1 00:00:05,200 --> 00:00:07,840 Speaker 1: This is what the Flux I'm brand and I'm justin 2 00:00:07,920 --> 00:00:09,480 Speaker 1: and it's Friday, the first of August. 3 00:00:09,600 --> 00:00:10,040 Speaker 2: Jusey Boy. 4 00:00:10,119 --> 00:00:13,399 Speaker 3: Timing is everything, and at Lassian's co founders clearly forgot 5 00:00:13,400 --> 00:00:16,000 Speaker 3: to sink their calendars this week. On Wednesday, at Lassian 6 00:00:16,079 --> 00:00:18,600 Speaker 3: CEO Mike Kennon Brooks announced plans to cut one hundred 7 00:00:18,600 --> 00:00:21,120 Speaker 3: and fifty employees from the business. Next Minute is co 8 00:00:21,160 --> 00:00:25,040 Speaker 3: founder hyped up publicly about the limitless potential of AI. 9 00:00:25,640 --> 00:00:28,639 Speaker 3: Not exactly the PEP talk the remaining twelve thousand employees 10 00:00:28,720 --> 00:00:30,400 Speaker 3: we're hoping for, not at all. 11 00:00:30,760 --> 00:00:33,879 Speaker 1: Flux sam New month means brand new academy in the 12 00:00:33,880 --> 00:00:36,120 Speaker 1: Flex app, and this time we are talking one of 13 00:00:36,200 --> 00:00:39,559 Speaker 1: my favorites. Everything that you need to know about business reporting, 14 00:00:39,640 --> 00:00:43,080 Speaker 1: everything from profit and losses, term margins, gross profit and 15 00:00:43,159 --> 00:00:45,800 Speaker 1: cogs and every single thing that you need to interpret 16 00:00:45,840 --> 00:00:48,599 Speaker 1: a financial report. It's the secret Flex Academy to help 17 00:00:48,640 --> 00:00:50,559 Speaker 1: you become the smartest investor in the rooms. If you 18 00:00:50,560 --> 00:00:52,000 Speaker 1: want to check it out, make sure to download the 19 00:00:52,040 --> 00:00:52,520 Speaker 1: Flux app. 20 00:00:52,600 --> 00:00:54,840 Speaker 2: Three informative stories today. 21 00:00:54,880 --> 00:00:57,760 Speaker 3: Juzzi Boy, let's do it for our first Flight Center 22 00:00:57,880 --> 00:01:01,880 Speaker 3: has downgraded its profit guidance for the third time because 23 00:01:01,880 --> 00:01:03,600 Speaker 3: of a slowdown in global travel. 24 00:01:03,680 --> 00:01:06,360 Speaker 1: Is this just Flight Center's excuse the global travel slow down? 25 00:01:06,400 --> 00:01:08,200 Speaker 1: Or is this legit? Be man tell me more. 26 00:01:08,240 --> 00:01:11,560 Speaker 3: Okay, So Flight Center is one of Australia's biggest travel agencies. 27 00:01:11,560 --> 00:01:14,280 Speaker 3: It was actually founded in nineteen eighty two and be man. 28 00:01:14,280 --> 00:01:17,720 Speaker 1: Well, Flight Center used to use the lowest air fairs guaranteed. 29 00:01:18,200 --> 00:01:20,720 Speaker 1: Has this slogan that shifted when the AH Triple C 30 00:01:21,000 --> 00:01:23,319 Speaker 1: wasn't quite sure it lived up to its promises. 31 00:01:23,600 --> 00:01:26,480 Speaker 3: So now it goes for the safer vega slogan of 32 00:01:26,520 --> 00:01:27,840 Speaker 3: your center for travel? 33 00:01:28,400 --> 00:01:28,640 Speaker 1: Does it? 34 00:01:28,680 --> 00:01:31,560 Speaker 3: What? In November last year, Flight Center predicted an underlying 35 00:01:31,560 --> 00:01:34,480 Speaker 3: profit before tax up to four hundred and five million bucks, 36 00:01:34,480 --> 00:01:35,679 Speaker 3: and that was for FI twenty five. 37 00:01:35,760 --> 00:01:38,120 Speaker 1: Then in April this year they cut that forecast to 38 00:01:38,160 --> 00:01:40,600 Speaker 1: a maximum of three hundred and thirty five million dollars 39 00:01:40,640 --> 00:01:41,639 Speaker 1: in profit before tax. 40 00:01:41,680 --> 00:01:44,600 Speaker 3: But now they've worn that the net profit is expected 41 00:01:44,640 --> 00:01:46,600 Speaker 3: to be between two hundred and eighty five and two 42 00:01:46,640 --> 00:01:48,960 Speaker 3: hundred and ninety five million bucks, which, if I put. 43 00:01:48,800 --> 00:01:51,400 Speaker 1: Up my calculator, is more than twenty seven percent less 44 00:01:51,480 --> 00:01:53,240 Speaker 1: than their original profit forecast. 45 00:01:53,320 --> 00:01:54,680 Speaker 2: So what do you reckon went wrong? 46 00:01:54,680 --> 00:01:57,080 Speaker 1: Well, apparently Ozzie is sticking closer to home. That means 47 00:01:57,120 --> 00:02:00,400 Speaker 1: traveling to Fiji, Japan, and New Zealand instead of Europe 48 00:02:00,400 --> 00:02:01,200 Speaker 1: and the US. 49 00:02:01,160 --> 00:02:04,440 Speaker 2: Not what my Instagram feed tells me or be managed. 50 00:02:04,440 --> 00:02:06,520 Speaker 1: Flight Center says that some people are holding off on 51 00:02:06,600 --> 00:02:09,600 Speaker 1: bookings all together. Next minute, flight Center shares dropped over 52 00:02:09,680 --> 00:02:10,280 Speaker 1: eight percent. 53 00:02:10,480 --> 00:02:12,680 Speaker 3: The good news for the flight center crew is that 54 00:02:12,800 --> 00:02:15,560 Speaker 3: leisure bookings have actually increased over the year, but the. 55 00:02:15,520 --> 00:02:18,679 Speaker 1: Bad news is that this increase was mainly driven by 56 00:02:18,720 --> 00:02:19,959 Speaker 1: lower margin products. 57 00:02:20,160 --> 00:02:22,200 Speaker 2: Okay, so what is the key learning here? 58 00:02:22,360 --> 00:02:25,120 Speaker 1: Margin refers to how much profit you make from every 59 00:02:25,200 --> 00:02:26,120 Speaker 1: dollar of sales. 60 00:02:26,240 --> 00:02:29,359 Speaker 3: A high margin brand makes more profit per sale, and 61 00:02:29,440 --> 00:02:32,079 Speaker 3: a low margin one, like budget travel, they bring in 62 00:02:32,160 --> 00:02:34,680 Speaker 3: less per sale. So even if total bookings go up, 63 00:02:34,720 --> 00:02:38,280 Speaker 3: profits can fall if the mix shifts towards lower margin 64 00:02:38,360 --> 00:02:39,760 Speaker 3: products or services and the man. 65 00:02:39,840 --> 00:02:42,240 Speaker 1: That's exactly what's happened with flight Center and a Man. 66 00:02:42,280 --> 00:02:44,520 Speaker 1: If that wasn't bad enough, trips to places like the US, 67 00:02:44,560 --> 00:02:47,720 Speaker 1: which often has juicier margins, were cut by Aussie travelers. 68 00:02:47,760 --> 00:02:49,840 Speaker 3: In fact, the US was the only travel market that 69 00:02:49,840 --> 00:02:52,880 Speaker 3: saw international visitor spending decline. 70 00:02:52,440 --> 00:02:54,519 Speaker 1: Out of one hundred and eighty four markets. 71 00:02:54,919 --> 00:02:57,280 Speaker 3: So Chazy Boy Flight Center needs to find a way 72 00:02:57,280 --> 00:02:59,920 Speaker 3: to bring back its high margin travel customers or. 73 00:03:00,280 --> 00:03:02,560 Speaker 1: Risk continually downgrading its profit guidance. 74 00:03:02,639 --> 00:03:06,040 Speaker 3: For our second story, Harley Davidson has just a key 75 00:03:06,120 --> 00:03:09,000 Speaker 3: part of the engine that keeps its business humming after 76 00:03:09,080 --> 00:03:11,880 Speaker 3: its sales keep falling year after year after year. 77 00:03:12,080 --> 00:03:13,919 Speaker 1: Stuff, you're a black leather jacket b man, you little 78 00:03:13,960 --> 00:03:15,360 Speaker 1: repell me more, all right? 79 00:03:15,400 --> 00:03:18,440 Speaker 3: So, Harley Davidson is the motorcycle company that's been deafening 80 00:03:18,480 --> 00:03:21,160 Speaker 3: neighborhoods since nineteen oh three. But Josey Boy, over the 81 00:03:21,200 --> 00:03:24,359 Speaker 3: past few years, Harley Davidson has struggled with declining revenue. 82 00:03:24,400 --> 00:03:27,320 Speaker 3: In fact, this quarter, Harley Davidson reported a thirty five 83 00:03:27,360 --> 00:03:30,120 Speaker 3: and a half percent year on year revenue decline. 84 00:03:30,160 --> 00:03:32,919 Speaker 1: And the man, things got so bad that Harley Davidson 85 00:03:33,040 --> 00:03:36,040 Speaker 1: withdrew its twenty twenty five guidance. So they mean, despite 86 00:03:36,080 --> 00:03:39,760 Speaker 1: all of this, Harley Davidson share price rose sixteen percent. 87 00:03:39,840 --> 00:03:40,520 Speaker 2: How does that work? 88 00:03:40,520 --> 00:03:42,920 Speaker 1: Well, it turns out that Harley's secret weapon hasn't been 89 00:03:42,960 --> 00:03:45,840 Speaker 1: the bikes. It's been the loans associated with the bikes. 90 00:03:45,880 --> 00:03:50,160 Speaker 3: You'd be talking Harley Davidson Financial Services HDFS, which is 91 00:03:50,200 --> 00:03:51,400 Speaker 3: their in house lender. 92 00:03:51,600 --> 00:03:53,680 Speaker 1: Yeah, this is the company that offers loans to Harley 93 00:03:53,760 --> 00:03:56,880 Speaker 1: Davidson customers who can't afford to purchase the motorcycles outright. 94 00:03:56,920 --> 00:03:59,640 Speaker 3: But now Harley Davidson announced plans to sell off five 95 00:03:59,640 --> 00:04:02,960 Speaker 3: billion million dollars worth of loans to financial firms KKR 96 00:04:03,120 --> 00:04:03,720 Speaker 3: and PIMCO. 97 00:04:03,880 --> 00:04:06,880 Speaker 1: Nothing like a captive finance arm of a business. Yes, 98 00:04:06,960 --> 00:04:09,520 Speaker 1: so what's the key learning here? Captive finance arms allow 99 00:04:09,640 --> 00:04:13,200 Speaker 1: parent company to offer loans directly to customers that enables 100 00:04:13,240 --> 00:04:14,560 Speaker 1: them to purchase their product. 101 00:04:14,600 --> 00:04:15,720 Speaker 2: Yeah, it's interesting, Jazzi boy. 102 00:04:15,840 --> 00:04:19,800 Speaker 3: These loans help providers control the entire customer experience from 103 00:04:19,839 --> 00:04:22,480 Speaker 3: sale to financing to loyalty program. 104 00:04:22,120 --> 00:04:24,200 Speaker 1: And they We see this type of captive finance in 105 00:04:24,279 --> 00:04:26,480 Speaker 1: car or manufacturing industries very often. 106 00:04:26,600 --> 00:04:29,640 Speaker 3: Yes, we do, think Toyota Financial Services or Forward Motor 107 00:04:29,680 --> 00:04:30,360 Speaker 3: Credit Company. 108 00:04:30,400 --> 00:04:33,760 Speaker 1: And these arms can be very, very lucrative, sometimes even 109 00:04:33,839 --> 00:04:35,920 Speaker 1: more lucrative than the product business itself. 110 00:04:35,920 --> 00:04:38,880 Speaker 3: In fact, loan business accounts for roughly twenty percent of 111 00:04:38,960 --> 00:04:40,280 Speaker 3: Harley Davidson's revenue, and. 112 00:04:40,200 --> 00:04:42,320 Speaker 1: It's believed that Harley Davidson will earn close to one 113 00:04:42,360 --> 00:04:44,839 Speaker 1: point twenty five billion US dollars for the sale of 114 00:04:44,880 --> 00:04:46,240 Speaker 1: its existing loan book. 115 00:04:46,279 --> 00:04:48,360 Speaker 3: But for Harley d, selling off a stake in its 116 00:04:48,360 --> 00:04:51,200 Speaker 3: captive finance business is a way to raise cash without 117 00:04:51,240 --> 00:04:52,920 Speaker 3: needing to sell its core assets. 118 00:04:53,320 --> 00:04:56,440 Speaker 1: For our third and final story, Meta share prices jump 119 00:04:56,560 --> 00:05:00,760 Speaker 1: nine percent after its quarterly earnings smashed past investment expectations. 120 00:05:00,920 --> 00:05:02,640 Speaker 1: The spenderthon is continuing. 121 00:05:02,760 --> 00:05:06,560 Speaker 3: Not only zuck bulking right now, but metas profits are too. 122 00:05:06,800 --> 00:05:07,680 Speaker 2: Tell me more. 123 00:05:07,800 --> 00:05:10,200 Speaker 1: Do you know Meta, the company behind Facebook which started 124 00:05:10,200 --> 00:05:12,599 Speaker 1: in the Harvard dorm back in two thousand and four. 125 00:05:12,680 --> 00:05:15,279 Speaker 2: Since then it acquired Instagram and WhatsApp. 126 00:05:14,880 --> 00:05:17,240 Speaker 1: And be man. We know that the part man, part cyborg, 127 00:05:17,360 --> 00:05:19,640 Speaker 1: Mark Zuckerberger loves to chase the next big thing. 128 00:05:19,720 --> 00:05:21,719 Speaker 2: For a hot minute, it was creating a digital currency 129 00:05:21,720 --> 00:05:22,599 Speaker 2: called Libra. 130 00:05:22,360 --> 00:05:23,600 Speaker 1: And there was the hot a minute when it was 131 00:05:23,640 --> 00:05:25,039 Speaker 1: creating the metaverse. 132 00:05:24,720 --> 00:05:27,760 Speaker 3: And now the hottest minute with Meta focusing on competing 133 00:05:27,800 --> 00:05:31,520 Speaker 3: against Open Ai, Google and Anthropic for AI dominance. 134 00:05:31,640 --> 00:05:35,279 Speaker 1: But now Mark cyborg Berg has the revenue of forty 135 00:05:35,279 --> 00:05:37,799 Speaker 1: seven and a half billion US dollars for Meta's last 136 00:05:37,839 --> 00:05:38,480 Speaker 1: quarter up. 137 00:05:38,440 --> 00:05:40,640 Speaker 3: To twenty two percent. Year on you next minute, share 138 00:05:40,680 --> 00:05:42,039 Speaker 3: price up more than nine percent, and. 139 00:05:42,040 --> 00:05:44,839 Speaker 1: The man Meta says that AI is becoming a real 140 00:05:45,000 --> 00:05:48,320 Speaker 1: revenue driver for the business. While investors clearly like the vision, 141 00:05:48,440 --> 00:05:51,400 Speaker 1: they also like the projected dollars coming through. But Jose 142 00:05:51,520 --> 00:05:54,240 Speaker 1: boit growth in revenue means next to nothing if it's 143 00:05:54,240 --> 00:05:57,039 Speaker 1: not coupled with a growth in earnings as well. So 144 00:05:57,200 --> 00:05:58,280 Speaker 1: what is the key learning here? 145 00:05:58,360 --> 00:06:01,200 Speaker 3: Well, revenue tells you how much company made. Earnings tell 146 00:06:01,240 --> 00:06:02,840 Speaker 3: you whether they actually kept any of it. 147 00:06:02,880 --> 00:06:05,360 Speaker 1: For example, Meta earned forty seven and a half billion 148 00:06:05,400 --> 00:06:06,760 Speaker 1: dollars in revenue this quarter. 149 00:06:06,880 --> 00:06:09,599 Speaker 3: Earnings, also known as profit or net income, is what's 150 00:06:09,720 --> 00:06:11,279 Speaker 3: left after the bills are paid. 151 00:06:11,279 --> 00:06:14,360 Speaker 1: I think staff wages, AD spend, R and D and yes, 152 00:06:14,560 --> 00:06:16,599 Speaker 1: those billion dollar data centers as well. 153 00:06:16,400 --> 00:06:18,960 Speaker 2: And does a boy for investors. Both metrics matter a lot. 154 00:06:18,839 --> 00:06:20,760 Speaker 1: But be man, In this quarter, Meta didn't just go 155 00:06:20,839 --> 00:06:23,440 Speaker 1: a revenue It also grew its earnings per share by 156 00:06:23,520 --> 00:06:24,359 Speaker 1: thirty eight. 157 00:06:24,200 --> 00:06:26,479 Speaker 2: Percent, and that was well above expectations. 158 00:06:26,480 --> 00:06:29,320 Speaker 1: So yes, Meta's AI dreams are expensive, but this quarter 159 00:06:29,360 --> 00:06:31,479 Speaker 1: at least, it looks like they're starting to pay off. 160 00:06:31,520 --> 00:06:33,800 Speaker 3: And for shareholders who were worried that AI was becoming 161 00:06:33,800 --> 00:06:36,520 Speaker 3: a money pit, it's a reassuring sign because it means the. 162 00:06:36,480 --> 00:06:39,839 Speaker 1: AI arms race might actually deliver financial returns Bluck Sam. 163 00:06:39,880 --> 00:06:42,200 Speaker 1: This month's Academy, we're covering all the terms that you 164 00:06:42,279 --> 00:06:44,560 Speaker 1: need to know while working in a business, profits to 165 00:06:44,680 --> 00:06:46,800 Speaker 1: margins to assets and not only will this help you 166 00:06:46,800 --> 00:06:48,919 Speaker 1: in your job, but also when you're looking to invest 167 00:06:48,920 --> 00:06:50,120 Speaker 1: in a company. So if you want to learn more, 168 00:06:50,160 --> 00:06:52,160 Speaker 1: make sure to download the Flex app and check it out. 169 00:06:52,200 --> 00:06:54,760 Speaker 2: Thanks for listening, and we'll see you on Monday.