Free with subscriptionShop all flower subscriptions on BloomsyBoxPros: Multiple weekly and monthly plans to choose from, offers month-to-month and prepaid plans, bouquets are gorgeous, a la carte bouquets and plants availableCons: Don't get to choose which flowers are in your bouquet, which might not be a good option for those with allergies or petsFlower subscriptions are a great way to brighten someone's day on a more frequent basis — or to liven up your own home with regularly-scheduled blooms. BloomsyBox offers a robust fleet of weekly and monthly subscription options at reasonable prices. You can pay month-to-month or save a few dollars by prepaying for 3-, 6-, or 12-month subscriptions. While the retailer also sells a la carte bouquets and plants, we think its subscriptions offer the best value.We tried BloomsyBox's priciest subscription: Its NYBG Collection. Each bouquet in the subscription is curated by the New York Botanical Garden's floral experts and features blooms that are in season. A portion of the subscription goes to supporting the NYBG's plant science and conservation efforts.We highly recommend BloomsyBox's subscriptions to anyone looking for a bit of floral cheer on a regular basis. It's a nice treat each month to get an e-mail saying a new bouquet is on the way. Worth a look:Best for preserved roses: RoseBoxLauren Savoie/Maliah West/Hannah Freedman/InsiderPrice range: $89 to $1,119Delivery area: All 50 statesSame-day delivery: Yes, in Manhattan onlyNext-day delivery: YesShipping: $0 to $30, depending on delivery date and order totalShop all preserved flowers on RoseBoxPros: More than 20 rose color options, many container types, smell and look like fresh roses, can last a year or longer with proper careCons: Don't have the same feel as real rosesIf you've been on Instagram lately, chances are you've seen these trendy preserved roses somewhere on your feed. Usually packed into boxes or displayed in a classic ball arrangement, these flowers are incredibly popular with influencers and celebrities. We tested three preserved rose brands and found the quality very similar. Ultimately, we chose RoseBox as the best preserved roses for its diverse range of color and display options. We particularly liked that its plentiful display containers had discreet branding or none at all, unlike other preserved rose brands that their cover containers (which can't be separated from the flowers) with logos.  Almost all of RoseBox's 90+ products can be customized with 21 or more different rose color options. One of our testers opted for turquoise, while others chose more classic red and pink varieties. Preserved roses are expensive, no matter what brand you choose. A single preserved rose will cost you anywhere from $44 to $89, which is the same price as a full-sized bouquet from most of our other top picks. Expect a medium-sized array of preserved roses to cost about $300. That said, they can end up being an economical alternative to buying flowers every week. We're eager to see if our arrangements live up to their purported longevity.Worth a look:Best for fresh roses: Roses OnlyLauren Savoie/Katie Decker-Jacoby/InsiderPrice range: $49 to $669Delivery area: All 50 states and internationally to the United Kingdom, Hong Kong, Singapore, and AustraliaSame-day delivery: Yes, in New York City and Los Angeles onlyNext-day delivery: YesShipping: $19.95Shop all roses on Roses OnlyPros: Stunning roses; beautiful presentation; long-lasting flowers; available in quantities from six to 100Cons: Limited product and color choices.Roses are such a big seller that we made sure every arrangement we received as part of this guide included at least some of them. Having seen the spectrum of what's out there, we can confidently say that Roses Only delivers the most pristine, long-lasting roses we've found.So much care is put into the delivery: The cartoonishly perfect long-stemmed roses (which you can order in quantities of 6-100) come packaged in a long, elegant box with a linen ribbon, and every rose has its own water reservoir to ensure it arrives pristine. The roses themselves are flawless, with big velvety petals. They lasted about two weeks and gradually opened up until each bud was about palm-sized.At about $8 per flower, Roses Only sells some of the most expensive roses out there, but if it's just fresh roses you're after, no flower delivery service does it better.Worth a look:Best for dried bouquets: East OliviaLauren Savoie/InsiderPrice range: $60 to $225Delivery area: All 50 statesSame-day delivery: NoNext-day delivery: NoShipping: $12.99Shop all dried flowers at East OliviaPros: Unique and inventive designs, each arrangement comes with a coordinating vase, options change seasonally, arrangements can last a year or longer with proper careCons: Order processing can take up to five business days, limited edition collections can sell out quicklyNo matter how pretty the bouquet, fresh flowers will all eventually wilt. Dried bouquets are a good solution for those who love the look of florals but hate the upkeep. Some of the most creative and beautiful preserved arrangements we've seen come from East Olivia.The offerings change seasonally, but at the time of our testing, the brand featured a winter collection and Valentine's Day collection, both featuring ornamental grasses and filler flowers dyed dreamy pastel colors. Each bouquet comes fully arranged and delicately packaged with its own matching ceramic vase. We love knowing that we'll get many, many months of enjoyment out of these.The fact that East Olivia's collections change with the season makes each arrangement feel special. Order processing can take up to five business days, so you'll want to plan ahead if you plan on gifting one of these dried arrangements, especially considering the limited edition collections can sell out quickly.Worth a look:How we tested flower delivery servicesCaitlin Petreycik/Lauren Savoie/InsiderTo find the best flower delivery service, we conducted hands-on testing of every brand in this guide. We ordered two to three arrangements from each brand, evaluating the selection, ordering, and delivery process. We sent bouquets to testers in different parts of the country — including New York City, Boston, Los Angeles, Seattle, rural Colorado, and suburban Connecticut — to see if quality and delivery time varied based on location. In all, we tested 39 bouquets from 16 brands.What to look for in flower delivery servicesLauren Savoie/InsiderHere's what we looked for in the best flower delivery service:Ordering: We scrutinized the ordering process of each service, noting whether the website was simple to navigate, what the product selection was like, and how easy it was to place an order. We also looked at shipping options and estimated delivery times.Delivery: We noted whether the arrangements arrived when they said they would (all did), evaluated packaging, and looked at the condition of the flowers when they first arrived. Testers across the country compared notes; we found delivery times and quality consistent across the country.Quality of flowers: We looked for full bouquets of lively-looking flowers that matched the description and photo of the arrangement we ordered online. We read all care instructions and followed them meticulously, noting how long the flowers remained fresh enough to display. Consistency: A good flower service should deliver quality blooms no matter the location of your recipient. Our testers across the country took photos and detailed notes about delivery and bouquet quality to compare experiences.FAQsLauren Savoie/InsiderWhen should I order flowers for Valentine's Day, Mother's Day, and other popular holidays?While many flower delivery services offer next-day delivery for most of the year, all bets are off when it comes to major holidays like Valentine's Day and Mother's Day. When ordering around popular holidays, a safe bet is to place your order two weeks in advance of the day you want the flowers delivered. This will ensure you have plenty of arrangements and delivery dates to choose from.Is it safe to have fresh flowers around pets?It depends on the types of flowers. The ASPCA maintains a comprehensive list of flowers and plants and whether they are toxic or safe for dogs and cats. It's important to remember that certain plants can still be toxic to animals even if they are kept out of reach; pollen and other airborne spores can get into the fur of animals and be ingested during grooming. If you're ordering flowers for a household that has pets, it's best to stick with a service that allows you to see the types of flowers in the arrangement before ordering. Some brands, like Fresh Sends or subscription services, don't allow you to preview the bouquet before it's sent, which could land you with a bouquet that isn't pet safe.Our top pick, UrbanStems, lists the type of flowers in each arrangement, so you can check to make sure it's safe for your pet. Some brands, like Floracracy, take it a step further and let you completely customize your bouquet so you can be sure to only include plants and flowers that are safe.  Check out our guides on 11 pet-friendly houseplants and the best pet-friendly plants.How long do fresh flowers last?A lot depends on how recently the flowers were cut before they arrived at your home. Flowers can be cut hours, days, or weeks before shipping to you, greatly varying their lifespan in your home. On average, however, you can expect fresh flowers to last five days to a week in a vase with good care. If you're interested in longer-lasting flowers, preserved roses or a dried bouquet are great options.What's the best way to keep fresh flowers alive longer?Some ways to extend the life of your fresh flowers include cutting the stems before putting them in water, using flower food in the water (often supplied with the bouquet, but can be homemade), and changing the water whenever it gets discolored or cloudy. You can read more tips for keeping flowers fresh here. Remember that you don't have to trash the whole bouquet if a few flowers are dead or wilted; just remove the dead flowers and rearrange or tighten the bouquet as needed (you may need to downsize to a smaller vase). Hardy flowers with woody stems (like roses) can last several weeks with proper care.   What are the best types of flowers to buy?When in doubt, roses are a great pick. They're long-lasting, easy to care for, and largely pet safe. You can get roses in all sorts of colors, shapes, and sizes to suit any recipient. Read the original article on Business Insider.....»»

Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions. When you buy through our links, Insider may earn an affiliate commission. Learn more.Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions.Lauren Savoie/InsiderWhether it's for Valentine's Day, a celebration, sympathy, or just because, sending fresh flowers is a thoughtful way to let someone know you care about them. Plus, it's easier than ever: There are dozens of online flower delivery services out there offering unique fresh bouquets, trendy dried flower arrangements, and even floral subscriptions.While our staff has used nearly every one of these merchants to send loved ones flowers over the years, we wanted to know exactly how they stack up against one another. We ordered 39 arrangements from 16 popular brands, sending the flowers to Insider Reviews team members all over the country. Our goal was to find a service that delivers the freshest, most attractive flowers that arrive on time — no matter your location.Our top picks for online flower delivery servicesBest overall: UrbanStemsUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.Best farm-fresh: Farmgirl FlowersFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Best custom arrangements: FloracracyFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Best same-day delivery: FTDFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Best subscription: BloomsyBoxBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.Best preserved roses: RoseBoxPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Best fresh roses: Roses OnlyAs the name implies, Roses Only sells just one product, but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Best dried bouquets: East OliviaFresh flowers have a short lifespan, but dried florals from East Olivia can last for years with proper care — and feature inventive colors and textures not found in traditional fresh bouquets.Best overall: UrbanStemsLauren Savoie/Maria Del Russo/Rachael Shultz/InsiderPrice range: $45 to $185Delivery area: Lower 48 statesSame-day delivery: Yes, in New York City and Washington, D.C. onlyNext-day delivery: YesShipping: $10 to $15, depending on delivery date and methodShop all flowers on UrbanStemsPros: Lots of options to choose from, including dried bouquets and plants; attractive floral designs in a range of styles, sizes, and pricesCons: Some testers noted flowers lasted a few days less than other brandsUrbanStems offers a robust selection of modern, fresh bouquets, along with dried flowers, plants, candles, chocolate, and subscriptions. It's a great one-stop shop to find something that feels unique to your recipient.We tried the Juliet, Luna, and Double the Pink Champagne fresh bouquets, along with the Aspen dried bouquet and Claude plant. Everything arrived on time and in excellent condition. The arrangements were some of the freshest, most attractive bouquets we tested and were filled with lively, creative blooms in a range of colors.The bouquets lasted a little over a week — average for fresh-cut flowers — and the dried bouquet and plant are still going strong. The site is also very easy to navigate and lets you filter by occasion, color, price, and more.Read our full review of UrbanStems.Worth a look:Best for farm-fresh flowers: Farmgirl FlowersLauren Savoie/Connie Chen/InsiderPrice range: $50 to $250Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: Possible, but not guaranteedShipping: $25Shop all bouquets from Farmgirl FlowersPros: Whimsical, in-season blooms; each bouquet is unique; moderately priced; offers some rare flowers; some florals are grown in the US Cons: Surprise bouquets are not ideal if you have specific flowers you want to include or avoid; some customers report wilting or short-lived bloomsIf you're after an arrangement that looks like it was recently plucked from the garden, Farmgirl Flowers offers inventive and playful bouquets based on what's in season. Farmgirl's flagship offerings are the Fun Size, Just Right, and Big Love bouquets (formerly Mini, Midi, and Maxi). You don't get to choose what you receive; instead, Farmgirl puts together a bouquet based on what's available and in season. The company's website and social media give you an idea of what to expect, but every bouquet is slightly different, giving it a special, unique feel. We received a Just Right and a Big Love, as well as another Just Right sent to a tester in California. We loved that the arrangements had a whimsical, wild shape to them, and they were gorgeous from every angle. The Just Right and Big Love both appeared the same size when we first received them, but after a few hours in water, the Big Love's closed buds opened up to create a fuller bouquet. If you want your bouquet to include (or avoid) certain flowers, Farmgirl also offers a few dozen specialty bouquets, including some rare blooms like flower breeder David Austin's Patience roses.Worth a look:Best for custom arrangements: FloracracyLauren Savoie/Connie Chen/InsiderPrice range: $155 to $350Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: YesShipping: IncludedShop all flowers on FloracracyPros: Completely customizable arrangements, online tool helps you choose the right arrangement, beautiful packaging, thoughtful extras like a petal pressing book and mini shears, letter writing serviceCons: Online tool can be a bit tricky to navigate, lots of packaging (though most options are compostable or recyclable), few budget optionsIf you really want to wow your giftee with something special, a custom arrangement from Floracracy is perhaps the most personal flower gift you can buy. Every aspect of the design can be customized, from the shape and the colors to the blooms.If you're not sure where to start, the company's design tool walks you through a quiz that lets you select the intended recipient, occasion, and meaning you wish to convey to make a recommendation. Each flower is paired with a meaning from the company's thorough research of historical flower symbolism. You're also given the option to write a letter yourself or have the company write one for you based on the information you provide.The arrangements we received from Floracracy were the lushest and most vibrant we've ever seen from a flower delivery service. Each arrangement comes with a coordinating vase, a handbound book for pressing petals, and an illustrated card with each of the flowers and their meaning. Our blooms lasted almost three weeks — longer than any other arrangement. While this service is pricier and requires some of your time to design, it makes for a truly meaningful and memorable flower gift. Read our full review of Floracracy here.Worth a look:Best for same-day delivery: FTDLauren Savoie/Jenny McGrath/InsiderPrice range: $40 to $225Delivery area: All 50 states, 150 countriesSame-day delivery: YesNext-day delivery: YesShipping: Starts at $17.99 and varies based on delivery date and order totalShop all flowers from FTDPros: Orders filled by local florists; a large selection of bouquets, plants, and giftsCons: Experience can vary based on which florist fills your order, designs are more traditional and less modernWhen you need to send flowers fast, a floral wire service is your best option. Florists' Transworld Delivery Service (FTD) has been in the flower delivery business for more than 100 years and partners with local florists to fulfill and deliver orders in all 50 states and more than 150 countries. In many cases, you'll also have the option of same-day delivery. The arrangements lean toward more traditional colors and flowers instead of more modern or unique designs.Compared to other similar floral wire services, we had a better experience with FTD. The bouquets and plants we received were fuller, fresher, and in better condition than blooms from 1-800-Flowers. Of course, since orders are typically filled by local florists, your experience may vary depending on who ultimately fills your order.If you need to send flowers quickly, internationally, or to hard-to-reach places, FTD is the best same-day service we've found.Read our full review of FTD.Worth a look:Best subscription: BloomsyBoxLauren Savoie/InsiderPrice range: $45 to $70Delivery area: Nationwide, except Puerto Rico and HawaiiSame-day delivery: N/A for subscriptionsNext-day delivery: N/A for subscriptionsShipping: Free with subscriptionShop all flower subscriptions on BloomsyBoxPros: Multiple weekly and monthly plans to choose from, offers month-to-month and prepaid plans, bouquets are gorgeous, a la carte bouquets and plants availableCons: Don't get to choose which flowers are in your bouquet, which might not be a good option for those with allergies or petsFlower subscriptions are a great way to brighten someone's day on a more frequent basis — or to liven up your own home with regularly-scheduled blooms. BloomsyBox offers a robust fleet of weekly and monthly subscription options at reasonable prices. You can pay month-to-month or save a few dollars by prepaying for 3-, 6-, or 12-month subscriptions. While the retailer also sells a la carte bouquets and plants, we think its subscriptions offer the best value.We tried BloomsyBox's priciest subscription: Its NYBG Collection. Each bouquet in the subscription is curated by the New York Botanical Garden's floral experts and features blooms that are in season. A portion of the subscription goes to supporting the NYBG's plant science and conservation efforts.We highly recommend BloomsyBox's subscriptions to anyone looking for a bit of floral cheer on a regular basis. It's a nice treat each month to get an e-mail saying a new bouquet is on the way. Worth a look:Best for preserved roses: RoseBoxLauren Savoie/Maliah West/Hannah Freedman/InsiderPrice range: $89 to $1,119Delivery area: All 50 statesSame-day delivery: Yes, in Manhattan onlyNext-day delivery: YesShipping: $0 to $30, depending on delivery date and order totalShop all preserved flowers on RoseBoxPros: More than 20 rose color options, many container types, smell and look like fresh roses, can last a year or longer with proper careCons: Don't have the same feel as real rosesIf you've been on Instagram lately, chances are you've seen these trendy preserved roses somewhere on your feed. Usually packed into boxes or displayed in a classic ball arrangement, these flowers are incredibly popular with influencers and celebrities. We tested three preserved rose brands and found the quality very similar. Ultimately, we chose RoseBox as the best preserved roses for its diverse range of color and display options. We particularly liked that its plentiful display containers had discreet branding or none at all, unlike other preserved rose brands that their cover containers (which can't be separated from the flowers) with logos.  Almost all of RoseBox's 90+ products can be customized with 21 or more different rose color options. One of our testers opted for turquoise, while others chose more classic red and pink varieties. Preserved roses are expensive, no matter what brand you choose. A single preserved rose will cost you anywhere from $44 to $89, which is the same price as a full-sized bouquet from most of our other top picks. Expect a medium-sized array of preserved roses to cost about $300. That said, they can end up being an economical alternative to buying flowers every week. We're eager to see if our arrangements live up to their purported longevity.Worth a look:Best for fresh roses: Roses OnlyLauren Savoie/Katie Decker-Jacoby/InsiderPrice range: $49 to $669Delivery area: All 50 states and internationally to the United Kingdom, Hong Kong, Singapore, and AustraliaSame-day delivery: Yes, in New York City and Los Angeles onlyNext-day delivery: YesShipping: $19.95Shop all roses on Roses OnlyPros: Stunning roses; beautiful presentation; long-lasting flowers; available in quantities from six to 100Cons: Limited product and color choices.Roses are such a big seller that we made sure every arrangement we received as part of this guide included at least some of them. Having seen the spectrum of what's out there, we can confidently say that Roses Only delivers the most pristine, long-lasting roses we've found.So much care is put into the delivery: The cartoonishly perfect long-stemmed roses (which you can order in quantities of 6-100) come packaged in a long, elegant box with a linen ribbon, and every rose has its own water reservoir to ensure it arrives pristine. The roses themselves are flawless, with big velvety petals. They lasted about two weeks and gradually opened up until each bud was about palm-sized.At about $8 per flower, Roses Only sells some of the most expensive roses out there, but if it's just fresh roses you're after, no flower delivery service does it better.Worth a look:Best for dried bouquets: East OliviaLauren Savoie/InsiderPrice range: $60 to $225Delivery area: All 50 statesSame-day delivery: NoNext-day delivery: NoShipping: $12.99Shop all dried flowers at East OliviaPros: Unique and inventive designs, each arrangement comes with a coordinating vase, options change seasonally, arrangements can last a year or longer with proper careCons: Order processing can take up to five business days, limited edition collections can sell out quicklyNo matter how pretty the bouquet, fresh flowers will all eventually wilt. Dried bouquets are a good solution for those who love the look of florals but hate the upkeep. Some of the most creative and beautiful preserved arrangements we've seen come from East Olivia.The offerings change seasonally, but at the time of our testing, the brand featured a winter collection and Valentine's Day collection, both featuring ornamental grasses and filler flowers dyed dreamy pastel colors. Each bouquet comes fully arranged and delicately packaged with its own matching ceramic vase. We love knowing that we'll get many, many months of enjoyment out of these.The fact that East Olivia's collections change with the season makes each arrangement feel special. Order processing can take up to five business days, so you'll want to plan ahead if you plan on gifting one of these dried arrangements, especially considering the limited edition collections can sell out quickly.Worth a look:How we tested flower delivery servicesCaitlin Petreycik/Lauren Savoie/InsiderTo find the best flower delivery service, we conducted hands-on testing of every brand in this guide. We ordered two to three arrangements from each brand, evaluating the selection, ordering, and delivery process. We sent bouquets to testers in different parts of the country — including New York City, Boston, Los Angeles, Seattle, rural Colorado, and suburban Connecticut — to see if quality and delivery time varied based on location. In all, we tested 39 bouquets from 16 brands.What to look for in flower delivery servicesLauren Savoie/InsiderHere's what we looked for in the best flower delivery service:Ordering: We scrutinized the ordering process of each service, noting whether the website was simple to navigate, what the product selection was like, and how easy it was to place an order. We also looked at shipping options and estimated delivery times.Delivery: We noted whether the arrangements arrived when they said they would (all did), evaluated packaging, and looked at the condition of the flowers when they first arrived. Testers across the country compared notes; we found delivery times and quality consistent across the country.Quality of flowers: We looked for full bouquets of lively-looking flowers that matched the description and photo of the arrangement we ordered online. We read all care instructions and followed them meticulously, noting how long the flowers remained fresh enough to display. Consistency: A good flower service should deliver quality blooms no matter the location of your recipient. Our testers across the country took photos and detailed notes about delivery and bouquet quality to compare experiences.FAQsLauren Savoie/InsiderWhen should I order flowers for Valentine's Day, Mother's Day, and other popular holidays?While many flower delivery services offer next-day delivery for most of the year, all bets are off when it comes to major holidays like Valentine's Day and Mother's Day. When ordering around popular holidays, a safe bet is to place your order two weeks in advance of the day you want the flowers delivered. This will ensure you have plenty of arrangements and delivery dates to choose from.Is it safe to have fresh flowers around pets?It depends on the types of flowers. The ASPCA maintains a comprehensive list of flowers and plants and whether they are toxic or safe for dogs and cats. It's important to remember that certain plants can still be toxic to animals even if they are kept out of reach; pollen and other airborne spores can get into the fur of animals and be ingested during grooming. If you're ordering flowers for a household that has pets, it's best to stick with a service that allows you to see the types of flowers in the arrangement before ordering. Some brands, like Fresh Sends or subscription services, don't allow you to preview the bouquet before it's sent, which could land you with a bouquet that isn't pet safe.Our top pick, UrbanStems, lists the type of flowers in each arrangement, so you can check to make sure it's safe for your pet. Some brands, like Floracracy, take it a step further and let you completely customize your bouquet so you can be sure to only include plants and flowers that are safe.  Check out our guides on 11 pet-friendly houseplants and the best pet-friendly plants.How long do fresh flowers last?A lot depends on how recently the flowers were cut before they arrived at your home. Flowers can be cut hours, days, or weeks before shipping to you, greatly varying their lifespan in your home. On average, however, you can expect fresh flowers to last five days to a week in a vase with good care. If you're interested in longer-lasting flowers, preserved roses or a dried bouquet are great options.What's the best way to keep fresh flowers alive longer?Some ways to extend the life of your fresh flowers include cutting the stems before putting them in water, using flower food in the water (often supplied with the bouquet, but can be homemade), and changing the water whenever it gets discolored or cloudy. You can read more tips for keeping flowers fresh here. Remember that you don't have to trash the whole bouquet if a few flowers are dead or wilted; just remove the dead flowers and rearrange or tighten the bouquet as needed (you may need to downsize to a smaller vase). Hardy flowers with woody stems (like roses) can last several weeks with proper care.   What are the best types of flowers to buy?When in doubt, roses are a great pick. They're long-lasting, easy to care for, and largely pet safe. You can get roses in all sorts of colors, shapes, and sizes to suit any recipient. Read the original article on Business Insider.....»»

Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions. When you buy through our links, Insider may earn an affiliate commission. Learn more.Fresh flowers make a thoughtful and easy gift. We ordered 39 bouquets from 16 brands to find the best flowers for all occasions.Lauren Savoie/InsiderWhether it's for Valentine's Day, a celebration, sympathy, or just because, sending fresh flowers is a thoughtful way to let someone know you care about them. Plus, it's easier than ever: There are dozens of online flower delivery services out there offering unique fresh bouquets, trendy dried flower arrangements, and even floral subscriptions.While our staff has used nearly every one of these merchants to send loved ones flowers over the years, we wanted to know exactly how they stack up against one another. We ordered 39 arrangements from 16 popular brands, sending the flowers to Insider Reviews team members all over the country. Our goal was to find a service that delivers the freshest, most attractive flowers that arrive on time — no matter your location.You can read more about our methodology, and find out more about what services didn't make the cut here.Here are the best online flower delivery services in 2023Best flower delivery service overall: UrbanStemsUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.Best flower delivery service for farm-fresh flowers: Farmgirl FlowersFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Best flower delivery service for custom arrangements: FloracracyFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Best flower delivery service for same-day delivery: FTDFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Best flower delivery subscription: BloomsyBoxBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.Best flower delivery service for preserved roses: RoseBoxPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Best flower delivery service for fresh roses: Roses OnlyAs the name implies, Roses Only sells just one product, but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Best flower delivery service for dried bouquets: East OliviaFresh flowers have a short lifespan, but dried florals from East Olivia can last for years with proper care — and feature inventive colors and textures not found in traditional fresh bouquets. Best flower delivery service overallLauren Savoie/Maria Del Russo/Rachael Shultz/InsiderUrbanStems makes some of the most stunning bouquets we've found and offers something for everyone, with a diverse selection of fresh flowers, dried flowers, plants, gifts, and subscriptions.  Price range: $45 to $185Delivery area: Lower 48 statesSame-day delivery: Yes, in New York City and Washington, D.C. onlyNext-day delivery: YesShipping: $10 to $15, depending on delivery date and methodShop all flowers on UrbanStemsPros: Lots of options to choose from, including dried bouquets and plants; attractive floral designs in a range of styles, sizes, and pricesCons: Some testers noted flowers lasted a few days less than other brandsUrbanStems offers a robust selection of modern, fresh bouquets, along with dried flowers, plants, candles, chocolate, and subscriptions. It's a great one-stop shop to find something that feels unique to your recipient.We tried the Juliet, Luna, and Double the Pink Champagne fresh bouquets, along with the Aspen dried bouquet and Claude plant. Everything arrived on time and in excellent condition. The arrangements were some of the freshest, most attractive bouquets we tested and were filled with lively, creative blooms in a range of colors.The bouquets lasted a little over a week — average for fresh-cut flowers — and the dried bouquet and plant are still going strong. The site is also very easy to navigate and lets you filter by occasion, color, price, and more.Read our full review of UrbanStems.Worth a look:Double the Juliet, $129The Finesse, $80The Suri dried bouquet, $115The Pucker Up flower and chocolate gift set, $125Best flower delivery service for farm-fresh flowersLauren Savoie/Connie Chen/InsiderFarmgirl Flowers offers unique and playful arrangements that change with what's in season and with many blooms sourced from California farmers.Price range: $50 to $250Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: Possible, but not guaranteedShipping: $25Shop all bouquets from Farmgirl FlowersPros: Whimsical, in-season blooms; each bouquet is unique; moderately priced; offers some rare flowers; some florals are grown in the US Cons: Surprise bouquets are not ideal if you have specific flowers you want to include or avoid; some customers report wilting or short-lived bloomsIf you're after an arrangement that looks like it was recently plucked from the garden, Farmgirl Flowers offers inventive and playful bouquets based on what's in season. Farmgirl's flagship offerings are the Fun Size, Just Right, and Big Love bouquets (formerly Mini, Midi, and Maxi). You don't get to choose what you receive; instead, Farmgirl puts together a bouquet based on what's available and in season. The company's website and social media give you an idea of what to expect, but every bouquet is slightly different, giving it a special, unique feel. We received a Just Right and a Big Love, as well as another Just Right sent to a tester in California. We loved that the arrangements had a whimsical, wild shape to them, and they were gorgeous from every angle. The Just Right and Big Love both appeared the same size when we first received them, but after a few hours in water, the Big Love's closed buds opened up to create a fuller bouquet. If you want your bouquet to include (or avoid) certain flowers, Farmgirl also offers a few dozen specialty bouquets, including some rare blooms like flower breeder David Austin's Patience roses.Worth a look:Just Right Burlap-Wrapped Bouquet, $79Before Sunrise David Austin and Wabara roses, $101Bright of my Life, $120Rose Goes, $55Best flower delivery service for custom arrangementsLauren Savoie/Connie Chen/InsiderFloracracy's custom arrangements are a unique way to mark life's meaningful moments and make gifting flowers feel incredibly personal and special. Price range: $155 to $350Delivery area: Lower 48 statesSame-day delivery: NoNext-day delivery: YesShipping: IncludedShop all flowers on FloracracyPros: Completely customizable arrangements, online tool helps you choose the right arrangement, beautiful packaging, thoughtful extras like a petal pressing book and mini shears, letter writing serviceCons: Online tool can be a bit tricky to navigate, lots of packaging (though most options are compostable or recyclable), few budget optionsIf you really want to wow your giftee with something special, a custom arrangement from Floracracy is perhaps the most personal flower gift you can buy. Every aspect of the design can be customized, from the shape and the colors to the blooms.If you're not sure where to start, the company's design tool walks you through a quiz that lets you select the intended recipient, occasion, and meaning you wish to convey to make a recommendation. Each flower is paired with a meaning from the company's thorough research of historical flower symbolism. You're also given the option to write a letter yourself or have the company write one for you based on the information you provide.The arrangements we received from Floracracy were the lushest and most vibrant we've ever seen from a flower delivery service. Each arrangement comes with a coordinating vase, a handbound book for pressing petals, and an illustrated card with each of the flowers and their meaning. Our blooms lasted almost three weeks — longer than any other arrangement. While this service is pricier and requires some of your time to design, it makes for a truly meaningful and memorable flower gift. Read our full review of Floracracy here.Worth a look:Chloe Tussie Mussie, $195Arch, $365Edge, $155George, $215Best flower delivery service for same-day deliveryLauren Savoie/Jenny McGrath/InsiderFTD offers hundreds of bouquets, gifts, and plants for delivery in all 50 states and 150 counties, with many options for same-day arrival.  Price range: $40 to $225Delivery area: All 50 states, 150 countriesSame-day delivery: YesNext-day delivery: YesShipping: Starts at $17.99 and varies based on delivery date and order totalShop all flowers from FTDPros: Orders filled by local florists; a large selection of bouquets, plants, and giftsCons: Experience can vary based on which florist fills your order, designs are more traditional and less modernWhen you need to send flowers fast, a floral wire service is your best option. Florists' Transworld Delivery Service (FTD) has been in the flower delivery business for more than 100 years and partners with local florists to fulfill and deliver orders in all 50 states and more than 150 countries. In many cases, you'll also have the option of same-day delivery. The arrangements lean toward more traditional colors and flowers instead of more modern or unique designs.Compared to other similar floral wire services, we had a better experience with FTD. The bouquets and plants we received were fuller, fresher, and in better condition than blooms from 1-800-Flowers. Of course, since orders are typically filled by local florists, your experience may vary depending on who ultimately fills your order.If you need to send flowers quickly, internationally, or to hard-to-reach places, FTD is the best same-day service we've found.Read our full review of FTD.Worth a look:Clear Skies Bouquet, $85Magnolia Sapling with Lavender Soap & Lotion Duet, $110Fiesta Bouquet, $90Light of My Life Bouquet, $65Best flower subscriptionLauren Savoie/InsiderBloomsyBox offers a la carte bouquets and plants, but its wide variety of subscription plans are where the service really shines.   Price range: $45 to $70Delivery area: Nationwide, except Puerto Rico and HawaiiSame-day delivery: N/A for subscriptionsNext-day delivery: N/A for subscriptionsShipping: Free with subscriptionShop all flower subscriptions on BloomsyBoxPros: Multiple weekly and monthly plans to choose from, offers month-to-month and prepaid plans, bouquets are gorgeous, a la carte bouquets and plants availableCons: Don't get to choose which flowers are in your bouquet, which might not be a good option for those with allergies or petsFlower subscriptions are a great way to brighten someone's day on a more frequent basis — or to liven up your own home with regularly-scheduled blooms. BloomsyBox offers a robust fleet of weekly and monthly subscription options at reasonable prices. You can pay month-to-month or save a few dollars by prepaying for 3-, 6-, or 12-month subscriptions. While the retailer also sells a la carte bouquets and plants, we think its subscriptions offer the best value.We tried BloomsyBox's priciest subscription: Its NYBG Collection. Each bouquet in the subscription is curated by the New York Botanical Garden's floral experts and features blooms that are in season. A portion of the subscription goes to supporting the NYBG's plant science and conservation efforts.We highly recommend BloomsyBox's subscriptions to anyone looking for a bit of floral cheer on a regular basis. It's a nice treat each month to get an e-mail saying a new bouquet is on the way. Worth a look:Bloomsy Deluxe Subscription, $49.99 per monthThe NYBG Subscription, $69.99 per monthPet-Safe Blooms Subscription, $49.99 per monthBloomsy Eucalyptus Subscription, $39.99 per monthBest flower delivery service for preserved rosesLauren Savoie/Maliah West/Hannah Freedman/InsiderPreserved roses are incredibly popular and can last more than a year with proper care. We love Rosebox for preserved roses because of its robust selection of arrangements, vases, and colors.Price range: $89 to $1,119Delivery area: All 50 statesSame-day delivery: Yes, in Manhattan onlyNext-day delivery: YesShipping: $0 to $30, depending on delivery date and order totalShop all preserved flowers on RoseBoxPros: More than 20 rose color options, many container types, smell and look like fresh roses, can last a year or longer with proper careCons: Don't have the same feel as real rosesIf you've been on Instagram lately, chances are you've seen these trendy preserved roses somewhere on your feed. Usually packed into boxes or displayed in a classic ball arrangement, these flowers are incredibly popular with influencers and celebrities. We tested three preserved rose brands and found the quality very similar. Ultimately, we chose RoseBox as the best preserved roses for its diverse range of color and display options. We particularly liked that its plentiful display containers had discreet branding or none at all, unlike other preserved rose brands that their cover containers (which can't be separated from the flowers) with logos.  Almost all of RoseBox's 90+ products can be customized with 21 or more different rose color options. One of our testers opted for turquoise, while others chose more classic red and pink varieties. Preserved roses are expensive, no matter what brand you choose. A single preserved rose will cost you anywhere from $44 to $89, which is the same price as a full-sized bouquet from most of our other top picks. Expect a medium-sized array of preserved roses to cost about $300. That said, they can end up being an economical alternative to buying flowers every week. We're eager to see if our arrangements live up to their purported longevity.Worth a look:Mini Modern Mirror Box, $119Single Flame Rose Jewelry Box, $89Signature Half Ball of 55 Roses, $479Custom Initial Box, $475Best flower delivery service for fresh rosesLauren Savoie/Katie Decker-Jacoby/InsiderAs the name implies, Roses Only sells just one product but it does it remarkably well, delivering some of the most pristine, stunning, long-stemmed roses we've ever seen.Price range: $49 to $669Delivery area: All 50 states and internationally to the United Kingdom, Hong Kong, Singapore, and AustraliaSame-day delivery: Yes, in New York City and Los Angeles onlyNext-day delivery: YesShipping: $19.95Shop all roses on Roses OnlyPros: Stunning roses; beautiful presentation; long-lasting flowers; available in quantities from six to 100Cons: Limited product and color choices.Roses are such a big seller that we made sure every arrangement we received as part of this guide included at least some of them. Having seen the spectrum of what's out there, we can confidently say that Roses Only delivers the most pristine, long-lasting roses we've found.So much care is put into the delivery: The cartoonishly perfect long-stemmed roses (which you can order in quantities of 6-100) come packaged in a long, elegant box with a linen ribbon, and every rose has its own water reservoir to ensure it arrives pristine. The roses themselves are flawless, with big velvety petals. They lasted about two weeks and gradually opened up until each bud was about palm-sized.At about $8 per flower, Roses Only sells some of the most expensive roses out there, but if it's just fresh roses you're after, no flower delivery service does it better.Worth a look:One Dozen Red Roses, $856 Yellow Roses, $5936 Red Roses, $175One Dozen Pink Roses and Godiva Chocolate, $115Best flower delivery service for dried bouquetsLauren Savoie/InsiderFresh flowers have a short lifespan but dried florals from East Olivia can last for years with proper care and feature inventive colors and textures not found in traditional fresh bouquets. Price range: $60 to $225Delivery area: All 50 statesSame-day delivery: NoNext-day delivery: NoShipping: $12.99Shop all dried flowers at East OliviaPros: Unique and inventive designs, each arrangement comes with a coordinating vase, options change seasonally, arrangements can last a year or longer with proper careCons: Order processing can take up to five business days, limited edition collections can sell out quicklyNo matter how pretty the bouquet, fresh flowers will all eventually wilt. Dried bouquets are a good solution for those who love the look of florals but hate the upkeep. Some of the most creative and beautiful preserved arrangements we've seen come from East Olivia.The offerings change seasonally, but at the time of our testing, the brand featured a winter collection and Valentine's Day collection, both featuring ornamental grasses and filler flowers dyed dreamy pastel colors. Each bouquet comes fully arranged and delicately packaged with its own matching ceramic vase. We love knowing that we'll get many, many months of enjoyment out of these.The fact that East Olivia's collections change with the season makes each arrangement feel special. Order processing can take up to five business days, so you'll want to plan ahead if you plan on gifting one of these dried arrangements, especially considering the limited edition collections can sell out quickly.Worth a look:Pink Pampas, $65The Samantha Spring XL, $185The Samantha Fall Bud, $60What else we testedCaitlin Petreycik/Lauren Savoie/InsiderWe tested 16 brands for our guide to the best flower delivery services. Here are the ones that didn't quite make the cut.What else we recommend and why:The Bouqs Co.: The first time we tested The Bouqs, we received lackluster results. The grand Santa Cruz'n arrangement came with half the number of promised blooms, many were wilted, and flowers were zip-tied directly to the shipping box with only a single sheet of paper laid over them for protection. The Bouqs claimed they fixed these issues, so we tried the service again recently with three more bouquets sent to three testers. The bouquets were noticeably fuller, better protected, and fresher this time around. We're upping the brand's status from "not recommended" to "recommended," but still keeping a close eye on reader reports of quality and freshness.  Ode à la Rose: Ode à la Rose makes beautiful, minimalist bouquets often consisting of just one to three flower types. The bouquets we received from Ode à la Rose were breathtaking, and this service is a fantastic option if you live in New York City, Philadelphia, or Chicago where you can choose from a wider selection of arrangements and have the option of same-day delivery. However, the selection is limited, especially for nationwide delivery (only 10 bouquets were available for delivery to Boston).Venus Et Fleur: This preserved rose brand delivered fresh-smelling, attractive roses. We loved the quality of the blooms and the creative options available on the site. However, we wished there were more container options, especially those that don't have Venus Et Fleur branding so prominently displayed.Bouquet Box: Bouquet Box offers you a chance to hone your flower arranging skills with a kit of flowers and instructions for arranging them. It's pricey compared to other comparable services, but we really enjoyed the experience and the instructions. We felt like we learned a skill and got a great bouquet. Plus, the shears, thorn-stripper, vase, and grid from the welcome kit are great home additions to have.Pomp: Pomp features sustainably-grown flowers from the owners' farms in Colombia. The roses are the stand-out option. We're looking forward to seeing Pomp's selection expand as the brand grows.Fresh Sends: Fresh Sends offers two products: a "regular" or "full" bouquet. You don't know what sort of arrangement you'll be receiving; the offerings change daily. While this is a great option if you struggle with decision fatigue (and love fun packaging), the "full" bouquet was quite small for $85.What we don't recommend and why:Rosepops: This preserved rose brand sends its arrangements packed in lidded boxes. When it arrives, you remove the lid and pull on the box strings to "pop" the roses up above the lid of the box for presentation. The popping mechanism was unique (and nice for storage). However, our testers thought the large and prominent logos on all the containers cheapened the presentation, and the website isn't intuitive to navigate.1-800-Flowers: While the selection is robust, the website is a bit tricky to navigate. The bouquet we received was skimpier and less impressive than others from similar services. Our Seattle-based tester noted that the orchid she ordered wasn't packed very well for shipping, and a lot of the gravel and soil in the container were spilled when it arrived.Our flower delivery service testing methodologyLauren Savoie/InsiderTo find the best flower delivery service, we conducted hands-on testing of every brand in this guide. We ordered two to three arrangements from each brand, evaluating the selection, ordering, and delivery process. We sent bouquets to testers in different parts of the country — including New York City, Boston, Los Angeles, Seattle, rural Colorado, and suburban Connecticut — to see if quality and delivery time varied based on location. In all, we tested 39 bouquets from 16 brands. Here's what we looked for in the best flower delivery service:Ordering: We scrutinized the ordering process of each service, noting whether the website was simple to navigate, what the product selection was like, and how easy it was to place an order. We also looked at shipping options and estimated delivery times.Delivery: We noted whether the arrangements arrived when they said they would (all did), evaluated packaging, and looked at the condition of the flowers when they first arrived. Testers across the country compared notes; we found delivery times and quality consistent across the country.Quality of flowers: We looked for full bouquets of lively-looking flowers that matched the description and photo of the arrangement we ordered online. We read all care instructions and followed them meticulously, noting how long the flowers remained fresh enough to display. Consistency: A good flower service should deliver quality blooms no matter the location of your recipient. Our testers across the country took photos and detailed notes about delivery and bouquet quality to compare experiences.FAQs about flower delivery servicesLauren Savoie/InsiderWhen should I order flowers for Valentine's Day, Mother's Day, and other popular holidays?While many flower delivery services offer next-day delivery for most of the year, all bets are off when it comes to major holidays like Valentine's Day and Mother's Day. When ordering around popular holidays, a safe bet is to place your order two weeks in advance of the day you want the flowers delivered. This will ensure you have plenty of arrangements and delivery dates to choose from.Is it safe to have fresh flowers around pets?It depends on the types of flowers. The ASPCA maintains a comprehensive list of flowers and plants and whether they are toxic or safe for dogs and cats. It's important to remember that certain plants can still be toxic to animals even if they are kept out of reach; pollen and other airborne spores can get into the fur of animals and be ingested during grooming. If you're ordering flowers for a household that has pets, it's best to stick with a service that allows you to see the types of flowers in the arrangement before ordering. Some brands, like Fresh Sends or subscription services, don't allow you to preview the bouquet before it's sent, which could land you with a bouquet that isn't pet safe.Our top pick, UrbanStems, lists the type of flowers in each arrangement, so you can check to make sure it's safe for your pet. Some brands, like Floracracy, take it a step further and let you completely customize your bouquet so you can be sure to only include plants and flowers that are safe.  How long do fresh flowers last?A lot depends on how recently the flowers were cut before they arrived at your home. Flowers can be cut hours, days, or weeks before shipping to you, greatly varying their lifespan in your home. On average, however, you can expect fresh flowers to last five days to a week in a vase with good care. If you're interested in longer-lasting flowers, preserved roses or a dried bouquet are great options.What's the best way to keep fresh flowers alive longer?Some ways to extend the life of your fresh flowers include cutting the stems before putting them in water, using flower food in the water (often supplied with the bouquet, but can be homemade), and changing the water whenever it gets discolored or cloudy. You can read more tips for keeping flowers fresh here. Remember that you don't have to trash the whole bouquet if a few flowers are dead or wilted; just remove the dead flowers and rearrange or tighten the bouquet as needed (you may need to downsize to a smaller vase). Hardy flowers with woody stems (like roses) can last several weeks with proper care.   What are the best types of flowers to buy?When in doubt, roses are a great pick. They're long-lasting, easy to care for, and largely pet safe. You can get roses in all sorts of colors, shapes, and sizes to suit any recipient. Read the original article on Business Insider.....»»

Here's what top investment firms and fund managers believe will happen in markets and the economy in 2023 — and where they say to invest. Investors are fearing the worst heading into 2023.John W Banagan / Investing Investors are reconsidering their strategies and bracing for more market turbulence in 2023. But opportunities remain across asset classes for those who look in the right places. You can read all about what to expect in 2023 by subscribing to Insider. The consensus among top investment firms 12 months ago was that US stocks would log modest gains in the year ahead as the post-pandemic economic recovery slowed. Cyclical sectors like financials and energy were seen as top picks, while high inflation was believed to be "transitory" at best.Turns out predicting the future is easier said than done.Those projections largely fell flat, with the notable exception of the bullish call on the energy sector. Energy stocks crushed the market for the second straight year as oil prices surged to 14-year highs after Russia unexpectedly mounted an invasion of Ukraine.But the rest of the market fell as inflation climbed to multi-decade highs, which caused the once-dovish Federal Reserve to raise interest rates at a pace that hurt profit margins and choked economic growth. With the S&P 500 down 20% year-to-date, many top investment firms believe a recession is inevitable and more market losses are likely next year. However, both bulls and bears see investing opportunities ahead, particularly at the start of the new year.Below is a comprehensive summary of Insider's coverage of what top analysts and firms are expecting for 2023, complete with stories that address investors' biggest questions.What will happen in the stock market and the economy in 2023?Most investors are betting that the US will enter a recession at some point in 2023, but some believe that an economic downturn isn't guaranteed. Even if the economy contracts, many investment firms are bullish on stocks in the coming year, though others are far less optimistic.Read more:Here's what to expect from stocks and the economy in 2023, according to Goldman Sachs, JPMorgan, and 9 other top Wall Street firmsRisks of a recession in 2023 are growing as the Federal Reserve continues to tighten policy. 4 Wall Street banks share how far stocks will fall if that happens — and when the market will bottom.Here are 10 reasons why the US won't be hit with a recession in 2023, according to Goldman SachsHow can I improve my investing strategy in 2023?After such a horrible year in markets, many investors are starting to rethink their investing strategies. Insider gathered tips on how to invest heading into the new year.Read more:2023 will be the worst year for the global economy in 4 decades, Citi predicts. Here's how investors can protect their money and position for a rally later on.$3.2 trillion State Street shares their 3-part strategy for driving returns in 2023 as the economy falters and enters a recessionHere's how investors should position themselves for success in 2023 as the US follows Europe into a recession, according to financial giant Macquarie.Give up on a traditional 60-40 portfolio in 2023 and adopt this unconventional allocation, according to a US stock chief for French financial giant SocGenWhere should I invest in 2023?Active management made a comeback in 2022, as the days of easy gains from low-cost index funds appear to be over for now. Here's how the brightest investors recommend investing next year.Read more:Here's where to put your money in 2023 with a recession likely closing in, according to Goldman Sachs, JPMorgan, and 9 other Wall Street giantsHere are the 4 best investing opportunities in 2023, according to the investment chief at Goldman Sachs' $1.8 trillion asset management armHere are the 4 smartest places to put your money in 2023 after a nightmarish year, according to a fund manager at JPMorgan's $2.3 trillion asset management armOne of 2022's top-performing fund managers built a downturn-resistant portfolio that's investing in these 5 sectors heading into 2023Bank of America says the US economy is hurtling toward a recession. Their stock chief shares her 5-part investing playbook for thriving during the downturn.Avoid stocks and make these 7 investments instead to improve your odds of enjoying a positive return in what may be a brutal 2023, according to PIMCOA veteran chartmaster expects the bear market to continue into 2023 after the latest rally fizzles — but these 4 types of stocks appear to be set up for strong gains next yearWhat stocks should I buy in 2023?Top fund managers and investment firms see opportunities in several types of stocks next year across a number of sectors. Some believe that stocks are primed for a rebound, while others endorse a more defensive strategy to protect your portfolio in case of a recession.Read more:These are the 23 best stocks to buy in 2023 as global growth slows, according to UBSUBS economists see a recession coming in 2023. Here are the 37 stocks that will lead the market recovery in the first half of next year, the bank says.Bank of America: Buy these 21 top-rated stocks that have been oversold in 2022 and are poised for outsize moves in 2023JEFFERIES: Buy these 20 bargain-priced stocks ahead of a rebound to get 2023 off to a good startA top 1% performing fund manager explains why history proves the S&P 500 will fall another 30% in the next 3-to-9 months — and shares 11 compelling stocks to buy in 2023 that will power through a recessionA hedge fund manager who's up over 39% this year says these 6 cheap stocks are well-positioned to survive another bear market in 2023Fund managers who have beaten 98% of their peers in 2022 share 9 'keeper stocks' they're betting on for 2023 — and the 3 market sectors they're overweight onMorgan Stanley says the market is underestimating these 9 travel and leisure stocks for 2023 as the industry enters a 'Goldilocks' year with surging demandThe top strategist at BMO Capital Markets says stocks are ready for a multi-year recovery in 2023 after a recession strikes — and these 11 names look attractive right nowRead the original article on Business Insider.....»»

Shop the 90+ best Amazon Cyber Monday deals before they sell out, including Kindle, Fire TV, and Apple products. We'll be keeping this page fresh with the latest Cyber Monday deals from Amazon.Amazon; Alyssa Powell/InsiderWhen you buy through our links, Insider may earn an affiliate commission. Learn more.Cyber Monday is nearly over, but if you hurry you can still get discounts during Amazon's Cyber Monday sale on 4K TVs, mattresses, and everything in between. Throughout the rest of Cyber Monday, we'll update this page with deals vetted by our expert team of editors and reporters. In other words: If the deal is highlighted here, it's worth your consideration. 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This is one of our favorite affordable skincare brands, and during Cyber Monday, you can find the spray nearly 30% off on Amazon.$30 off the Bentgo Kids Stainless Steel Leak-Resistant Lunch BoxAmazonThis bento-style lunch box is made from resilient, BPA-free stainless steel to lock in freshness, and it comes with a removable silicone container for more food than its portioned segments. Plus, lunches just look amazing in it. Down to $40, right now you can save $10 on any of the available colors. Save 25% on the Sunbeam Power Steam Fabric SteamerAmazonThe Sunbeam Power Steam Fabric Steamer stands out among similarly priced competitors thanks to its adjustable steam flow settings and clever additional features. Our pick for the best steamer on the market is at a new all-time low price during Cyber Monday.40% off Redken Pliable PasteAmazonRub the Redken Pliable Paste in your hands and apply it through either damp or dry hair to style hair just the way you like. During Cyber Monday, save 40% off the styling paste that twists, molds, and texturizers tresses. 10% off the Singer Heavy Duty 4423 Sewing MachineAmazonThe Singer Heavy Duty 4423 Sewing Machine is designed with the beginner in mind with its intuitive interface, ability to handle all types of fabrics, and one-step buttonholes. Currently on sale for Cyber Monday, it's 10% off its regular price.Save 33% on the Fjällräven Kanken 15-Inch BackpackAmazonThe Fjällräven Kanken is lightweight and spacious. It has a cool, contemporary look that looks great in a variety of settings. Right now, you can snag your own for only $80, a rare low price for this iconic backpack.$6 off the Blue Orange Games Kingdomino Board GameAmazonOne of our favorite board games for ages 8 and up, we especially love Kingdomino for families, but adults love it, too. Two to four players can have fun strategizing to lay the perfect tile. It's an award-winning game, and this is a great price for a game you can play over and over.20% off the Anker USB-C Hub for iMacAmazonThis Anker USB-C Hub is specially crafted to work with old and new Thunderbolt 3 iMacs to make it even easier to access ports. It includes an SD slot, micro SD slot, two USB-A ports, and one USB-C port. Down to $48, this is a very rare chance to save.Save 30% on Differin Gel with Adapalene 0.1%AmazonDifferin Gel is a tried-and-true treatment that targets both whiteheads and blackheads. It's one we always keep on hand, even after testing dozens of other products. Now 25% off for Cyber Monday, it's the best time to restock your skincare shelf.Save $85 on the Nemo Stargaze ReclinerREIThe Nemo Stargaze Recliner is almost comfortable enough to use in your living room. Made of water-resistant mesh and with a 300-pound weight capacity, the recliner is one of the best camping chairs we've tested. It's perfect for your next bonfire or outdoor movie night. It weighs just over 6 pounds, so it's fairly portable, too. It's currently on sale for $85 off.Coop Home Goods Original PillowLauren Savoie/Insider The Coop Home Goods Original Pillow offers thoughtful features like adjustable fill, a washable pillow cover, and an unparalleled 100-night trial that make it the best choice for most people. It's our favorite pillow we've tested because it works for so many sleeping styles. We recommend it even when it isn't on sale, but getting 20% off is always a bonus.$25 off the SanDisk 256GB microSDXC Card for Nintendo SwitchAmazonDesigned for Nintendo Switch, this huge microSD card will let gamers spend less time waiting and more time gaming. It offers 256GB of storage for keeping digital games, screenshots, and video captures on your console. We think SanDisk makes some of the best microSD cards, and at only $28, this is a must-buy for Switch owners who don't already have one.Save 40% on the Philips Premium Digital Air FryerWilliams SonomaThe Philips Premium Digital Air Fryer heats up within seconds, turning out evenly cooked, crispy food with greater efficiency than an oven and many other air fryers. In fact, it's the best air fryer we've tested. At 40% off, this is one of the lowest prices we've seen in months.24% off the Petkit Eversweet Pet Water FountainAmazonThis two-liter water fountain is designed for cats and small dogs. It uses a circulation system to provide oxygenated, fresher, and better tasting water for your furry friend. Right now it's down to only $34, a rare price drop from its typical retail price of $46. For more pet deals, we've rounded up Chewy's best Cyber Monday discounts.50% off on the Exploding Kittens Original Card GameExploding KittensThis highly-strategic, kitty-themed game is a true phenomenon and a great way to get the family together and is fun for almost any age group. It's currently half off, just in time for a great stocking stuffer or White Elephant gift.$35 off the MVMT Men's Legacy Slim Analog WatchMVMTMVMT makes some of our favorite affordable luxury watches, and all versions of this model are currently on sale for under $90. It features a minimalist analog design with different variations of watchbands, from brown leather to gold mesh.9% off the Asus VA24DCP 1080P MonitorAmazonIf you're in the market for an affordable monitor that doesn't forgo quality, the Asus VA24DCP is a solid choice. It's a good option for laptop users looking to up their productivity, with its decent color accuracy and contrast along with HDMI and USB-C ports offering up to 65W of charging. It rarely drops in price, making this discount to $150 especially worthwhile. For more options, check out our guide to the best gaming monitors.20% off the Thayers Alcohol-Free Rose Petal Witch Hazel Facial Toner with Aloe Vera FormulaAmazonThis "Holy Grail" witch hazel facial toner is free of alcohol, parabens, or propylene glycol, which can be harsh for some skin. It helps balance oily skin without drying it out. We tested it out, and it lived up to the hype. With the 20% discount, it's under $10.37% off the Osprey Men's Skarab 18 Hydration PackOspreyWe think Osprey makes some of the best hiking backpacks you can buy. The Skarab 18 hydration pack is perfect for trail runners and cyclists, featuring a 2.5-liter water reservoir and a comfortable design. It's on sale for under $70 during Cyber Monday.Save 25% on the Loftie Alarm ClockAmazonLoftie earned our recommendation for the best alarm clock thanks to its two-phase alarm system, which gently awakens you instead of a blaring beep. It also has customizable alarm sounds, white noise features, and excellent integration with WiFi and Bluetooth. The 25% Cyber Monday discount brings it to one of the best prices we've seen all year.25% off Splatoon 3 (Nintendo Switch)AmazonSplatoon 3 is a must-have for fans of the Splatoon universe. The latest game in the series lets squid kids and octolings play classic modes like Turf War and Salmon Run, along with a ton of fun new additions. At $45, this is the lowest price drop since its release, and there are more Switch sales still available if you're looking for more games and accessories.$230 off the Vitamix Professional Series 750 BlenderWilliams SonomaVitamix blenders are expensive but worth it. The Vitamix Professional Series 750 has everything you need in a blender, and its proven longevity makes it worth the price. This Black Friday deal is the lowest price we've seen by $60.15% off the Outward Hound Hide-A-Squirrel Puzzle Dog ToyAmazonPuzzle toys provide complex play for pups that will keep them entertained. The Outward Hound Hide-A-Squirrel toy specifically is one of our favorites for its durable build and high-quality features. The small size is down to only $5 right now, and the large is 15% off. Check out our full review of Outward Hound's toys. 32% off the Melissa & Doug Cookie Play SetAmazonFor any future star bakers, this sweet cookie kit comes with 12 cookies and toppings as well as all the kitchen tools they need to bring their creations out of the (metaphorical) oven. Beyond being a cute, screenless activity, this under-$20 kit is a great way to have kids develop their counting and motor skills. It's a perfect holiday gift for kids.Save $15 on the Koolaburra by UGG Women's Lezly SlipperMacy'sUGG is already famous for its plush boots, but its slippers are arguably even cozier. Complete with faux fur lining and a sturdy sole, they're perfect for lounging at home but also suitable for running outside if needed. Currently 25% off, they make a great stocking stuffer they'll appreciate.  $60 off the Beats Studio BudsBest BuyFor those looking for high-quality sound without the clunkiness of over-ear headphones, these buds from Beats fit the bill. They come in two listening modes — noise-canceling and transparency — and offer up to eight hours of listening time when charged. They make a thoughtful gift, and right now you can save $60 on them during Cyber Monday. Save $200 on the Eufy RoboVac X8AmazonThe Eufy Robova X8 features the brand's top features, including twin turbines, intelligent laser navigation, and intuitive smartphone controls. It's not one we've tested ourselves, but we do like other Eufy robot vacs. Down to $300, this is a solid deal with a $100 discount. Save $61 off the Orolay Women's Thickened Down JacketMaria Del Russo/InsiderDubbed by the internet as the "Amazon coat," this down jacket actually lives up to its hype of blending style with warmth and functionality. It comes in a range of colors from muted neutrals to bright red or yellow and is a perfect, practical gift as the winter season gets colder. Check out our full Orolay jacket review and see why it's a great deal at $61 off.25% off the Rumpl Original Puffy BlanketRumplRumpl's puffy blanket is designed for picnics, camping, and other outdoor use, but you can curl up on the couch with it, too. Made of recycled materials, it weighs around 2 pounds so it's very portable. More than a dozen different designs are discounted for Cyber Monday, and the 25%-off sale is the best price we've seen.$55 off the Waterpik Aquarius Water FlosserAmazonThis water flosser removes up to 99.9% of plaque from treated areas and is up to 50% more effective than floss. It also has a massage mode for gum stimulation and 10 pressure settings. It's typically closer to $70, but right now it's $45, a great place on a product Insider Reviews editors tend to snag for themselves during deal days. Save $25 on the Roku Streaming Stick 4KRokuCompared to the Roku Streaming Stick+, the new Streaming Stick 4K provides an improved viewing experience by adding support for Dolby Vision. This advanced high dynamic range (HDR) format can provide better picture quality on TVs that support it. Right now you can get it on sale for only $25, the best price we've seen for it yet. Get more details in our Roku Streaming Stick 4K review.Save $7 on the ChomChom Pet Hair RemoverBrenna Darling/InsiderThis pet hair remover does an amazing job of picking up fur off couches, rugs, and other surfaces without needing to replace sticky lint paper over and over. You can currently save $7, a great bargain for an already affordable tool you'll use almost daily. You can see why we love it so much in our full review. Save $15 on the 2022 KindleBlack Friday 2022 All-New KindleAmazonAmazon's newest Kindle is now on sale for $15 off. You can get it for just $85, which is a great deal if you're looking for a small, lightweight e-reader. The All-New Kindle is actually Amazon's lightest e-reader yet, weighing in at just over a third of a pound. Read more about why this is a great Kindle deal here.57% off NBA 2K23 (Xbox Series X/S)NBA 2K23 / 2K GamesThe NBA season is less than 20% complete, but this year's NBA 2K game is already 50% off two months after release. This is the best price we've seen, so grab it now if you've been wanting to play. Check out more worthwhile Xbox deals here.Save $16 on the Crest 3D White Professional Effects WhitestripsWalmartOne of the most popular purchases among our readers, Crest's Whitestrips are down to one of the best prices we'll see all year for Cyber Monday. The kit includes strips for a 20-day whitening treatment and two one-hour express treatments.6% off on the Apple 2022 11-Inch 4th-Gen iPad ProNYC Russ/ShutterstockThis 6% deal isn't the biggest in the world, but it's rare for an Apple device that was so recently released in October. It's still worth including here should you be looking to buy the latest iPad Pro. If you're looking for a different model, we can help you find the right iPad for your needs.29% off the Sony HT-A3000 3.1ch Dolby Atmos SoundbarAmazonSony discounted this 3.1-channel soundbar with built-in subwoofers and 360 spatial surround sound for Cyber Monday. It comes with a four-month trial for Amazon Music, and it's also on sale in bundles with two of Sony's 4K TVs: the 65-inch Bravia OLED, and the 75-inch Bravia LED. Save $30 on the Oxo Good Grips 7-Piece Pop Container SetAmazonAirtight containers are a must-have for any kitchen. You can store all your baking necessities, including flour, sugar, brown sugar, and more. We can't recommend the Oxo Pop containers enough because they keep cupboards and pantries organized and food fresher. Right now, you can save 30% on this set, which comes with two medium square containers, two tall medium containers, and three small ones. Read our full Oxo Pop container review here.25% off Brooklinen's Luxe Core Sheet SetBrooklinenA favorite set of sheets among the Insider Reviews team, the Luxe Core Sheet Set is noted for being durable and comfortable after many washes and nights of sleep. Right now, you can buy these sheets for 25% off during Brooklinen's Cyber Monday Sale, which is the lowest price we've seen all year. Find more great Brooklinen deals here. 15% off the Cuisinart CPT-122 2-Slice Compact ToasterAmazonThe budget pick in our best toasters guide, the Cuisinart CPT-122 is compact, speedy, ultra-affordable, and turns out toast just as evenly golden-brown as many of its much pricier competitors. During Cyber Monday, it's priced even more affordably when you click the coupon on the Amazon product page. 20% off the Fellow Stagg EKG Electric Pour-Over KettleAmazonThis stylish matte kettle has several features to give you the perfect pour-over: a precision pour spout, counterbalanced handle, 1,200-watt quick heating element, and variable temperature control. During Cyber Monday, you can get it for 20% off, which is the lowest price we've seen since July.20% off PopSockets PopGrip for MagSafePopsocketsIf you're looking to take advantage of Apple's MagSafe, the best grip you can buy is from old an standby: PopSockets' PopGrip. All you need to do is snap the oval in place and you've got an easy to way hold onto your phone. While these go on sale regularly throughout the year, PopSockets is currently offering 20% off sitewide.50% off the JBL Tune 230NC True Wireless Noise Cancelling In-Ear EarbudsAmazonJBL's affordable Tune 230NC earbuds offer active noise cancellation, great bass, and up to 40 hours of battery life on one charge. They're also water resistant and sweatproof. This 50% discount for Cyber Monday is the lowest price we've seen since they were released last year.44% off the Otterbox Amplify Glass Screen Protector for iPhone 13 and iPhone 13 ProAmazonThis Otterbox Amplify Glass Screen Protector says it's for the iPhone 13 and iPhone 13 Pro, but it's also compatible with the iPhone 14, too. Just note it won't properly fit the iPhone 14 Pro models of the iPhone 14 Plus. At 44% off this Cyber Monday, it's a well recommended screen protector from a trusted brand.20% off the Codenames BoardgameAmazonThe enormously fun Codenames boardgame is 20% this Cyber Monday. The rules are simple and quick to learn, and the game tests how well you truly know your friends and family.32% off the Brightworld Galaxy Moon LightAmazonThe Brightworld Galaxy Moonlight usually sells for around $24 rather than its $35 full price, so this deal is almost $10 off a beautiful decorative ambient light.$25 off the Nvidia ShieldAmazonThe regular Nvidia Shield model isn't as powerful as the Pro version, but it's still a very capable Android streaming device with access to every major service. It also features a unique, compact tube-shaped design that makes it easy to hide out of sight. At $125, this deal price matches the lowest we've ever seen. Save 20% on the Samsung 43-inch Frame QLED 4K TVAmazonThis is one of the smallest sizes you can get Samsung's gorgeous Frame TV in, which makes this an excellent choice for shoppers who want to hang a compact yet stylish display on their wall. The panel is made to look like a picture frame, so it can serve as a subtle design piece that can display art in your room with its matte screen. This deal price matches the all-time low. 36% off the Bosch PS31-2A 12-Volt Drill/DriverAmazonThe Bosch PS31-2A 12V is small and lightweight, the perfect tool to have on hand to tackle most light-duty household tasks. Often priced between $100 and $120, it's currently on sale for under $90.$10 off Ring Fit AdventureNintendoRing Fit Adventure is a fitness-centric game that challenges you to get off the couch and perform crunches, sit-ups, and more to defeat enemies. It even comes with a special accessory called the Ring-Con to track your movements. This game rarely goes on sale, so this $10 discount from Amazon is a good deal.40% off Jane Iredale Eyebrow KitAmazonGet perfect, natural-looking brows that are lustrous and smooth with this pigmented brow powder and nourishing botanical brow wax. This kit comes in a compact, travel-sized pack and at 40% off its normal price, it's around the lowest we've seen.$70 off Anova Precision Cooker NanoAmazonThe Anova Precision Cooker Nano offers accuracy and ease of use at a price unmatched by other sous vide machines. This model rarely goes to a lower price, so it's a good time to buy. When you apply the coupon on the Amazon product page, it's at the lowest price we've seen in years.$82 off Sony-Inzone H7 Wireless Gaming HeadsetAmazonThis wireless headset comes from Sony's new line of gaming products for PlayStation and PC, offering 360-degree spatial sound and a boom mic that can be folded away when not in use. It supports both Bluetooth and a dedicated wireless signal and lasts for up to 40 hours on a full charge.$80 off Apple AirPods (2nd Generation)A pair of white Airpods.iStock / Getty Images PlusThe second-generation AirPods are the company's most basic, affordable model. And they're still a good choice if you're looking for a no-fuss pair of wireless earbuds. For the Cyber Monday, they're now down to $90, which is just $11 more than their all-time low of $79.30% off Casper Essential PillowCasperWe're fans of Casper's pillows; we ranked the Original as the best pillow for side sleepers in our buying guide to the best pillows you can buy. The Essential pillow is soft and breathable on the outside and supportive on the inside. At $42, it matches the lowest price we've come across this year.Save 44% on Black + Decker 20V Max Flex Handheld VacuumAmazonThe powerful Black+Decker 20V Max Flex Handheld Vacuum (model BDH2020FL) has a narrow, flexible, 4-foot hose that can clean hard-to-reach areas of your car. This Cyber Monday deal matches the lowest price we've seen it offered.45% off Ecoprsio Nightstand Set of 2 Industrial End Table Side Table with Drawer and Storage ShelfAmazonAt up to 45% off (depending on what color you choose), this duo set of side tables can be used on opposite ends of a couch or divvied up between rooms. Each has a lower shelf and drawer for extra storage. This is the best price we've seen on this set.$60 off Apple Watch UltraLes Shu/InsiderThis isn't a huge deal for the Apple Watch Ultra, but it's the best deal we've seen for this model that was only released in September, and a discount is a discount for such a popular and expensive smartwatch.68% off SanDisk 128GB MicroSD cardSanDiskIf you own a GoPro or Nintendo Switch, you'll need a good microSD card to store your photos, videos, and games. SanDisk microSD cards are the best around, and right now, this 128GB card is 68% off.31% off Roku UltraAmazonThe Roku Ultra is our favorite streaming device. It delivers simple access to popular services and supports advanced features like Dolby Vision. This $69 deal price is an all-time low.25% off Magic Bullet Blender 11-Piece SetKohl'sAt under $30, this 11-piece Magic Bullet set is a great, space-conscious gift for anyone in need of a small, sturdy blender. It comes with three different mugs as well as lids for optimal freshness.25% off set of 8 Wüsthof Stainless-Steel Steak KnivesAmazonKnown for their durability and edge-retention, Wüsthof knives are a legacy addtion to your kitchen. The steak knife set comes in a wood case that's perfect for gifting. We haven't seen this set go on sale since last Cyber Monday, so it's a good time to buy for 25% off.30% off Amazon Smart ThermostatAmazonThe Amazon Smart Home Thermostat is a simple, Alexa-enabled, inexpensive smart home thermostat to control your home's temperature. It doesn't have a microphone or camera, so Alexa voice commands rely on another voice-enabled Alexa device, like an Echo smart speaker. It's down to an all-time low price during Cyber Monday.30% off Yeti Rambler 10 oz Wine TumblerAmazonNow 30% off, the Yeti Rambler holds up to 10 ounces of your favorite wine whether you're on a camping trip or the back patio. The stainless steel interior paired with the double-wall vacuum insulation is what keeps your drink exactly at the temperature you like.$20 off Apple Watch SE 2nd-genApple Watch SE.Mary Meisenzahl/Business InsiderThe 2nd-gen Apple Watch SE was only released in September, making it a rare deal for such a recently released Apple device, even if it's "only" 8% off. The 2nd-gen Apple Watch SE was already an excellent affordable option, so this deal only makes it an easier recommendation.$55 off Amazon Fire TV Gaming BundleAmazonThis gaming bundle includes two of Amazon's most sought-after devices. Together, the Fire TV Stick and Luna Controller are 46% off during Cyber Monday, which is one of the best deals we've seen on these products. $122 off Sony WH-1000XM4 noise-canceling headphonesSonySony's WH-1000XM4 is our go-to pair of headphones when we look for balance, sound quality, noise-canceling performance, and price. They're on sale for $228 during Cyber Monday, which is the lowest price we've ever seen them at.27% off De'Longhi Nespresso VertuoWilliams SonomaNespresso's Vertuo machine makes rich, frothy espresso at the touch of a button. This isn't the lowest price we've seen, but it does match last Cyber Monday's deal and it's still a solid discount.30% off Ring Floodlight Cam Wired PlusAmazonRing's Floodlight Cam Wired Plus combines the standard Spotlight Cam with a set of motion-activated floodlights for better lighting. The camera itself streams and records at 1080p resolution and is also motion-activated, and it includes a siren and two-way talk. The Cyber Monday sale matches the lowest price we've seen it available for.43% off Amazon Echo GlowAmazonThe Echo Glow is Amazon's child-friendly and Alexa-compatible smart lamp. It's able to change its color and brightness by voice control and is a great introduction to smart home devices. At full price, it's a great deal, so the fact it's on sale for just $17 gives this excellent value.56% off Amazon Halo ViewIsabel Fernández and Crystal Cox/InsiderThe Amazon Halo View is a basic fitness tracker that offers a comprehensive suite of features designed to help improve your overall health and wellness. At just $35 during Cyber Monday, you won't find a better deal on a wearable as good as this.25% off Hydro Flask ToteHydro FlaskThe Hydro Flask Tote makes for the perfect travel bag especially when storing food because its lightweight, insulated, and fully lined. For Cyber Monday, the tote is 25% off.32% off Kindle PaperwhiteAmazonThe Kindle Paperwhite is our favorite Kindle model so far for its big screen and adjustable warm light. At 32% off, you can snag it for under $100 to gift to the avid reader in your life.$180 off Insignia 50-inch F30 4K Fire TVAmazonThis Insignia 4K display is a standard entry-level smart TV. It's no frills when it comes to picture quality, but it features the Fire TV OS built-in for easy access to popular streaming apps. This isn't a set you'll want to build a home theater around, but it gets the job done for casual viewing, especially in a bedroom. This $220 deal price matches the all-time low we saw over the summer.$40 off Bissell Cleanview Rewind Pet Deluxe Upright Vacuum CleanerAmazonGreat for stuubborn pet hair nestled firmly in rugs and carpet, the Bissell Cleanview Vacuum Cleaner is now available for an all time low. For $40 off, save big on the home essential that includes the Pet TurboEraser Tool, the Pet Hair Corner Tool and so much more.Save $35 on two Blink Mini security camerasAmazonAffordable and user friendly, the Amazon Blink Mini home security camera is an indoor security for first timers. It has both 1080p camera footage quality and a black-and-white night mode. Save 54% on the security system this Cyber Monday.33% off Echo Dot speakersAmazonThe latest of the Echo Dot lineup, the 5th Gen comes with a handful of new features including better audio and built-in Eero. Right now it's down to only $40, matching the lowest price we've seen for this new speaker so far. You can also trade-in your old Echo speaker for an additional 25% off.33% off Coleman Beach Sun ShelterAmazonIt's hard to call the Coleman Beach Sun Shelter a tent when it offers great air ventilation from the back window, a zip away wall for privacy, a hanging line for drying wet clothes and so much more. Save 33% off on this outdoors must-have thats easy to set up and even easier to camp away in.25% off NuFace Trinity Starter KitAmazonNow 25% off for Cyber Monday, the Nu Fae Trinity Toning Device reduces the appearance on fine lines while stimulating the muscles in your face.41% off Instant Pot Pro 10-in-1 Pressure CookerAmazonSave 41% off on an instant pot with a Premium Cookware Grade Inner Pot that's stove top friendly, has overheat protection and a safe locking lid.80% off Amazon Smart PlugAmazonOver half off its original price using code PLUG at checkout, save 80% on the smart plug that pairs with your Alexa to control the lights, fans and appliances automatically at home or remotely when you forget to.42% off Coodoo Magnetic Blocks Tough Building Tiles Starter SetAmazonSimilar to ultra popular Magna-Tiles, these magnetic building blocks snap together quickly so you can build creatively. You can grab this starter set of 30 pieces for 39%, plus an extra 5% off when you clip the coupon on the page. For under $20, this set makes a great gift for the kiddo in your life.20% off Sengled Smart Light BulbSengledSengled's smart color-changing light bulb is significantly more affordable than bulbs from big names like Philips. For about $12, this single bulb is more affordable than ever.33% off Fitbit Charge 5Jenny McGrath/InsiderPriced at an all-time low, the Charge 5 hits a budget-friendly price point while offering stellar activity tracking in a smaller footprint than a smartwatch.20% off AirPods Pro (2nd Generation)AppleThe AirPods Pro (2nd generation) are the latest addition to their AirPods Pro series, a line of mid-range earbuds that feature spatial audio and noise canceling. And for just $200, this is the lowest price we've ever seen. 20% off Beats Fit ProBeats by DreBeats Fit Pro are among our top-rated wireless earbuds, thanks to Apple's wireless technology, solid noise-canceling, and flexible wingtips that tuck into the ear for a secure fit. They are are excellent everyday buds, but even better for fitness activities. $160 is the lowest we've seen it all year.28% off Tile Mate Bluetooth Tracker (2022)AmazonThe Tile Mate is designed to help you find easily misplaced items and attaches to keys, pet collars, and other important items. During Cyber Monday, it's at the lowest price we've seen this year.24% off Roborock S7 MaxV Ultra Robot VacuumRoborockWe haven't tested the Roborock S7 MaxV Ultra Robot Vacuum yet, but Roborock has consistently performed well in our tests, and this is the most innovative vacuum yet from the brand. It mops and vacuums simultaneously and features a charging base that empties the dustbin. Right now, it's on sale for the first time.40% off SodaStream Terra Sparkling Water MakerAmazonIf you're a seltzer fan, then you should consider investing in a sparkling water maker. The Terra is SodaStream's newest model that is also cordless. It comes with one CO2 cylinder and a bottle of lime Bubly Drops. For Cyber Monday, it's an all-time low price.33% off JBL Boombox 2AmazonWhen you need music for your gathering, the JBL Boombox 2 brings powerful sound and bass to keep the party going. It's one of the best Bluetooth speakers that you can get, and right now it's on sale with an excellent and rare $200 discount.39% off Coway Airmega AP-1512HHCowayCoway makes some of the best air purifiers on the market. The AP-1512HH is a reliable compact unit that's equipped with a 4-stage filtration sustem that reduces up to 99.6% of air pollution particles. This Cyber Monday deal is the lowest price we've seen since early 2021.37% off Amazon 55-inch 4-Series Fire TVAmazonIf you're in the market for a 55-inch entry-level smart TV, the 4-Series is a solid option when it's on sale. The TV's image performance is pretty basic, but it supports 4K, HDR10, and the Fire TV OS, which offers access to all the major streaming services. This $330 sale price doesn't quite match the all-time low of $293 we saw over the summer, but it's still a great discount.26% off Hydro Flask 32 oz. Wide Mouth BottleMarathon SportsHydro Flask makes some of our favorite water bottles — they're basically indestructible without being bulky or heavy, and keep hot and cold beverages at their original temperature for at least 12 hours. It's a solid, pragmatic gift for anyone who complains about forgetting to hydrate or is on the hunt for a reliable thermos.37% off Revlon One-Step VolumizerAmazonWhile Dyson's Airwrap definitely lives up to its reputation of a coveted hair tool, it's over $400. The Revlon One-Step brush, however, is a much better value for similar results and is additionally even cheaper thanks to its current Cyber Monday discount.33% off Keurig K-Mini Coffee MakerTargetAvailable in a range of cute colors, this slim, 5" Keurig fits easily on even the most crowded counters. At 33% off, it's a great gift for anyone who prefers the ease of coffee pods.50% off Fire TV Stick 4KAmazonFor 4K TV owners, the Fire TV Stick 4K offers sharper and more detailed streaming at the resolution you need. Currently down to $25, this discount matches the previous all-time low we've seen for the Fire TV Stick 4K, making now an excellent time to buy.50% off Fire TV Stick LiteAmazonAmazon's most affordable and simple Fire TV device, the Fire TV Stick Lite works by simply plugging into an HDMI port and connecting to the internet to bring your favorite services to your TV. Currently down to $15, this is a new all-time low and an especially worthwhile deal for an entry-level streaming device.46% off Amazon Echo Show 8In addition to a touchscreen, the Amazon Echo Show 8 has buttons for mute and volume, and a privacy slider that hides the camera.Isabel Fernández and Crystal Cox/InsiderThis mid-range, 8-inch smart display in Amazon's Echo Show line up is the best for most people who want a smart speaker that also lets you conduct video calls and stream videos. Priced at $70 for Cyber Monday, it's at the lowest price we've ever seen it.20% off Olaplex Hair Perfector No 3 Repairing TreatmentAmazonThough pricey, Olaplex's Hair Perfector is a cult favorite in beauty circles. At 20% off, it makes a thoughtful gift for anyone heard complaining about their split ends in the winter, this immensely popular hair treatment repairs brittle, dry hair and adds much-needed moisture.75% off LifeStraw Personal Water FilterAmazonLifeStraws are portable filters that can make even some of the murkiest standing water drinkable. For backpackers and hikers, a LifeStraw can be an invaluable tool in dire situations. Down to only $13 (that's a whopping 75% off), now is a great time to stock up.43% off Chamberlain myQ Smart Garage Door OpenerBest BuyThe Chamberlain MyQ Smart Garage Door Opener is a useful device that lets you open and close your garage door from anywhere with the companion mobile app on your phone. It was a reader favorite during Prime Day last year, and now for Cyber Monday, it's offered at its lowest price in a year.Read the original article on Business Insider.....»»