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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day, we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: Let's switch gears and go to our Federal Reserve. It

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Speaker 1: is Tuesday. We like to talk to Ira Jersey. He's

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Speaker 1: the chief US interst rate strategist for Bloomberg Intelligence. And

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Speaker 1: I really got some economic data today. I mean ISM,

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Speaker 1: manufacturing still in below fifty, still contracting, It's better than

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Speaker 1: last month. So the economy is, you know, trying to

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Speaker 1: keep kind of chugging along here. How do you think

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Speaker 1: the Fed kind of us kind of the overall economy here?

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Speaker 3: Yeah, I think the Federal Reserve is actually pretty happy

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Speaker 3: with the economy.

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Speaker 4: Their concern is still is inflation too high?

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Speaker 3: And well the data today with manufacturing maybe not as

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Speaker 3: bad as it has been in recent month, will that

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Speaker 3: mean that prices are going to go up? And interestingly,

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Speaker 3: in that ISM data that we got just a couple

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Speaker 3: of minutes ago, Paul.

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Speaker 4: Showed that prices paid was lower.

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Speaker 3: So actually the inflation component of the ISM Manufacturing survey

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Speaker 3: suggested goods prices.

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Speaker 4: Might continue to come down.

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Speaker 3: But this week, Paul, most importantly obviously it's payrolls, but

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Speaker 3: second to that in my book and the way that

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Speaker 3: I am analyzing the economy right now is going to

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Speaker 3: be Thursday's ISM Services report, So looking at prices paid

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Speaker 3: in there as well as new orders and what's going

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Speaker 3: on with some of the forward looking components of those data.

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Speaker 5: And IRA looking at treasuries pairing some of those losses

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Speaker 5: on the ISM, but then also the Jolts jobs opening data,

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Speaker 5: seeing that as far as those openings just dropping slightly

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Speaker 5: in the quits rate ticking down in June. In that data,

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Speaker 5: and looking over at what the ten years yielding close

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Speaker 5: around four percent? What's your view on the direction of

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Speaker 5: the tenure and where does Bloomberg Intelligence forecast to see it?

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Speaker 5: At your end?

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Speaker 3: Yeah, so we just revised our FOURK asked this morning, actually,

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Speaker 3: and so we do think that ten year yields are

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Speaker 3: going to be lower than where they are now. I

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Speaker 3: think currently the market's in a range and there's a

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Speaker 3: couple of technical things going on as well. So firstly

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Speaker 3: we saw today's move, the move about five base points

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Speaker 3: higher in ten year yields was driven largely by what's

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Speaker 3: going on in Europe and the hawkish or hawker's expectations

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Speaker 3: out of Europe and the Bank of England in particular.

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Speaker 3: But importantly, tomorrow morning at eight thirty, we have the

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Speaker 3: Treasury refunding announcement, and the Treasury Department will be increasing

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Speaker 3: the size and the supply of treasuries coming to market.

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Speaker 3: So I think some people are adjusting to that possibility

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Speaker 3: and just thinking, hey, if there's more supply, maybe it'll

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Speaker 3: be harder for market participants to digest the larger issuance sizes.

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Speaker 4: And so I think the market's adjusting to that.

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Speaker 3: But by the end of the year, you know, Anawog

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Speaker 3: and Bloomberg Economics believes that they'll be at a recession.

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Speaker 3: If there is a recession, you could expect ten year

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Speaker 3: treasury yields to rally about seventy rasis points are so

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Speaker 3: from current levels, and that's so our year on forecast

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Speaker 3: is a three point three two percent if you want

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Speaker 3: to be very.

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Speaker 1: So I wrote, when the government comes to refund their debt,

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Speaker 1: which I know they're going to do here. I guess

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Speaker 1: you know, in the next several days. Here they got

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Speaker 1: to raise a lot of money. Because the deficits keeps growing,

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Speaker 1: interest rates are higher, so the refinance becomes even more expensive.

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Speaker 1: I mean, do we run the risk of having not

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Speaker 1: failed auctions, but just disappointing auctions, which really causes some

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Speaker 1: concern in the marketplace?

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Speaker 4: Yeah, I think we do.

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Speaker 3: You know what happened in twenty twenty two, we had

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Speaker 3: some very weak auctions, and even earlier this year, particularly

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Speaker 3: when a lot of people thought maybe yields weren't high enough,

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Speaker 3: the Federal Reserve was continuing to hike interest rates pretty aggressively.

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Speaker 3: You know now that it looks like the Federal Reserve

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Speaker 3: is nearing or at the end of their hiking cycle.

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Speaker 3: Some of the auctions more recently in the last two

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Speaker 3: months have actually been been reasonably well received. I'd say

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Speaker 3: that the auctions are somewhat more mixed, But yeah, there

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Speaker 3: is to your point, Paul, I think a real risk

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Speaker 3: that if the government raises the size of some of

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Speaker 3: these auctions too far, too fast, that it may be

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Speaker 3: again difficult to digest. So some of the things you

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Speaker 3: want to look at when we get to some of

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Speaker 3: the auctions next week, is what's the bid to cover doing.

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Speaker 4: So how many bids, how many.

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Speaker 3: Offers are there to buy bonds are there compared to

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Speaker 3: the amount on offer? And then secondly, you're indirect bidder,

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Speaker 3: So these are investors, end users, central banks, pension funds,

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Speaker 3: mutual funds who all bid through third parties, and if

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Speaker 3: they come in strong, that means that end user demand

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Speaker 3: is really good. Obviously the converse is true as well.

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Speaker 3: If those are relatively low compared to recent history, then

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Speaker 3: you could expect there to be you know, maybe yields

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Speaker 3: go a little bit higher because of the lack of demand.

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Speaker 5: IIRA explain to us what's going on when we're looking

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Speaker 5: at how speculators were more bearish on treasury futures in

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Speaker 5: this latest data that came obviously ahead of the FEDS

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Speaker 5: just prior meeting that we just had, and what's happening

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Speaker 5: as far as how they're boosting their net short exposure

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Speaker 5: across this curve with the exception if you're looking at

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Speaker 5: say five and ten year futures.

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Speaker 3: Yeah, it's a little bit it's a little bit difficult

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Speaker 3: to tell, you know, when a hedge fund or a

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Speaker 3: levered investor, and that's a prim So there's speculators, right,

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Speaker 3: so we had no speculators versus hedgers.

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Speaker 4: That's one component.

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Speaker 3: But then they also there's another breakdown that's levered investors

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Speaker 3: versus versus asset managers versus dealers. And when you look,

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Speaker 3: it's almost all levered funds that are short. So the

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Speaker 3: question is are they short treasuries because on the other

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Speaker 3: side they happen to be long corporates or long equities,

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Speaker 3: like is that a hedge to other assets that they

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Speaker 3: might be might have a position in, And so it's

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Speaker 3: a little bit difficult to know that. I do suspect

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Speaker 3: that there are people who just had taken advantage of

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Speaker 3: the fact that we had rallied back to It wasn't

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Speaker 3: that long ago that we were at three and a

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Speaker 3: half percent in treasury, so now we've you know, sold

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Speaker 3: off to four percent, So there could be some short

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Speaker 3: covering that we see somewhere around the old yield highs

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Speaker 3: around four.

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Speaker 4: Point nine percent. Four point oh nine percent.

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Speaker 3: That's a pretty important technical level at this point, and

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Speaker 3: I suspect that as we get a little bit above

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Speaker 3: four percent, you will see some short covering among those

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Speaker 3: levered investors.

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Speaker 6: Ieric talked to us about liquidity in the marketplace.

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Speaker 1: If I'm a big mutual fund or hedge fund and

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Speaker 1: that I want to dump a bunch of treasuries, I

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Speaker 1: call it Morgan Stanley and Goldman Sachs, and I say, hey,

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Speaker 1: bid me here, what kind of efficiency?

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Speaker 6: What kind of execution am I going to get?

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Speaker 3: Yeah, there's been these pockets of illiquidity that have cropped up,

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Speaker 3: but liquidity over the last couple of weeks has actually

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Speaker 3: been pretty decent. You've seen decent sizes in terms of

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Speaker 3: on the screens.

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Speaker 4: Of what you're able to sell.

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Speaker 3: I think that the challenge for market participants is is

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Speaker 3: everyone going the same way all at once, And we

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Speaker 3: haven't seen that so much the last month or so.

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Speaker 3: But you did see earlier this year when there were

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Speaker 3: a lot of people rushing to buy securities. For example,

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Speaker 3: in March during the SVB the banking inks that was

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Speaker 3: going on. You know, you saw these pockets of illiquidity

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Speaker 3: where no one wanted to sell their treasuries because everyone

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Speaker 3: thought the price was going to be higher. So you

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Speaker 3: saw these big jumps in price and much lower yields

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Speaker 3: very quickly, So I call the liquidity at.

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Speaker 4: This point as being fickle.

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Speaker 3: So it's like liquidity is really good until it's not,

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Speaker 3: and then when it's not, it's really not good.

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Speaker 6: Right all right, Hira Jersey, thank you so much.

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Speaker 1: We appreciate it as always getting our lowdown on what

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Speaker 1: our federal reserve is going to do in the treasure market.

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Speaker 1: Ira Jersey, Chief US Interest rate Strategists for Bloomberg Intelligence.

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Speaker 7: You're listening to the Team Ken's Are Live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 7: the iHeartRadio app, and the Bloomberg Business App, or listen

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Speaker 7: on demand wherever you get your podcasts.

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Speaker 8: We welcome now our Bloomberg Television audience and radio listeners.

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Speaker 8: I'm Shanali Bassett standing alongside PJT partner CEO Paul Taubman,

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Speaker 8: who joins me now for an exclusive interview.

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Speaker 4: Thank you for being here.

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Speaker 8: It's pretty rare for you to join us for television.

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Speaker 8: It's also remarkable that eight years ago you started PJT,

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Speaker 8: took it public, and now you've tripled your headcount. You're

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Speaker 8: much bigger than you were and are having a record

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Speaker 8: half year at a time where most investment banks are

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Speaker 8: facing a prolonged slump in revenue.

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Speaker 4: So can you keep it up?

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Speaker 9: Well, I don't know if we can keep it up.

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Speaker 9: We're going to certainly try to. But first of all,

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Speaker 9: thank you for having me on this morning, Shanali. It's

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Speaker 9: great to be here. It's almost eight years as you

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Speaker 9: point out, and we have a plan and we're just

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Speaker 9: moving forward with the plan. But if you look at

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Speaker 9: our first six months, it was driven by we have

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Speaker 9: a leading restructuring practice and we're increasingly taking share from others,

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Speaker 9: and we're trying to get at the forefront of liability management,

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Speaker 9: trying to work with companies to reaquitize and restructure their

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Speaker 9: balance sheets and deal with the fact that interest rates

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Speaker 9: continue to grind higher. And we're growing out a leading

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Speaker 9: strategic advisory business that's still in the early innings. So

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Speaker 9: even though we're dealing with a lot of the same

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Speaker 9: macro headwinds that others are, we're able to gain share

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Speaker 9: and continue to move forward and continue to advance our position.

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Speaker 8: You know, we'll talk more about that restructuring wave because seriously,

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Speaker 8: these idea of higher interest rates are going to have

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Speaker 8: some impacts over a long period of time. But also

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Speaker 8: remarkable is that you're hiring. You are hiring at a

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Speaker 8: pretty rapid clip at a time when most investment banks

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Speaker 8: are letting people go by the tens of thousands. How

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Speaker 8: significant are your hiring plans this year?

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Speaker 9: Oh, they're quite significant. So if you take a step back,

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Speaker 9: we have tripled our headcount in eight years, we've tripled

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Speaker 9: the revenues, share prices up nearly four times. And if

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Speaker 9: you look at the size we are today, we're still

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Speaker 9: a half to a third the size of many of

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Speaker 9: our direct competitors, and where a fraction the size of

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Speaker 9: the large banks. So we see tremendous art opportunity to grow.

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Speaker 9: This is an incredibly conducive environment to grow. You need

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Speaker 9: to see M and a slow down in order to

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Speaker 9: hire the best M and A bankers. And that's the

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Speaker 9: ultimate paradox. And the reason for that, Shinali is because

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Speaker 9: the switching costs are much lower when you're dealing with

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Speaker 9: a low velocity environment trying to get a best in

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Speaker 9: class M and A banker to leave in the midst

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Speaker 9: of an M and a bull run when they're loaded

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Speaker 9: up with a whole host of mandates the switching costs

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Speaker 9: to extract themselves, they end up leaving their clients in

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Speaker 9: the lurch. So we're taking advantage of the fact that

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Speaker 9: even though the environment is quite challenging in the near term,

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Speaker 9: we know it's going to inflect. We know it's going

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Speaker 9: to come back, and we want to continue to press

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Speaker 9: forward and continue to grow the franchise.

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Speaker 8: Is this going to be a record hiring year and

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Speaker 8: can some of this momentum continue even into next year?

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Speaker 9: Well, it's certainly going to be a record and we

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Speaker 9: intend to continue to press forward. Now, how many individuals

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Speaker 9: we attract to the platform, really we don't control fully

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Speaker 9: because at the end of the day, we have a

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Speaker 9: very clear sens as to who.

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Speaker 10: Would work well on the platform.

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Speaker 9: Who's best in breed, who's best in class, who shares

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Speaker 9: our vision, shares our values, And you cannot end up

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Speaker 9: turning this into a quota as to how many you

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Speaker 9: hire each year. But there's no doubt that we're still

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Speaker 9: relatively small compared to the opportunity set. So if you

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Speaker 9: ask me, are we going to be much larger three

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Speaker 9: five years from now, the answer is absolutely.

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Speaker 8: Bring us under the hood, because it's a pretty fascinating dynamic.

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Speaker 8: You have such high profile bankers leaving Goldman, Sachs, and

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Speaker 8: Credit Suez, all for different reasons, and so what are

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Speaker 8: bankers telling you as you're having these conversations.

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Speaker 9: Well, if you step way back, there are a few

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Speaker 9: trends which have been in evidence for the last decade.

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Speaker 9: The first is that increasingly clients want to work with

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Speaker 9: smaller firms, and we started to see that coming out

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Speaker 9: of the global financial crisis. That's only picked up speed

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Speaker 9: over time. So that's the first point is you need

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Speaker 9: to have buy in from your client base. I think

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Speaker 9: the second, which is a corollary trend that most individuals

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Speaker 9: didn't really pick up on, is if the most sophisticated,

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Speaker 9: consequential companies around the globe are going to work with

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Speaker 9: smaller firms, they're going to expect the sophistication of a

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Speaker 9: larger firm. So that means you need to continue to

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Speaker 9: build out the breadth of services, the caliber of individual

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Speaker 9: You need to make sure that you can follow your

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Speaker 9: clients anywhere around the globe. So those two things have

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Speaker 9: continued to prove out, and as bankers at bullsh bracket

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Speaker 9: firms increasingly see that their clients would be highly supportive of.

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Speaker 4: A move to a smaller firm.

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Speaker 9: The question becomes, what's the catalyst, what's going to get

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Speaker 9: you out of a comfortable position to take a jump,

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Speaker 9: take a leap, do something different. And I like to

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Speaker 9: say that we're in that exquisite sweet spot, which is

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Speaker 9: we're big enough so that no one's going to miss

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Speaker 9: a beat. They're going to have access to working with

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Speaker 9: some of the most sophisticated colleagues around the globe, but

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Speaker 9: we have so much white space that they can get

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Speaker 9: in early, not be jocking for position, and do what

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Speaker 9: they love to do, which is be bankers, not managers.

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Speaker 8: Speaking of being a banker, bankers have been writing a

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Speaker 8: lot on Wall Street, always, always, always, about everything. But

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Speaker 8: you know, when you think about what they're actually talking

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Speaker 8: about now it's returned to work. How often do they

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Speaker 8: have to be in the building and how flexible do

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Speaker 8: you have to be to keep them around?

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Speaker 9: Well, that's a great question. I made a commitment in

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Speaker 9: the depths of COVID of two things. One was we

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Speaker 9: were learning so much from how to work remotely that

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Speaker 9: we were never going back precisely to how we did

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Speaker 9: work pre COVID. On the other hand, if you're not

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Speaker 9: in the office most of the time, and if you're

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Speaker 9: not creating those personal connections, and if you're not learning

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Speaker 9: through an apprenticeship model, you're not doing it the right way.

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Speaker 9: We've been continuing to evolve to is a model which

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Speaker 9: starts with being in the office, because that's where you learn,

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Speaker 9: that's the best way to support the clients, that's the

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Speaker 9: best way to train and develop individuals, and there's no

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Speaker 9: latitude for people not being back in the office. Having

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Speaker 9: said that, you can't allow technology to continue to invade

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Speaker 9: your personal space. Be on call seven days a week,

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Speaker 9: be expected to get on a zoom call on a

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Speaker 9: moment's notice, and not have some release valve. So what

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Speaker 9: we did about a year ago was we turned fridays

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Speaker 9: in office to be optional. You could work from home

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Speaker 9: on Fridays, but work from home starts with work. You

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Speaker 9: may be home, but you're working, and in the dog

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Speaker 9: days of summer, which is after the summer interns leave

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Speaker 9: until Labor Day, we also have a work from home option.

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Speaker 9: And I think by acknowledging that we can use technology

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Speaker 9: to be more productive, but making the centrality of being

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Speaker 9: in the office, can try and find that that sweet spot.

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Speaker 8: It's about to get busier slowly after a big deal slump.

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Speaker 8: How fast do you actually expect murders and acquisitions to

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Speaker 8: start coming back to the market.

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Speaker 9: The pace of activity and dialogue is clearly picking up.

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Speaker 9: We're looking at levels today that we haven't seen in

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Speaker 9: more than a decade. So M and A volumes today

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Speaker 9: are not much greater than they were coming out of

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Speaker 9: the global financial crisis. If you benchmarket relative to GDP

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Speaker 9: or market capitalizations, it's at low's we haven't seen I

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Speaker 9: think ever, So I'm not really going out on a

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Speaker 9: limb by saying it's going to get better from where

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Speaker 9: we are today. There's no doubt about that. It can't

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Speaker 9: get worse. There's an old saying you can't get hurt

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Speaker 9: jumping out of a basement. I don't think you know.

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Speaker 9: We are in danger of going lower than where we

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Speaker 9: are today. The question is how quickly does it inflect.

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Speaker 9: And one of the things about M and A iss

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Speaker 9: a pro cyclical business transaction activity begets more transaction activity.

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Speaker 9: There's the ultimate fomo fear of missing out, which is

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Speaker 9: if your competitor is transacting, if they're growing, if they're investing,

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Speaker 9: if another private equity firm in the alternative space is

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Speaker 9: committing capital, it tends to lead to more activity. I

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Speaker 9: think we have the conditions that are nearly ripe for that,

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Speaker 9: and it wouldn't surprise me if sometime between now and

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Speaker 9: the end of the year you see a very sharp inflection.

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Speaker 8: There is one place things could get worse. That is

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Speaker 8: with restructuring, higher interest rates, a whole bunch of forces

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Speaker 8: that are pushing companies to either restructure or go bankrupt.

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Speaker 8: How significant is this wave of distress going to be?

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Speaker 9: What does it look like? Well, I think we're in

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Speaker 9: for an extended wave of elevated restructuring relative to where

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Speaker 9: we are today. But where we are today is at

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Speaker 9: historic lows in terms of default rates and the like.

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Speaker 9: We're still feasting off of the easy money environment, relatively

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Speaker 9: low interest rates. But there's a day of reckoning and

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Speaker 9: we're going to see a meaningful uptick in restructuring activity.

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Speaker 9: But again, to put it in perspective, that's relative to

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Speaker 9: historic lows. And I often get asked the question, can

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Speaker 9: an upswing in M and A coexist with an upswing

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Speaker 9: in restructuring? And my answer is pretty simple, is right

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Speaker 9: now they're both at historic lows. We're seeing historically low

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Speaker 9: default rates and we're seeing historically low M and A volumes,

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Speaker 9: And I think both of them can sort of snap

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Speaker 9: back more to traditional long term levels and both start

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Speaker 9: to be engines for our firm.

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Speaker 8: Now, Paul, before you left and started PJT, you were

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Speaker 8: a very senior at Morgan Stanley. You were seen as

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Speaker 8: a CEO candidate. Now fast forward more than eight years

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Speaker 8: and you have Morgan Stanley going through its own CEO transition.

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Speaker 8: What do you think the future of Morgan Stanley looks like?

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Speaker 9: Look, I think James has done a terrific job. I

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Speaker 9: think the firm is firing on all cylinders, notwithstanding the

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Speaker 9: difficult macro backdrop, and I have no doubt that they'll

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Speaker 9: continue to thrive going forward. I think the question for

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Speaker 9: our firm is what do we do do we thrive

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Speaker 9: going forward? And I'm confident that we have so much

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Speaker 9: open running space ahead of us that.

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Speaker 10: That's what I'm focused on.

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Speaker 9: That's where my attention is.

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Speaker 8: How are you thinking about number two already?

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Speaker 9: I'm always thinking about a succession. I'm always thinking about,

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Speaker 9: you know, who's going to succeed me? Because We're building

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Speaker 9: this firm to last, to be durable, to be sustainable,

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Speaker 9: and that means that you need to be able to

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Speaker 9: train develop a next generation. Most of our growth has

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Speaker 9: come from external candidates, but that's reflective of the fact

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Speaker 9: that we're only eight years old. But the goal is

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Speaker 9: over the next eight years as more and more of

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Speaker 9: those individuals who join at the most entry level positions,

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Speaker 9: they get to grow up in our firm, their train

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Speaker 9: they're developed to be the world class banker and they

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Speaker 9: have only one home and that's PJAT.

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Speaker 10: So that's what I'm.

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Speaker 8: Focused speaking of. This is the last week for the interns.

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Speaker 8: The interns are starting to, you know, leave Manhattan now

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Speaker 8: and all the cities they're in. Do you have any

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Speaker 8: advice for them because there is a lot of anxiety

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Speaker 8: about what jobs they can get coming out of these cycles.

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Speaker 9: Well, it's crazy. We have our firm nearly one hundred

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Speaker 9: summer interns around the globe, and that's about one percent

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Speaker 9: of the resumes that we get. We get close to

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Speaker 9: ten thousand applications every year and about one hundred show

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Speaker 9: up at our firm for the summer. And one of

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Speaker 9: the things that we've initiated which I think is terrific,

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Speaker 9: is that at the end of the program, every one

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Speaker 9: of our interns is obligated to then spend time doing

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Speaker 9: community service in a project of their choice. And to me,

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Speaker 9: that's one of the things that I would tell everyone

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Speaker 9: on Wall Street to take away, which is you can

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Speaker 9: go at it really hard, be very focused on your career,

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Speaker 9: but there's a bigger world out there. You're part of

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Speaker 9: a broader community, and find a way to do something

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Speaker 9: to give back to your community.

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Speaker 8: Anchors are people too, Yanks. Absolutely, Paul, thank you so

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Speaker 8: much for your time. It was great to sit with

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Speaker 8: you in such a very interview with you at a

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Speaker 8: really historic time for your company.

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Speaker 4: So thank you.

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Speaker 8: That is Paul Tauman. He is the CEO and founder

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Speaker 8: and chairman of PJT Partners.

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Speaker 7: You're listening to the tape cats are Live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 7: tune in app, Bloomberg dot Com, and.

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Speaker 10: The Bloomberg Business App.

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Speaker 7: flagship New York station, Just Say Alexa, play Bloomberg eleven.

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Speaker 1: Thirty Caterpillar our good friends. They reported some good numbers

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Speaker 1: last night, stock up over seven percent. Caterpillar based in Irving, Texas,

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Speaker 1: joining us Chris Chilino. He follows the stock on all

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Speaker 1: that construction industry stuff for Bloomberg Intelligence.

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Speaker 6: Hey, Chris, talk to us about Caterpillar. What did this

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Speaker 6: street like here?

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Speaker 10: A lot?

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Speaker 11: It was a really impressive quarter with pretty significant top

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Speaker 11: and bottom line beats, really driven by strong pricing and

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Speaker 11: better than expected volume growth doing part to some dealer

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Speaker 11: inventory restocking, and really just continued strong execution as a

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Speaker 11: supply chain continues to normalize. We actually saw enterprise margins

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Speaker 11: strengthen sequentially in the period, which is kind of counter

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Speaker 11: to normal seasonality. But I think kind of beyond the

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Speaker 11: stronger operating performance, both orders and backlog improved in the quarter,

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Speaker 11: which was a little bit of a surprise to us,

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Speaker 11: and retail sales accelerated, So I think that alleviates some

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Speaker 11: of the concerns investors have around the cycle peaking here.

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Speaker 6: Yeah, that's kind of where I wanted to go.

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Speaker 1: I'm looking at the stock hitting an all time high.

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Speaker 6: So that's good for shareholders.

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Speaker 1: Then I look at the A n R function Analyst

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Speaker 1: recommendations twelve buys fourteen holes in three cells. Half the

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Speaker 1: analysts on the street missed this run here, this all

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Speaker 1: time run up to an all time high. What's the

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Speaker 1: concern if the business is so strong.

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Speaker 11: Yeah, the concern is really how sustainable are these results?

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Speaker 10: Right?

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Speaker 11: Is this as good as it gets? We're posting margins

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Speaker 11: now above twenty percent, which they haven't done before. Margins

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Speaker 11: are going to be at the high end of their

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Speaker 11: long term framework. We have a record backlog. Pricing is

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Speaker 11: phenomenally strong, but that will moderate in the back half

437
00:22:13,880 --> 00:22:17,520
Speaker 11: of the year. Dealers will will start to de stock

438
00:22:17,600 --> 00:22:19,840
Speaker 11: in the back half too, So I think the concern

439
00:22:19,960 --> 00:22:24,359
Speaker 11: is this sustainable. I think this quarter was kind of

440
00:22:24,560 --> 00:22:26,960
Speaker 11: a step in the right directions, and I think we're

441
00:22:27,000 --> 00:22:31,840
Speaker 11: looking at probably a structurally higher return business cycle over cycle.

442
00:22:32,720 --> 00:22:35,320
Speaker 11: But the concern is if we're not at peak, we're

443
00:22:35,320 --> 00:22:36,320
Speaker 11: probably pretty close.

444
00:22:37,280 --> 00:22:39,879
Speaker 5: And whenever I think of Caterpillar, obviously I think of

445
00:22:39,880 --> 00:22:44,440
Speaker 5: those yellow bulldozers, but also the world's biggest producer when

446
00:22:44,440 --> 00:22:47,400
Speaker 5: you are thinking of heavy machinery, can you really have

447
00:22:47,600 --> 00:22:51,479
Speaker 5: a global recession with the way Caterpillar is performing at

448
00:22:51,480 --> 00:22:52,320
Speaker 5: this point?

449
00:22:53,320 --> 00:22:56,080
Speaker 11: Yeah, So there certainly puts in takes that if you

450
00:22:56,080 --> 00:22:59,840
Speaker 11: think globally. I mean, you know, North America continues to

451
00:22:59,840 --> 00:23:02,320
Speaker 11: be very strong. Europe has hung in there, although it

452
00:23:02,359 --> 00:23:05,160
Speaker 11: was a little bit weaker in the period. China, which

453
00:23:05,280 --> 00:23:10,840
Speaker 11: is the largest construction equipment market globally, continues to deteriorate,

454
00:23:10,920 --> 00:23:14,520
Speaker 11: took another leg down in the quarter, which really wasn't

455
00:23:14,520 --> 00:23:17,640
Speaker 11: a surprise. We kind of expect that to bounce back

456
00:23:17,680 --> 00:23:22,679
Speaker 11: next year. So there's a lot of moving pieces geographically speaking.

457
00:23:23,000 --> 00:23:25,040
Speaker 5: So I'm sorry, I'm just going to follow up on

458
00:23:25,080 --> 00:23:27,919
Speaker 5: that because the CEO of Caterpillar actually said during the

459
00:23:27,960 --> 00:23:31,160
Speaker 5: earnings call that the company does anticipate for the weakness

460
00:23:31,160 --> 00:23:35,719
Speaker 5: and sales of the machines used specifically in Chinese construction projects.

461
00:23:35,720 --> 00:23:38,239
Speaker 5: So I would imagine when you're hearing something like that,

462
00:23:38,320 --> 00:23:41,000
Speaker 5: what kind of indicators are you honing in on to

463
00:23:41,080 --> 00:23:43,159
Speaker 5: see what that could mean for the company and obviously

464
00:23:43,200 --> 00:23:45,959
Speaker 5: how that could potentially translate to its peers as well

465
00:23:46,000 --> 00:23:47,320
Speaker 5: as what that means for the economy.

466
00:23:48,560 --> 00:23:50,560
Speaker 11: Yeah, so we've seen a lot of the macro indoses

467
00:23:50,600 --> 00:23:54,160
Speaker 11: deteriorate over there. We've actually had a number of machinery

468
00:23:54,160 --> 00:23:56,760
Speaker 11: companies globally reports, so we kind of had an inkling

469
00:23:56,800 --> 00:24:02,639
Speaker 11: that China was weakening throughout the quarter. But in the

470
00:24:02,680 --> 00:24:06,280
Speaker 11: big scheme of things. Remember, you know, China historically in

471
00:24:06,680 --> 00:24:09,720
Speaker 11: a normal years five to ten percent of consolidated revenue.

472
00:24:09,960 --> 00:24:13,520
Speaker 11: We're looking at a second year down with pretty significant decline.

473
00:24:13,600 --> 00:24:16,439
Speaker 11: So it's going to be less than five percent of

474
00:24:16,480 --> 00:24:18,480
Speaker 11: their total business this year.

475
00:24:19,320 --> 00:24:22,840
Speaker 1: All right, So, Chris, I hear my president talking about

476
00:24:22,880 --> 00:24:27,199
Speaker 1: infrastructure here, members of Congress talking about infrastructure spending. I

477
00:24:27,240 --> 00:24:29,760
Speaker 1: mean it sounds to me like, at least in North America,

478
00:24:29,960 --> 00:24:33,480
Speaker 1: there's several years of growth a head for this industry

479
00:24:33,560 --> 00:24:34,359
Speaker 1: and for CAT.

480
00:24:34,440 --> 00:24:35,639
Speaker 6: What does a company say about that?

481
00:24:37,160 --> 00:24:40,320
Speaker 11: Yeah, so they are starting to see over the past

482
00:24:40,359 --> 00:24:45,040
Speaker 11: few quarters some of that infrastructure funds flow. And you're right,

483
00:24:45,119 --> 00:24:47,880
Speaker 11: I mean, we have an immense amount of fiscal stimulus

484
00:24:47,960 --> 00:24:51,240
Speaker 11: coming through the pipe here, So I think you're probably

485
00:24:51,280 --> 00:24:54,480
Speaker 11: looking at a more resilient CAT through the next downturn.

486
00:24:55,240 --> 00:24:59,080
Speaker 11: Just given this year vast amount of money that's going

487
00:24:59,119 --> 00:25:02,720
Speaker 11: to be coming through, You're really not seeing customers in

488
00:25:02,760 --> 00:25:06,679
Speaker 11: any kind of financial distress. They're in healthier positions compared

489
00:25:06,720 --> 00:25:10,720
Speaker 11: to other prior downturns. The services business continues to grow,

490
00:25:10,800 --> 00:25:14,359
Speaker 11: so I think this helps, you know, helps offset some

491
00:25:14,400 --> 00:25:18,960
Speaker 11: of maybe the cyclical weakness that we'll probably start to

492
00:25:19,119 --> 00:25:21,760
Speaker 11: creep in into the business next year.

493
00:25:22,119 --> 00:25:24,600
Speaker 5: Talk to us about the cost cutting efforts the company

494
00:25:24,640 --> 00:25:26,720
Speaker 5: has gone through and how does that translate to its

495
00:25:26,720 --> 00:25:29,280
Speaker 5: margins and potentially its stock price as well.

496
00:25:30,560 --> 00:25:33,119
Speaker 11: Yeah, so, if you think about in the prior downturn,

497
00:25:33,400 --> 00:25:35,560
Speaker 11: KAT did a phenomenal job of taking a lot of

498
00:25:35,600 --> 00:25:39,840
Speaker 11: structural costs out of the business. They run at extremely

499
00:25:39,920 --> 00:25:42,160
Speaker 11: lean levels compared to a lot of their peers, which

500
00:25:42,160 --> 00:25:45,080
Speaker 11: is why they're able to put up best in class margins.

501
00:25:46,160 --> 00:25:49,240
Speaker 11: We're looking at probably margins, you know, pushing up close

502
00:25:49,280 --> 00:25:51,800
Speaker 11: to operating margins close to twenty percent this year, which

503
00:25:51,800 --> 00:25:53,600
Speaker 11: would be a record for them.

504
00:25:53,880 --> 00:25:55,840
Speaker 1: Who has got to pull really compete against on a

505
00:25:55,880 --> 00:25:56,760
Speaker 1: global basis.

506
00:25:57,960 --> 00:26:00,959
Speaker 11: If you think about it, it's a very solidated market.

507
00:26:01,320 --> 00:26:05,359
Speaker 11: Kamatsu is probably their their biggest competitor both on the

508
00:26:05,400 --> 00:26:09,240
Speaker 11: construction and the mining side. Mining is essentially duopoly with

509
00:26:09,680 --> 00:26:12,959
Speaker 11: Kamatsu and KAT. When it comes to construction, there's other peers.

510
00:26:13,000 --> 00:26:17,359
Speaker 11: Deers as a growing presence in the construction market. They

511
00:26:17,400 --> 00:26:19,480
Speaker 11: made an acquisition of work in a number of years

512
00:26:19,480 --> 00:26:23,440
Speaker 11: back to kind of expand their global breadth. CNH Industrial

513
00:26:23,960 --> 00:26:27,639
Speaker 11: a much smaller competitor on the construction side, Volvo, and

514
00:26:27,640 --> 00:26:31,560
Speaker 11: then you have another number of regional competitors over in Asia.

515
00:26:31,720 --> 00:26:34,640
Speaker 1: All right, great stuff as always nice getting an update

516
00:26:34,680 --> 00:26:38,720
Speaker 1: on one of our favorite companies, Caterpillar Irving, Texas construction equipment.

517
00:26:38,920 --> 00:26:40,639
Speaker 6: Chris Chieling a break in it all down for us.

518
00:26:40,680 --> 00:26:41,400
Speaker 6: He covers all.

519
00:26:41,359 --> 00:26:45,640
Speaker 1: Those industrial things for Bloomberg Intelligence. Joining us from Princeton,

520
00:26:45,640 --> 00:26:50,120
Speaker 1: New Jersey, the Global HQ, if you will, a Bloomberg Intelligence.

521
00:26:50,160 --> 00:26:52,160
Speaker 1: That's what we founded this thing down in Princeton, New Jersey.

522
00:26:52,200 --> 00:26:53,760
Speaker 1: Nobody's bothered as nobodyknew we.

523
00:26:53,640 --> 00:26:56,359
Speaker 6: Were there, and now we're four hundred strong all around

524
00:26:56,359 --> 00:26:56,760
Speaker 6: the world.

525
00:26:57,840 --> 00:27:02,200
Speaker 7: You're listening to the Team Kenjerl program Bloomberg Markets weekdays

526
00:27:02,240 --> 00:27:05,920
Speaker 7: at ten am Eastern on Bloomberg dot Com, the iHeartRadio app,

527
00:27:06,000 --> 00:27:08,920
Speaker 7: and the Bloomberg Business App, or listen on demand wherever

528
00:27:08,960 --> 00:27:10,080
Speaker 7: you get your podcasts.

529
00:27:11,960 --> 00:27:13,520
Speaker 6: Timber, thanks so much for joining us here.

530
00:27:13,880 --> 00:27:17,040
Speaker 1: Boy twenty twenty three has been so much better than

531
00:27:17,119 --> 00:27:21,720
Speaker 1: twenty twenty two, where you couldn't hide anywhere last year.

532
00:27:22,080 --> 00:27:24,480
Speaker 1: How are you guys positioned coming into this year and

533
00:27:25,119 --> 00:27:27,959
Speaker 1: maybe how has that changed since Boy markets have had

534
00:27:27,960 --> 00:27:29,560
Speaker 1: such a good first seven months of the year.

535
00:27:30,840 --> 00:27:33,000
Speaker 12: Yeah, no, thank you for having me, and thank you,

536
00:27:33,080 --> 00:27:37,040
Speaker 12: Paul for that question. Yeah, twenty twenty three has been

537
00:27:37,080 --> 00:27:40,679
Speaker 12: a surprise to everyone coming into the year. You know,

538
00:27:40,800 --> 00:27:44,600
Speaker 12: there's been widely expected calls of a recession economic slowdown,

539
00:27:44,680 --> 00:27:48,280
Speaker 12: which is still missing in action. The economy is pretty resilient.

540
00:27:48,840 --> 00:27:52,840
Speaker 12: As we came into the year, we have been very

541
00:27:53,640 --> 00:27:57,560
Speaker 12: concerned about the long term outlook. And the reason we

542
00:27:57,600 --> 00:28:00,320
Speaker 12: say that is there are a number of trends that

543
00:28:00,359 --> 00:28:04,560
Speaker 12: are coming together, Paul, which in the over the medium

544
00:28:04,560 --> 00:28:08,320
Speaker 12: to long term we think means higher volatility and higher

545
00:28:08,440 --> 00:28:11,080
Speaker 12: uncertainty in the markets. And let me just take a

546
00:28:11,119 --> 00:28:14,400
Speaker 12: step back into why we say that. It's a convergence

547
00:28:14,440 --> 00:28:17,080
Speaker 12: of number of mega trends that have been in making

548
00:28:17,119 --> 00:28:18,119
Speaker 12: for a long time.

549
00:28:18,600 --> 00:28:18,800
Speaker 13: You know.

550
00:28:18,840 --> 00:28:21,040
Speaker 12: The number one thing that we see is there's an

551
00:28:21,240 --> 00:28:25,399
Speaker 12: end to the cycle of almost like a decade of

552
00:28:25,520 --> 00:28:29,520
Speaker 12: easy money, zero interest rates. All of a sudden, we

553
00:28:29,600 --> 00:28:34,119
Speaker 12: have to we are contending with higher interest rates, tighter

554
00:28:34,240 --> 00:28:37,600
Speaker 12: credit conditions. But then you overlay that with some of

555
00:28:37,600 --> 00:28:40,480
Speaker 12: the longer term problems, such as all the things that

556
00:28:40,480 --> 00:28:44,000
Speaker 12: we're seeing related to the ecological changes. I mean, you

557
00:28:44,200 --> 00:28:49,640
Speaker 12: have heard we've experienced it ourselves, extreme weather, extreme heat, floods, droughts.

558
00:28:49,720 --> 00:28:52,800
Speaker 12: All that means is that we just don't know where

559
00:28:52,800 --> 00:28:55,760
Speaker 12: the next shock is going to come from, all kinds

560
00:28:55,800 --> 00:28:58,440
Speaker 12: of bottlenecks that we have to contend with. And then

561
00:28:58,520 --> 00:29:03,520
Speaker 12: you know, there's increased social polarization and increased political polarization,

562
00:29:04,120 --> 00:29:08,320
Speaker 12: all of that, and now we're at this very special

563
00:29:08,360 --> 00:29:12,800
Speaker 12: inflection point for the artificial intelligence technology and how that's

564
00:29:12,840 --> 00:29:16,040
Speaker 12: being disseminated and rolled out, and is that going to

565
00:29:16,160 --> 00:29:20,640
Speaker 12: just widen the divisions that we have in our society.

566
00:29:21,040 --> 00:29:24,280
Speaker 12: All those things when we combine them, Yes, the economy

567
00:29:24,360 --> 00:29:27,440
Speaker 12: is way more resilient than anybody expected in twenty twenty three.

568
00:29:27,800 --> 00:29:30,240
Speaker 12: But longer term, that just tells us that we really

569
00:29:30,280 --> 00:29:33,800
Speaker 12: need to be laser focused on managing risks for our

570
00:29:33,800 --> 00:29:34,920
Speaker 12: client portfolios.

571
00:29:35,240 --> 00:29:35,400
Speaker 14: NIM.

572
00:29:35,680 --> 00:29:39,000
Speaker 5: With that type of backdrop in the economy, how are

573
00:29:39,080 --> 00:29:41,440
Speaker 5: you positioning, what are you buying, what are you selling?

574
00:29:41,440 --> 00:29:44,520
Speaker 5: When it comes to being a portfolio manager managing that

575
00:29:44,560 --> 00:29:46,000
Speaker 5: money for your clients.

576
00:29:46,840 --> 00:29:51,120
Speaker 12: Yeah, absolutely so. For the equity portion of the portfolio,

577
00:29:51,280 --> 00:29:54,560
Speaker 12: the best way we can manage risk for the client

578
00:29:54,600 --> 00:29:58,760
Speaker 12: portfolios is to focus on high quality stocks. High quality

579
00:29:58,800 --> 00:30:02,320
Speaker 12: stocks which are trying to to solve long term secular

580
00:30:02,400 --> 00:30:08,520
Speaker 12: problems related to water and resource efficiency, related to aging demographics.

581
00:30:08,800 --> 00:30:12,000
Speaker 12: You know, those are the things that we're really focused on. Well,

582
00:30:12,120 --> 00:30:15,360
Speaker 12: high quality companies run by very strong managements that are

583
00:30:15,400 --> 00:30:19,480
Speaker 12: good stewards of capital and labor, and our adept at

584
00:30:19,760 --> 00:30:23,200
Speaker 12: responded swiftly to any kind of changing trends that happen,

585
00:30:23,320 --> 00:30:28,080
Speaker 12: be supply change, chain bottlenecks or anything else that might

586
00:30:28,120 --> 00:30:28,440
Speaker 12: come up.

587
00:30:28,520 --> 00:30:32,320
Speaker 5: Right, what particular industries or sectors can you get into

588
00:30:32,360 --> 00:30:33,960
Speaker 5: that to be more specific?

589
00:30:34,760 --> 00:30:38,040
Speaker 12: Yeah, absolutely so. Some of the companies that we really

590
00:30:38,160 --> 00:30:40,560
Speaker 12: like a lot are the ones that are actually solving

591
00:30:40,640 --> 00:30:45,240
Speaker 12: these problems related to water and energy efficiency. Some that

592
00:30:45,280 --> 00:30:48,040
Speaker 12: come to mind right away are like a Schneider Electric.

593
00:30:48,320 --> 00:30:51,760
Speaker 12: It's an European company based in France, one of the

594
00:30:51,920 --> 00:30:57,360
Speaker 12: largest electrical products companies, and Schneider makes everything from switch gears,

595
00:30:57,480 --> 00:31:04,000
Speaker 12: circuit breakers, automation. They're providing products and solutions that are

596
00:31:04,000 --> 00:31:11,120
Speaker 12: helping save energy, energy usage for companies, for buildings, for

597
00:31:11,280 --> 00:31:15,640
Speaker 12: industrial processes. So that's a stock that we like very much. Similarly,

598
00:31:15,680 --> 00:31:20,840
Speaker 12: there's Eton PLC. Eton actually provided the results today this morning,

599
00:31:20,920 --> 00:31:25,240
Speaker 12: again double digit growth in revenues, record margins, very strong

600
00:31:25,280 --> 00:31:29,240
Speaker 12: backlock again very much driven by the same secular trends

601
00:31:29,280 --> 00:31:34,960
Speaker 12: in decarbonization and increasing use of energy efficiency products because

602
00:31:35,240 --> 00:31:40,800
Speaker 12: we're having this huge transition to a sustainable infrastructure, more

603
00:31:41,120 --> 00:31:46,680
Speaker 12: demand for renewable transition to renewable energy sources and so forth.

604
00:31:46,920 --> 00:31:50,240
Speaker 12: And lastly, I will give you another small stock. Actually

605
00:31:50,240 --> 00:31:53,800
Speaker 12: it's a company based in Milwaukee, Wisconsin, and it's Badger

606
00:31:53,840 --> 00:31:57,960
Speaker 12: Meter and they make water meters, fluid meters, and their

607
00:31:58,080 --> 00:32:03,960
Speaker 12: customers are utilities, moots of other type of businesses that

608
00:32:04,000 --> 00:32:08,160
Speaker 12: are very focused on conserving water and providing high quality

609
00:32:08,240 --> 00:32:12,200
Speaker 12: and pure water for customers. So again they're seeing record

610
00:32:12,200 --> 00:32:16,240
Speaker 12: demand for their products and solutions as the demand for

611
00:32:16,320 --> 00:32:18,480
Speaker 12: these types of products continues to grow.

612
00:32:19,000 --> 00:32:21,400
Speaker 1: So Nim, when you look at your across your portfolio,

613
00:32:21,480 --> 00:32:25,640
Speaker 1: are you, guys, what's what's your waiting equity versus fixed

614
00:32:25,680 --> 00:32:29,320
Speaker 1: income today and maybe and maybe other assets versus maybe

615
00:32:30,440 --> 00:32:33,040
Speaker 1: more normalized time. Are you overweight equities underweight equities? How

616
00:32:33,040 --> 00:32:34,200
Speaker 1: do you think about that now?

617
00:32:35,200 --> 00:32:35,600
Speaker 13: Yeah?

618
00:32:35,640 --> 00:32:40,320
Speaker 12: Absolutely so. One of the first things I'll say, Paul,

619
00:32:40,400 --> 00:32:43,040
Speaker 12: we're the first to admit on the fertility of the

620
00:32:43,080 --> 00:32:47,000
Speaker 12: short term macro forecast right. So we have a strategic

621
00:32:47,280 --> 00:32:51,840
Speaker 12: asset allocation for equities and fixed income, and even though

622
00:32:51,880 --> 00:32:54,960
Speaker 12: we have been coming into this year we were slightly

623
00:32:55,040 --> 00:32:59,760
Speaker 12: underweight equities versus our strategic allocation target. One of the

624
00:32:59,800 --> 00:33:05,280
Speaker 12: things that the equity portfolio has done quite well because

625
00:33:05,320 --> 00:33:08,880
Speaker 12: of the types of companies that we own. But looking forward,

626
00:33:09,040 --> 00:33:12,720
Speaker 12: I think for us, we really don't want to get

627
00:33:12,800 --> 00:33:17,000
Speaker 12: too worried about the tactical calls on equities versus fixed income.

628
00:33:17,360 --> 00:33:20,600
Speaker 12: Fixed income is a very viable alternative for our clients now,

629
00:33:20,720 --> 00:33:23,680
Speaker 12: much more viable than it has been for years, so

630
00:33:23,960 --> 00:33:26,760
Speaker 12: with a higher yield. So that's definitely close to our

631
00:33:26,800 --> 00:33:30,880
Speaker 12: strategic weight on the fixed income there and for our equities,

632
00:33:30,920 --> 00:33:33,400
Speaker 12: even though we don't see a major dislocation where we

633
00:33:33,440 --> 00:33:36,280
Speaker 12: need to be overweight or even at benchmark, we want

634
00:33:36,320 --> 00:33:40,520
Speaker 12: to have that drive powder available in cash, especially with

635
00:33:40,560 --> 00:33:43,200
Speaker 12: the money market yields where you see them today, we

636
00:33:43,240 --> 00:33:47,160
Speaker 12: want to have that small cushion available so that if

637
00:33:47,160 --> 00:33:50,480
Speaker 12: there is a dislocation, we can continuously add that exposure.

638
00:33:50,680 --> 00:33:53,400
Speaker 5: Do you said money market funds? Something Paul and I

639
00:33:53,440 --> 00:33:56,440
Speaker 5: discuss often, is it just as simply what you can

640
00:33:56,480 --> 00:33:58,920
Speaker 5: yield in that space, and if so what's the catalyst

641
00:33:59,040 --> 00:34:00,960
Speaker 5: for you to move that money toward equities?

642
00:34:01,800 --> 00:34:05,040
Speaker 12: Yeah, you know, Jess, it really comes down to you know,

643
00:34:05,240 --> 00:34:09,160
Speaker 12: constantly we're evaluating the risk reward, right, so when we

644
00:34:09,200 --> 00:34:12,200
Speaker 12: talk about being very risk aware, we're really focused on

645
00:34:12,280 --> 00:34:15,680
Speaker 12: making sure that you know, what's the better alternative. So

646
00:34:15,760 --> 00:34:19,920
Speaker 12: for the money markets, as a cash alternative has been

647
00:34:20,040 --> 00:34:22,879
Speaker 12: yielding four and a half percent higher than that. That's

648
00:34:22,880 --> 00:34:26,000
Speaker 12: a pretty nice yield. So you know, if the catalyst

649
00:34:26,040 --> 00:34:28,799
Speaker 12: to move that into fixed income would be if we

650
00:34:28,840 --> 00:34:32,280
Speaker 12: start to see if we can long lock in higher

651
00:34:32,360 --> 00:34:35,240
Speaker 12: yields than that over longer periods of time, that's always

652
00:34:35,320 --> 00:34:37,719
Speaker 12: a catalyst. And then on equities if we see a

653
00:34:37,760 --> 00:34:41,400
Speaker 12: major dislocation. So just to give you an example, some

654
00:34:41,560 --> 00:34:44,840
Speaker 12: of our technology stocks. You know, as you know, the

655
00:34:45,440 --> 00:34:48,640
Speaker 12: rally in the s P five hundred and and the

656
00:34:48,680 --> 00:34:52,560
Speaker 12: major indices has been primarily driven by the Magnificent seven

657
00:34:52,719 --> 00:34:56,720
Speaker 12: so far. So and we've owned several of these stocks

658
00:34:56,760 --> 00:34:59,440
Speaker 12: into this year. We will continue to own them because

659
00:34:59,480 --> 00:35:03,319
Speaker 12: of the long term growth outlook, but we are rebalancing.

660
00:35:03,400 --> 00:35:07,359
Speaker 12: We are taking profits on those stocks and putting them

661
00:35:07,360 --> 00:35:10,000
Speaker 12: into some of the laggards for the year. So we

662
00:35:10,040 --> 00:35:13,719
Speaker 12: will continue to take those opportunities, but we need to

663
00:35:13,719 --> 00:35:17,279
Speaker 12: see a major dislocation inequities to start moving the yash.

664
00:35:18,200 --> 00:35:20,560
Speaker 1: All right, Hey Niamer, thanks so much for joining us.

665
00:35:20,560 --> 00:35:24,800
Speaker 1: Neri kang Cio, Senior portfolio manager, north Star Asset Management,

666
00:35:24,800 --> 00:35:26,800
Speaker 1: getting her call on this market that came in a

667
00:35:26,840 --> 00:35:28,520
Speaker 1: little bit underweight this year.

668
00:35:29,640 --> 00:35:32,759
Speaker 7: You're listening to the tape can's our live program Bloomberg

669
00:35:32,840 --> 00:35:36,400
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

670
00:35:36,480 --> 00:35:38,440
Speaker 7: tune in app, Bloomberg dot Com, and.

671
00:35:38,400 --> 00:35:39,719
Speaker 10: The Bloomberg Business App.

672
00:35:39,760 --> 00:35:42,560
Speaker 7: You can also listen live on Amazon Alexa from our

673
00:35:42,600 --> 00:35:48,600
Speaker 7: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

674
00:35:48,560 --> 00:35:52,600
Speaker 5: Jasmin Good Paul Sweeney here in the Bloomberg Interactive Brokers studio,

675
00:35:52,719 --> 00:35:54,759
Speaker 5: and we're gonna switch things up and do our c

676
00:35:54,920 --> 00:35:58,160
Speaker 5: suite conversation of taking a look at what's happening with

677
00:35:58,280 --> 00:36:02,400
Speaker 5: the first watch. This is Tickerson Paul FWRG. If you're

678
00:36:02,440 --> 00:36:05,840
Speaker 5: looking at this stock up about two percent today after

679
00:36:05,880 --> 00:36:09,160
Speaker 5: the earnings for the latest quarter. The profit in sales

680
00:36:09,239 --> 00:36:12,400
Speaker 5: did beat, but they also did see some higher expenses there.

681
00:36:12,520 --> 00:36:14,560
Speaker 5: But looking at this stock here date up more than

682
00:36:14,600 --> 00:36:17,960
Speaker 5: forty percent. So who better to chat with us about

683
00:36:18,000 --> 00:36:20,719
Speaker 5: when it comes to this latest earnings report for the

684
00:36:20,719 --> 00:36:23,000
Speaker 5: company as well as the outlook for the restaurant industry

685
00:36:23,040 --> 00:36:27,640
Speaker 5: than Chris Tomasso, CEO at this breakfast and restaurant lunch

686
00:36:27,719 --> 00:36:30,520
Speaker 5: chain here for first watch. Chris, thank you so much

687
00:36:30,560 --> 00:36:33,840
Speaker 5: for joining us on zoom to chat with Paul and myself.

688
00:36:33,880 --> 00:36:35,920
Speaker 5: I'll start off with talk to us and walk us

689
00:36:35,920 --> 00:36:38,960
Speaker 5: through this latest earnings report. And what you're seeing us

690
00:36:38,960 --> 00:36:42,000
Speaker 5: for is when it comes to the consumer and spending,

691
00:36:42,000 --> 00:36:43,320
Speaker 5: what it means for the economy.

692
00:36:44,560 --> 00:36:49,120
Speaker 15: Yeah, we had a great quarter. Overall. Top line performance

693
00:36:49,200 --> 00:36:52,360
Speaker 15: was great. We were able to take a lot to

694
00:36:52,360 --> 00:36:56,360
Speaker 15: the bottom line thanks to some relief from commodity inflation

695
00:36:56,400 --> 00:36:58,040
Speaker 15: that we'd seen in previous quarters.

696
00:36:58,640 --> 00:37:00,880
Speaker 13: Our consumer has been extremely resilient.

697
00:37:01,960 --> 00:37:04,640
Speaker 15: You know, the restaurant industry has been challenged lately, but

698
00:37:04,719 --> 00:37:08,120
Speaker 15: we haven't seen that. We've seen, you know, tremendous visitation

699
00:37:08,360 --> 00:37:12,279
Speaker 15: and the consumer opting for the full experience when they

700
00:37:12,320 --> 00:37:14,600
Speaker 15: come in our restaurants. They're ordering the beverages, they're ordering

701
00:37:14,600 --> 00:37:17,000
Speaker 15: the add on. So, like I said, a great quarter

702
00:37:17,040 --> 00:37:18,280
Speaker 15: by our team top to bottom.

703
00:37:18,880 --> 00:37:19,920
Speaker 4: All right, talk to.

704
00:37:19,960 --> 00:37:21,640
Speaker 1: Us about kind of where you guys are in your

705
00:37:21,760 --> 00:37:25,880
Speaker 1: development here, how many restaurants you have owned versus franchisees

706
00:37:25,920 --> 00:37:27,200
Speaker 1: and kind of what what's the growth plan.

707
00:37:28,239 --> 00:37:31,319
Speaker 15: Yeah, we have just over four hundred and thirty restaurants

708
00:37:32,080 --> 00:37:35,960
Speaker 15: in twenty nine states. We're predominantly company owned. We're about

709
00:37:36,040 --> 00:37:39,280
Speaker 15: ninety percent company owned. We have excuse me, eighty percent

710
00:37:39,320 --> 00:37:42,560
Speaker 15: company owned. But we also announced with this earnings that

711
00:37:43,080 --> 00:37:47,000
Speaker 15: we've acquired some franchise groups and converted those two company

712
00:37:47,000 --> 00:37:49,640
Speaker 15: owned restaurants. So that's that's part of our overall value

713
00:37:49,680 --> 00:37:50,879
Speaker 15: creation strategy as well.

714
00:37:51,280 --> 00:37:54,600
Speaker 5: We're exactly if you're looking more the demographics through the US,

715
00:37:54,680 --> 00:37:56,440
Speaker 5: where are you based in what states?

716
00:37:57,880 --> 00:38:01,680
Speaker 15: So we're we're again we're in twenty nine states, but

717
00:38:01,760 --> 00:38:04,200
Speaker 15: we're all the way from Florida up the East coast

718
00:38:04,200 --> 00:38:07,920
Speaker 15: to New Jersey, over to you know, Illinois, Chicago, Milwaukee,

719
00:38:08,000 --> 00:38:10,640
Speaker 15: and all the way out west to Denver, Colorado. But

720
00:38:10,719 --> 00:38:14,880
Speaker 15: our big markets are Texas, Colorado, Arizona.

721
00:38:14,239 --> 00:38:14,880
Speaker 13: And Florida.

722
00:38:15,320 --> 00:38:17,960
Speaker 15: But we have a you know, a big presence in

723
00:38:18,000 --> 00:38:19,719
Speaker 15: the Midwest as well.

724
00:38:19,880 --> 00:38:22,560
Speaker 1: So talk to us about I guess one of the

725
00:38:22,600 --> 00:38:25,600
Speaker 1: issues just kind of inflation. How do you see it

726
00:38:25,640 --> 00:38:27,680
Speaker 1: in your business model to what degree have you been

727
00:38:27,719 --> 00:38:29,560
Speaker 1: able to pass along to your consumers?

728
00:38:29,560 --> 00:38:30,680
Speaker 6: How do you guys dealt with that?

729
00:38:32,360 --> 00:38:35,239
Speaker 15: Yeah, you know this this pass quarter, thankfully, we saw

730
00:38:35,280 --> 00:38:37,840
Speaker 15: a lot of relief. We were in a unique situation

731
00:38:37,960 --> 00:38:40,960
Speaker 15: last year where we because we're a breakfast and brunch restaurant,

732
00:38:41,040 --> 00:38:45,000
Speaker 15: we obviously are heavily relyant on eggs and avian fluid

733
00:38:45,040 --> 00:38:46,879
Speaker 15: was a issue for us last year. So we saw

734
00:38:47,200 --> 00:38:50,520
Speaker 15: outsized commodity inflation last year and we're starting to see

735
00:38:50,520 --> 00:38:54,399
Speaker 15: that that temper. I will say that, you know, we

736
00:38:54,440 --> 00:38:56,960
Speaker 15: were I would call us a laggard as it related

737
00:38:57,000 --> 00:38:59,640
Speaker 15: to price increases compared to others in our industry, and

738
00:38:59,680 --> 00:39:01,719
Speaker 15: in fact, in twenty twenty one, we didn't take any

739
00:39:01,760 --> 00:39:04,799
Speaker 15: pricing at all, and our focus there really was on

740
00:39:04,880 --> 00:39:07,719
Speaker 15: getting the consumer back in our restaurants, getting them back

741
00:39:07,760 --> 00:39:09,839
Speaker 15: into a normal cadence of visiting us, and we didn't

742
00:39:09,840 --> 00:39:13,120
Speaker 15: want price to be a factor that kept them from

743
00:39:13,160 --> 00:39:15,680
Speaker 15: doing that. So as we got out of COVID as

744
00:39:15,960 --> 00:39:18,719
Speaker 15: a concept, we wanted to make sure that we came

745
00:39:18,760 --> 00:39:21,520
Speaker 15: back strong, and so we've been very conservative in our

746
00:39:21,560 --> 00:39:24,680
Speaker 15: pricing and we think that's what's led to our traffic

747
00:39:24,760 --> 00:39:27,360
Speaker 15: increases over the past couple of years.

748
00:39:27,520 --> 00:39:29,920
Speaker 5: What are you seeing with labor costs in wages?

749
00:39:32,080 --> 00:39:35,600
Speaker 15: Labor costs continue to increase, We plan for that. We

750
00:39:35,640 --> 00:39:38,040
Speaker 15: know what our labor and inflation is expected to be.

751
00:39:38,440 --> 00:39:42,239
Speaker 15: Most of it comes from statutory minimum wage increases, specifically

752
00:39:42,280 --> 00:39:44,200
Speaker 15: in three of those markets that I just mentioned to

753
00:39:44,280 --> 00:39:47,200
Speaker 15: you that are big for us, which is Arizona, Colorado,

754
00:39:47,239 --> 00:39:50,040
Speaker 15: and Florida. So we know what those increases are, those

755
00:39:50,080 --> 00:39:51,920
Speaker 15: planned increases, and we know when they're going to hit,

756
00:39:51,960 --> 00:39:53,680
Speaker 15: so we're able to plan appropriately.

757
00:39:54,280 --> 00:39:57,520
Speaker 1: On the competitive front, what is your or who was

758
00:39:57,520 --> 00:40:00,279
Speaker 1: your kind of some of your main competition is like

759
00:40:00,280 --> 00:40:03,759
Speaker 1: a Starbucks who's trying to brand you know, start of

760
00:40:03,800 --> 00:40:06,399
Speaker 1: Coffee now offers so much more. Who would it really

761
00:40:06,440 --> 00:40:07,600
Speaker 1: your competitors.

762
00:40:08,520 --> 00:40:11,120
Speaker 15: One of the most exciting things about our category, frankly,

763
00:40:11,239 --> 00:40:14,200
Speaker 15: is that most of the meal occasions that at breakfast

764
00:40:14,200 --> 00:40:15,120
Speaker 15: are still eating at home.

765
00:40:15,560 --> 00:40:18,239
Speaker 13: So that's our that's our main competition.

766
00:40:18,360 --> 00:40:21,800
Speaker 15: But if you think about it, you know anybody who's

767
00:40:21,880 --> 00:40:25,200
Speaker 15: who's uh attracting a consumer in the morning hours as

768
00:40:25,200 --> 00:40:28,319
Speaker 15: a competitor to ours, we really feel like we're differentiated.

769
00:40:28,360 --> 00:40:31,160
Speaker 15: We have the speeding convenience of a of a quick server,

770
00:40:31,280 --> 00:40:34,000
Speaker 15: a fast casual but in a in a full service

771
00:40:34,080 --> 00:40:38,120
Speaker 15: environment using high quality ingredients. So we we offer a

772
00:40:38,120 --> 00:40:41,400
Speaker 15: different occasion and a and a different opportunity for the consumer,

773
00:40:41,640 --> 00:40:43,960
Speaker 15: and we think that's what's helped differentiate us for the

774
00:40:43,960 --> 00:40:45,240
Speaker 15: forty years that we've been around.

775
00:40:45,480 --> 00:40:48,520
Speaker 5: How do you view the direction of the economy whenever

776
00:40:48,560 --> 00:40:50,840
Speaker 5: customers are coming in spending.

777
00:40:52,600 --> 00:40:56,880
Speaker 13: So a typical bell weather for you know, seares of

778
00:40:57,280 --> 00:40:58,360
Speaker 13: a consumer.

779
00:40:57,920 --> 00:41:01,080
Speaker 15: Pulled back, typically in the restaurant industry come from things

780
00:41:01,239 --> 00:41:04,720
Speaker 15: like managing their check so maybe not ordering a beverage

781
00:41:04,760 --> 00:41:07,400
Speaker 15: and having water and things like that. We've seen our

782
00:41:07,440 --> 00:41:11,640
Speaker 15: dining room traffic actually increase over the last quarter, and

783
00:41:11,760 --> 00:41:14,960
Speaker 15: also we're not seeing any check management whatsoever in the

784
00:41:15,000 --> 00:41:17,520
Speaker 15: dining rooms. Where we've seen some pressure has been in

785
00:41:17,560 --> 00:41:22,440
Speaker 15: the third party off premise channel, which exploded during COVID

786
00:41:22,440 --> 00:41:25,000
Speaker 15: and post COVID. In fact, we went from an off

787
00:41:25,040 --> 00:41:27,480
Speaker 15: prem business that was about five percent of our overall

788
00:41:27,480 --> 00:41:31,080
Speaker 15: sales to at one point upwards of twenty percent, and

789
00:41:31,080 --> 00:41:33,920
Speaker 15: it's settled down now around eighteen. But you are starting

790
00:41:33,960 --> 00:41:36,040
Speaker 15: to see not just with us, but in the industry

791
00:41:36,080 --> 00:41:39,960
Speaker 15: in general, that third party delivery occasion, which is the

792
00:41:40,000 --> 00:41:44,640
Speaker 15: most expensive way to use a restaurant starting to soften

793
00:41:44,800 --> 00:41:47,279
Speaker 15: and we're seeing that as well.

794
00:41:47,560 --> 00:41:50,200
Speaker 1: So your company went public September thirty at twenty twenty

795
00:41:50,280 --> 00:41:53,680
Speaker 1: one by our data here, talk to us about just

796
00:41:53,719 --> 00:41:57,279
Speaker 1: discuss what was the IPO discussion for you guys. How

797
00:41:57,280 --> 00:41:59,799
Speaker 1: did you decide upon an IPO and why did you

798
00:41:59,840 --> 00:42:01,840
Speaker 1: do it with then and kind of what was the

799
00:42:01,920 --> 00:42:03,080
Speaker 1: rationale for going public.

800
00:42:04,360 --> 00:42:06,880
Speaker 15: Yeah, So we've been the fastest growing full service restaurant

801
00:42:06,920 --> 00:42:09,080
Speaker 15: company in America for the last three years, and I

802
00:42:09,080 --> 00:42:11,799
Speaker 15: expect we'll get that title again this year with the

803
00:42:11,840 --> 00:42:13,040
Speaker 15: growth that we have teed up.

804
00:42:13,760 --> 00:42:15,440
Speaker 13: We also have forty years of experience.

805
00:42:15,520 --> 00:42:19,440
Speaker 15: So we had been with three private equity partners and

806
00:42:19,600 --> 00:42:21,640
Speaker 15: had just determined that it was the right time for

807
00:42:21,760 --> 00:42:25,640
Speaker 15: us to go public as a way to you know,

808
00:42:25,719 --> 00:42:28,239
Speaker 15: capitalize the business. And we had to wait for the

809
00:42:28,320 --> 00:42:32,520
Speaker 15: right time with the market to be ready to accept

810
00:42:32,520 --> 00:42:35,799
Speaker 15: the restaurant company IPO. And we feel like we kind

811
00:42:35,840 --> 00:42:38,960
Speaker 15: of opened the door back to restaurant IPOs, which you've

812
00:42:39,000 --> 00:42:40,520
Speaker 15: seen a number since then.

813
00:42:40,600 --> 00:42:42,120
Speaker 6: Hey, Chris, just about thirty seconds left.

814
00:42:42,160 --> 00:42:44,719
Speaker 1: But my restaurant analyst here Bloomberg just emailed in and

815
00:42:44,760 --> 00:42:47,719
Speaker 1: said the one shift model is great for labor retention. Employees'

816
00:42:47,760 --> 00:42:50,120
Speaker 1: work normal hours and love it. Talk to us about

817
00:42:50,160 --> 00:42:50,719
Speaker 1: that real quick.

818
00:42:51,719 --> 00:42:54,400
Speaker 15: Well, your analyst is smart because it's it's definitely a

819
00:42:54,480 --> 00:42:57,600
Speaker 15: key differentiator for us. Our folks work one shift to day,

820
00:42:58,280 --> 00:43:00,520
Speaker 15: Our hours are only seven am to two thirds. They

821
00:43:00,560 --> 00:43:02,520
Speaker 15: get to be home with their families at night, make

822
00:43:02,560 --> 00:43:05,080
Speaker 15: a great living, and still have a work life balance

823
00:43:05,080 --> 00:43:07,840
Speaker 15: and a quality of life that's really unrivaled in our industry.

824
00:43:08,239 --> 00:43:10,640
Speaker 1: Oh interesting, all right, Chris, thanks for joining us. Really

825
00:43:10,640 --> 00:43:14,080
Speaker 1: appreciate you taking the time. Chris Tomasso, CEO First Watch

826
00:43:14,600 --> 00:43:16,319
Speaker 1: Restaurant company. I was not aware of it. Now there's

827
00:43:16,360 --> 00:43:17,560
Speaker 1: another one. I've got to go to.

828
00:43:17,680 --> 00:43:18,680
Speaker 6: Mars in New Jersey.

829
00:43:18,719 --> 00:43:19,480
Speaker 5: There are I looked at.

830
00:43:19,560 --> 00:43:23,560
Speaker 6: U did Sweet Green, yes yesterday. I'll do First Watch

831
00:43:23,600 --> 00:43:24,359
Speaker 6: this weekend, and.

832
00:43:24,280 --> 00:43:27,800
Speaker 5: Then at some point Cava Cava. That's another on the list.

833
00:43:27,840 --> 00:43:28,120
Speaker 10: All right.

834
00:43:28,160 --> 00:43:31,480
Speaker 1: First Watch FWRG is a ticker stocks at a fifty

835
00:43:31,520 --> 00:43:34,400
Speaker 1: two weeks high. They just reported some some good numbers,

836
00:43:34,400 --> 00:43:37,320
Speaker 1: So everything's good there at First Watch based down.

837
00:43:37,200 --> 00:43:40,480
Speaker 6: In Florida, stock up over forty today. Yep, not too bad,

838
00:43:40,480 --> 00:43:41,320
Speaker 6: happy shareholders.

839
00:43:41,560 --> 00:43:44,640
Speaker 7: You're listening to the tape Cat's Are Live program Bloomberg

840
00:43:44,719 --> 00:43:48,319
Speaker 7: markets weekdays at ten am Eastern on Bloomberg Radio, the

841
00:43:48,360 --> 00:43:51,600
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

842
00:43:51,640 --> 00:43:54,440
Speaker 7: You can also listen live on Amazon Alexa from our

843
00:43:54,480 --> 00:43:59,759
Speaker 7: flagship New York station, Just say Alexa, play Bloomberg eleven thirty.

844
00:44:00,120 --> 00:44:02,920
Speaker 1: Just men, Paul Sweeney here in our Bloomberg Interactive Brokers Studio,

845
00:44:02,920 --> 00:44:06,400
Speaker 1: and of course we are live streaming this thing on YouTube.

846
00:44:06,440 --> 00:44:08,840
Speaker 1: To just head over to YouTube and search Bloomberg Global

847
00:44:08,840 --> 00:44:11,000
Speaker 1: News and that'll get you there. In our c suite

848
00:44:11,040 --> 00:44:14,080
Speaker 1: discussion today, we'll talk reet. We do that with Jim Taylor,

849
00:44:14,200 --> 00:44:17,120
Speaker 1: CEO Brixmore. Brickxmoor is a New York Stock Exchange traded

850
00:44:17,160 --> 00:44:20,200
Speaker 1: company b RX as your symbol, about six point seven

851
00:44:20,239 --> 00:44:23,280
Speaker 1: billion dollars in market cap. I look at the comp

852
00:44:23,320 --> 00:44:26,279
Speaker 1: function compel on the Bloomberg and it shows me over

853
00:44:26,280 --> 00:44:29,040
Speaker 1: to the last five years, Bricksmoor has had a compound

854
00:44:29,080 --> 00:44:31,040
Speaker 1: and on your return of about ten point four percent,

855
00:44:31,360 --> 00:44:34,480
Speaker 1: and that compares very well with the Bloomberg Reat Index

856
00:44:34,520 --> 00:44:35,720
Speaker 1: about three point six percent.

857
00:44:36,000 --> 00:44:37,120
Speaker 6: A good performance there.

858
00:44:37,280 --> 00:44:42,160
Speaker 5: The landlord behind retailer's TJ Max, Kroger, Dollar Tree Publics.

859
00:44:41,760 --> 00:44:44,680
Speaker 6: And also Jim thanks for joining us here in our studio.

860
00:44:44,719 --> 00:44:45,560
Speaker 6: Thank you for having me.

861
00:44:45,719 --> 00:44:48,680
Speaker 1: Also, bed Bath and Beyond what I'm from the New

862
00:44:48,760 --> 00:44:51,080
Speaker 1: Jersey so this is a this is a Jersey company.

863
00:44:51,800 --> 00:44:52,400
Speaker 6: They're gone.

864
00:44:53,120 --> 00:44:54,840
Speaker 1: How much exposure did you have the bed bath and

865
00:44:54,920 --> 00:44:57,720
Speaker 1: beyond and what do you do with that space?

866
00:44:57,800 --> 00:45:00,560
Speaker 6: And what's the rent upside? Maybe I don't know, you know, the.

867
00:45:00,520 --> 00:45:03,960
Speaker 16: Rent upside is actually very significant. We're in a period

868
00:45:03,960 --> 00:45:08,440
Speaker 16: of time where there's a supply demand balance that's very

869
00:45:08,520 --> 00:45:11,960
Speaker 16: much in favor of landlords because there's been basically no

870
00:45:12,080 --> 00:45:14,960
Speaker 16: new supply built over the last ten to fifteen years.

871
00:45:15,200 --> 00:45:17,799
Speaker 16: So when we have tenant disruption, which you always have

872
00:45:17,920 --> 00:45:21,000
Speaker 16: in this industry where a retail landlord, we're not a retailer,

873
00:45:22,160 --> 00:45:25,880
Speaker 16: those tenants, when you get that space back, oftentimes present

874
00:45:25,920 --> 00:45:28,919
Speaker 16: a significant opportunity for upside for us. So we bring

875
00:45:28,960 --> 00:45:36,600
Speaker 16: in better tenants, as I like to say, at better rents, specialty, grocer, value, apparel, fitness, health, wellness.

876
00:45:36,920 --> 00:45:39,120
Speaker 16: These are the kind of uses that when you bring

877
00:45:39,200 --> 00:45:42,480
Speaker 16: into what was a failing retailer, not only do you

878
00:45:42,480 --> 00:45:45,000
Speaker 16: make a great return, but you help the balance of

879
00:45:45,040 --> 00:45:48,080
Speaker 16: the shopping center and you drive docupency and rate on

880
00:45:48,160 --> 00:45:50,839
Speaker 16: the small shops as you bring in a more relevant use,

881
00:45:51,320 --> 00:45:54,520
Speaker 16: So I expect we'll continue to see some disruption. I

882
00:45:54,520 --> 00:45:57,440
Speaker 16: think the real question, and we've demonstrated it. Thank you

883
00:45:57,520 --> 00:46:00,400
Speaker 16: for highlighting our returns is how you were on to

884
00:46:00,520 --> 00:46:03,799
Speaker 16: it and is it an opportunity to create value for

885
00:46:03,840 --> 00:46:07,520
Speaker 16: your stakeholders, which we see there it clearly is.

886
00:46:07,680 --> 00:46:09,319
Speaker 6: I didn't know this, he's a uva guy.

887
00:46:09,520 --> 00:46:15,040
Speaker 5: Oh there you go. What ships that have been crucial

888
00:46:15,239 --> 00:46:17,439
Speaker 5: to your company have you seen over the past year?

889
00:46:17,600 --> 00:46:20,439
Speaker 5: In what direction do you think this leaves the reed

890
00:46:20,480 --> 00:46:22,200
Speaker 5: space moving forward over the next year.

891
00:46:22,480 --> 00:46:25,480
Speaker 16: Well, I think open air retail has been stronger for

892
00:46:25,560 --> 00:46:28,359
Speaker 16: longer than people appreciate. I think it got caught up

893
00:46:28,400 --> 00:46:31,719
Speaker 16: in the bricks and mortar retail is dead narrative for

894
00:46:31,760 --> 00:46:35,239
Speaker 16: the last several years, which we weren't seeing. You know,

895
00:46:35,280 --> 00:46:37,960
Speaker 16: our grocers were doing well, as you know, through the pandemic,

896
00:46:38,000 --> 00:46:40,680
Speaker 16: they not only saw a bump, but after the pandemic

897
00:46:41,040 --> 00:46:42,400
Speaker 16: they've retained it.

898
00:46:42,400 --> 00:46:45,680
Speaker 6: It's also a very profitable.

899
00:46:45,120 --> 00:46:49,000
Speaker 16: Channel for retailers wishing to connect with the customer. So

900
00:46:49,080 --> 00:46:52,839
Speaker 16: as we move forward, you know, what's exciting for us

901
00:46:52,960 --> 00:46:56,120
Speaker 16: is that we're seeing the funnel of potential uses to

902
00:46:56,120 --> 00:46:58,839
Speaker 16: come in a shopping center as broad as it's ever been,

903
00:46:59,320 --> 00:47:03,360
Speaker 16: so not only traditional uses like grocery and health and wellness,

904
00:47:03,440 --> 00:47:06,479
Speaker 16: but all native retailers looking to come out of the mall,

905
00:47:06,960 --> 00:47:10,440
Speaker 16: looking for lower costs of documancy, looking for more immediacy

906
00:47:10,480 --> 00:47:13,960
Speaker 16: with the customer. So as I look forward, I'm pretty

907
00:47:13,960 --> 00:47:16,840
Speaker 16: bullish on the ability to continue to drive growth in

908
00:47:16,920 --> 00:47:20,600
Speaker 16: returns given that basic supply demand picture.

909
00:47:21,600 --> 00:47:24,440
Speaker 6: What's a typical property for you? Guys like, what do

910
00:47:24,480 --> 00:47:25,480
Speaker 6: you like to target?

911
00:47:25,760 --> 00:47:29,719
Speaker 16: So about seventy five percent or so of our properties

912
00:47:29,760 --> 00:47:33,600
Speaker 16: are actually grocery anchored. What we like are larger open

913
00:47:33,640 --> 00:47:37,000
Speaker 16: air centers, typically over one hundred and fifty thousand square feet,

914
00:47:37,280 --> 00:47:41,000
Speaker 16: where you have a mix of anchors, junior anchors, and

915
00:47:41,040 --> 00:47:44,200
Speaker 16: small shops. And the reason that mix is important is

916
00:47:44,280 --> 00:47:48,640
Speaker 16: you see demand fluctuating in those categories over time. Also

917
00:47:48,760 --> 00:47:51,800
Speaker 16: with small shops, you're able to bring in vibrant small

918
00:47:51,880 --> 00:47:56,359
Speaker 16: businesses and achieve better returns because you're able to grow

919
00:47:56,440 --> 00:47:59,279
Speaker 16: rents and you see a little bit more turn than

920
00:47:59,320 --> 00:48:03,120
Speaker 16: you see in the larger anchors. So that's why some

921
00:48:03,200 --> 00:48:06,359
Speaker 16: of this anchor disruption is actually an exciting opportunity for

922
00:48:06,440 --> 00:48:09,800
Speaker 16: us because it allows us to recapture that anchor space

923
00:48:09,840 --> 00:48:11,399
Speaker 16: and put in a more relevant use.

924
00:48:11,560 --> 00:48:14,279
Speaker 5: It's interesting too that you're working also in the read

925
00:48:14,320 --> 00:48:17,160
Speaker 5: space when it comes to these grocers like Albertson's that

926
00:48:17,200 --> 00:48:20,759
Speaker 5: obviously has struggled a lot with rising costs, especially in

927
00:48:20,840 --> 00:48:23,759
Speaker 5: recent years. What are you seeing in that space when

928
00:48:23,760 --> 00:48:27,120
Speaker 5: you look at that particular company versus say, Publics and

929
00:48:27,160 --> 00:48:27,800
Speaker 5: then Kroger.

930
00:48:28,400 --> 00:48:31,560
Speaker 16: You know, it's always been an intensely competitive space with

931
00:48:31,800 --> 00:48:36,080
Speaker 16: very tight margins, and you're seeing a lot of innovation. Nonetheless,

932
00:48:36,120 --> 00:48:39,919
Speaker 16: So you see the mainline grocers like Kroger and Albertson's

933
00:48:39,920 --> 00:48:44,520
Speaker 16: and Publics doing well, capturing a lot of that pandemic

934
00:48:44,560 --> 00:48:48,560
Speaker 16: bump and keeping it. But you're also seeing specialty grocers

935
00:48:48,600 --> 00:48:53,360
Speaker 16: that offer a different value proposition. Sometimes it's more organic

936
00:48:53,520 --> 00:48:57,080
Speaker 16: or higher ends. Sometimes it's just more value for the money.

937
00:48:57,160 --> 00:49:01,680
Speaker 16: So you're seeing folks like Sprouts, Whole Foods continue to grow,

938
00:49:02,000 --> 00:49:05,560
Speaker 16: Aldi and others. In addition to you do have food

939
00:49:05,640 --> 00:49:08,440
Speaker 16: being offered by some of the dollars stores as well.

940
00:49:08,760 --> 00:49:12,640
Speaker 16: So an intensely competitive space in one that you know

941
00:49:12,719 --> 00:49:14,279
Speaker 16: we've capitalized very well on.

942
00:49:14,719 --> 00:49:14,799
Speaker 5: All.

943
00:49:14,880 --> 00:49:17,480
Speaker 1: Right, If this next question sounds smart, it's because It

944
00:49:17,480 --> 00:49:20,640
Speaker 1: came from Lindsay Dutch. She's a Bloomberg Intelligence ret an

945
00:49:20,640 --> 00:49:23,480
Speaker 1: also covers your company, and she writes in and says,

946
00:49:23,760 --> 00:49:26,400
Speaker 1: you came into the company at twenty sixteen, you transform

947
00:49:26,440 --> 00:49:29,880
Speaker 1: the portfolio by updating centers, buying better ones.

948
00:49:29,640 --> 00:49:30,680
Speaker 6: And selling old ones.

949
00:49:30,840 --> 00:49:33,319
Speaker 1: So the question is how much is left to go

950
00:49:33,400 --> 00:49:36,239
Speaker 1: in that transformation and how has the shutdown in the

951
00:49:36,280 --> 00:49:40,440
Speaker 1: transaction market impact your plans to continue updating the portfolio.

952
00:49:40,760 --> 00:49:43,680
Speaker 16: Great question, Lindsay. So, we have about four hundred million

953
00:49:43,680 --> 00:49:48,200
Speaker 16: of reinvestment underway today that's going to deliver at verioccreative yields,

954
00:49:48,200 --> 00:49:50,760
Speaker 16: and as we've told the market, we have about another

955
00:49:50,840 --> 00:49:55,560
Speaker 16: billion dollars of reinvestment opportunity behind that. Importantly, Paul, that's

956
00:49:55,560 --> 00:49:59,239
Speaker 16: in what we own and control. We're starting to see

957
00:49:59,239 --> 00:50:03,920
Speaker 16: the transaction market move our way in terms of valuations

958
00:50:03,960 --> 00:50:07,880
Speaker 16: of assets that we might look to acquire. Not anything yet,

959
00:50:07,920 --> 00:50:12,359
Speaker 16: but I'm certainly optimistic that with the credit markets constrained,

960
00:50:12,400 --> 00:50:15,680
Speaker 16: with asset level financing not as available as it once was,

961
00:50:16,120 --> 00:50:19,440
Speaker 16: we may have an opportunity to continue to consolidate in

962
00:50:19,520 --> 00:50:22,760
Speaker 16: a space that's actually owned about ninety percent in private hands,

963
00:50:22,800 --> 00:50:26,320
Speaker 16: so the public companies collectively only own about ten percent

964
00:50:26,360 --> 00:50:30,080
Speaker 16: of the shopping centers. So I'm hopeful and optimistic that

965
00:50:30,480 --> 00:50:34,040
Speaker 16: we'll see some exciting external growth. But importantly, we have

966
00:50:34,160 --> 00:50:36,080
Speaker 16: a lot in what we own and control today.

967
00:50:36,400 --> 00:50:38,759
Speaker 5: Are there any red flags that are bubbling up at

968
00:50:38,760 --> 00:50:39,600
Speaker 5: this point?

969
00:50:39,719 --> 00:50:43,200
Speaker 16: Well, I think you're seeing ongoing tenant disruption, but you know,

970
00:50:43,280 --> 00:50:46,160
Speaker 16: that's an ongoing part of our business. And as I

971
00:50:46,200 --> 00:50:50,120
Speaker 16: alluded to earlier, we're a retail landlord, not retailer, and

972
00:50:50,239 --> 00:50:54,040
Speaker 16: it's important to appreciate that because we can see the

973
00:50:54,239 --> 00:50:57,920
Speaker 16: retailer disruption coming from some time, and he gives us

974
00:50:57,920 --> 00:51:01,480
Speaker 16: a chance to reposition put the company in a position

975
00:51:01,640 --> 00:51:06,279
Speaker 16: to benefit from that disruption. But really, you know, the

976
00:51:06,320 --> 00:51:11,000
Speaker 16: supply demand fundamentals are so healthy for retail landlords today.

977
00:51:11,320 --> 00:51:14,160
Speaker 16: I don't think that's as fully understood as it should be.

978
00:51:15,120 --> 00:51:17,920
Speaker 16: I think people sort of cast retail real estate with

979
00:51:17,960 --> 00:51:21,080
Speaker 16: the broad brush and sort of failed to see that

980
00:51:21,080 --> 00:51:23,200
Speaker 16: there's been no new supply for the last ten to

981
00:51:23,280 --> 00:51:24,080
Speaker 16: fifteen years.

982
00:51:24,640 --> 00:51:27,600
Speaker 1: Capital markets talked us about what it's like for your

983
00:51:27,680 --> 00:51:28,360
Speaker 1: type of business.

984
00:51:28,760 --> 00:51:32,120
Speaker 16: You know, the capital markets remain open for us. We

985
00:51:32,200 --> 00:51:35,920
Speaker 16: have access to the unsecured market, you know, don't like

986
00:51:36,000 --> 00:51:39,520
Speaker 16: where our equities priced today, so not really thinking about that.

987
00:51:40,440 --> 00:51:43,880
Speaker 16: But importantly, and it's a great point, we have access

988
00:51:43,920 --> 00:51:46,360
Speaker 16: to capital and we have liquidity. We have over a

989
00:51:46,400 --> 00:51:51,040
Speaker 16: billion three of undrawn capacity. We continue to reduce our leverage,

990
00:51:51,080 --> 00:51:55,239
Speaker 16: We continue to harvest non core assets and have continued

991
00:51:55,280 --> 00:51:58,080
Speaker 16: to park dry powder on the balance sheet.

992
00:51:58,120 --> 00:52:01,040
Speaker 5: Do you expect leasing activity to continue increasing?

993
00:52:01,520 --> 00:52:04,000
Speaker 16: It has in it? Well, you know, we have a

994
00:52:04,080 --> 00:52:07,359
Speaker 16: forward leasing pipeline. This is robust, it's has ever been.

995
00:52:07,800 --> 00:52:10,880
Speaker 16: We also have an additional fifty seven million of signed

996
00:52:10,880 --> 00:52:14,799
Speaker 16: but not commenced rent, So these are commitments from retailers

997
00:52:14,800 --> 00:52:18,440
Speaker 16: to open stores within our portfolio. That rent is coming

998
00:52:18,560 --> 00:52:22,400
Speaker 16: onto our income statement over the next several quarters. So

999
00:52:22,440 --> 00:52:25,839
Speaker 16: it gives us tremendous visibility on near term growth. And

1000
00:52:25,880 --> 00:52:28,080
Speaker 16: then behind that, as I mentioned, we have a very

1001
00:52:28,200 --> 00:52:30,080
Speaker 16: robust shadow pipeline.

1002
00:52:30,280 --> 00:52:32,440
Speaker 6: Hey, Jim Bett, thirty seconds left. Oh, just gives a

1003
00:52:32,480 --> 00:52:33,000
Speaker 6: sense of kind.

1004
00:52:32,920 --> 00:52:35,439
Speaker 1: Of what your geographical footprint looks like and maybe where

1005
00:52:35,440 --> 00:52:36,440
Speaker 1: the areas are for growth.

1006
00:52:37,000 --> 00:52:40,000
Speaker 16: You know, we're a national company. We have large presence

1007
00:52:40,040 --> 00:52:43,160
Speaker 16: in the northeast down the coast into Florida. We also

1008
00:52:43,200 --> 00:52:47,239
Speaker 16: are significant in Texas southern California and the Upper Midwest.

1009
00:52:47,680 --> 00:52:52,040
Speaker 16: Our investment strategy has been to cluster our investments and markets.

1010
00:52:51,640 --> 00:52:52,600
Speaker 4: Where we already are.

1011
00:52:52,680 --> 00:52:55,719
Speaker 16: So if you look at our acquisitions that we have made,

1012
00:52:56,000 --> 00:52:59,880
Speaker 16: they're in markets like Florida, Southern California, Texas where we

1013
00:53:00,120 --> 00:53:04,400
Speaker 16: see opportunities for growth. But we've also seen pretty robust

1014
00:53:04,920 --> 00:53:09,920
Speaker 16: demand characteristics in the Upper Midwest as well. So expect

1015
00:53:10,040 --> 00:53:12,719
Speaker 16: us to not go into new markets, but the focus

1016
00:53:12,800 --> 00:53:14,760
Speaker 16: on those where we already have a presence.

1017
00:53:14,880 --> 00:53:19,400
Speaker 1: All right, good overview, appreciate it. Jim Taylor, CEO of Brismore,

1018
00:53:20,160 --> 00:53:23,360
Speaker 1: New York Stock Exchange listed stock b r X is

1019
00:53:23,400 --> 00:53:27,239
Speaker 1: a ticker to load into your Bloomberg terminal and learn

1020
00:53:27,280 --> 00:53:28,160
Speaker 1: about the.

1021
00:53:27,880 --> 00:53:31,440
Speaker 5: Retail landlord, not a retailer, but looking at how especially

1022
00:53:31,520 --> 00:53:36,719
Speaker 5: when you are the when it comes to Kroger, Albertson's,

1023
00:53:36,719 --> 00:53:38,800
Speaker 5: all these companies that it works with, it's really interesting

1024
00:53:38,840 --> 00:53:41,200
Speaker 5: to see how that space and the outlook is moving forward.

1025
00:53:41,239 --> 00:53:44,279
Speaker 6: This is pretty good anchors to have in the marketplace.

1026
00:53:44,560 --> 00:53:47,640
Speaker 7: You're listening to the tape catcher are live program Bloomberg

1027
00:53:47,719 --> 00:53:51,319
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio. The

1028
00:53:51,360 --> 00:53:53,440
Speaker 7: tune in app Bloomberg dot Com.

1029
00:53:53,160 --> 00:53:54,600
Speaker 10: And the Bloomberg Business app.

1030
00:53:54,640 --> 00:53:57,440
Speaker 7: You can also listen live on Amazon Alexa from our

1031
00:53:57,480 --> 00:54:01,759
Speaker 7: flagship New York station. Just say Alexa play Bloomberg eleven.

1032
00:54:01,560 --> 00:54:06,719
Speaker 14: Thirty Joining us now, The CEO of Uba, Dara Koshashahi

1033
00:54:06,840 --> 00:54:10,320
Speaker 14: and Blambagg's Emily chang with me on set in San Francisco.

1034
00:54:10,360 --> 00:54:12,560
Speaker 17: Emily, thank you, and Dara, thank you so much for

1035
00:54:12,680 --> 00:54:14,560
Speaker 17: joining us. It's good to have you back. Look, I

1036
00:54:14,600 --> 00:54:18,080
Speaker 17: think investors are reacting to a bit of a revenue miss,

1037
00:54:18,120 --> 00:54:22,360
Speaker 17: but your first gap profit reported ever. Talk to us

1038
00:54:22,360 --> 00:54:24,359
Speaker 17: a little bit about the discipline here and what kind

1039
00:54:24,360 --> 00:54:26,920
Speaker 17: of choices you had to make to make this happen

1040
00:54:26,960 --> 00:54:28,000
Speaker 17: in this macro environment.

1041
00:54:28,680 --> 00:54:28,879
Speaker 10: Yeah.

1042
00:54:28,920 --> 00:54:31,359
Speaker 18: Absolutely, we're very excited about this.

1043
00:54:31,560 --> 00:54:35,840
Speaker 19: It's a seminal moment for Uber to deliver gap operating

1044
00:54:36,440 --> 00:54:40,680
Speaker 19: profit free cash row of over a billion dollars just

1045
00:54:41,000 --> 00:54:44,399
Speaker 19: in the quarter, along with a really strong, strong top line.

1046
00:54:44,440 --> 00:54:46,000
Speaker 19: You look at a gross booking strow out that was

1047
00:54:46,680 --> 00:54:51,520
Speaker 19: thirty three point six billion dollars, up eighteen percent on

1048
00:54:51,560 --> 00:54:54,680
Speaker 19: a constant currency basis. So I think the results both

1049
00:54:54,680 --> 00:54:56,920
Speaker 19: in terms of the top line and the bottom line

1050
00:54:57,040 --> 00:55:00,760
Speaker 19: have been second to none and certainly leading in our industry,

1051
00:55:01,640 --> 00:55:03,840
Speaker 19: and it has taken a lot of cost discipline in

1052
00:55:03,960 --> 00:55:09,719
Speaker 19: terms of really looking at making that perfect match between

1053
00:55:09,960 --> 00:55:13,520
Speaker 19: a rider and a driver, or an eater and a

1054
00:55:13,560 --> 00:55:17,719
Speaker 19: courier and a restaurant, and making sure everything in that

1055
00:55:18,120 --> 00:55:22,799
Speaker 19: transaction happens perfectly with no errors, no mistakes, no cancelations,

1056
00:55:22,840 --> 00:55:26,279
Speaker 19: et cetera. And at the same time it takes a

1057
00:55:26,320 --> 00:55:29,920
Speaker 19: lot of cost discipline. In terms of overheads. Our headcount

1058
00:55:29,960 --> 00:55:32,440
Speaker 19: has been flat, and if you look at our headcount

1059
00:55:32,520 --> 00:55:37,120
Speaker 19: compared to twenty nineteen pre pandemic, our total cat count

1060
00:55:37,200 --> 00:55:40,040
Speaker 19: is up ten percent during those years, and our growth

1061
00:55:40,080 --> 00:55:43,360
Speaker 19: bookings in the core business has been up eighty percent

1062
00:55:43,640 --> 00:55:47,319
Speaker 19: versus headcount growth of ten percent. So it absolutely has

1063
00:55:47,320 --> 00:55:50,000
Speaker 19: taken that discipline. But at the same time, the company

1064
00:55:50,000 --> 00:55:53,360
Speaker 19: continues to innovate and gain category position, which is what

1065
00:55:53,400 --> 00:55:54,000
Speaker 19: it's all about.

1066
00:55:54,840 --> 00:55:57,960
Speaker 17: Now you've formally announced that CFO Nelson Chai will be

1067
00:55:58,080 --> 00:56:01,399
Speaker 17: leaving the company, which Bloomberg reportart a few weeks ago.

1068
00:56:02,120 --> 00:56:04,919
Speaker 17: What is the interim plan and what are you looking for?

1069
00:56:05,000 --> 00:56:07,279
Speaker 17: Will this be an internal hire and external hire?

1070
00:56:08,880 --> 00:56:12,319
Speaker 19: Yeah, so Nelson is going to be staying with us

1071
00:56:12,480 --> 00:56:16,240
Speaker 19: really through the balance of the year up until early

1072
00:56:16,360 --> 00:56:21,360
Speaker 19: January to make sure that we have a smooth succession plan.

1073
00:56:22,120 --> 00:56:25,160
Speaker 19: The next CFO is in seat and can be coached

1074
00:56:25,160 --> 00:56:28,440
Speaker 19: by Nelson as well. And really what I'm looking for

1075
00:56:28,600 --> 00:56:31,279
Speaker 19: is another partner like Nelson. You know, Nelson came in

1076
00:56:31,280 --> 00:56:35,640
Speaker 19: in a very difficult time and teamed up with myself

1077
00:56:35,680 --> 00:56:38,000
Speaker 19: and the rest of the team, taking us through an

1078
00:56:38,080 --> 00:56:41,560
Speaker 19: environment of deep operating losses, taking us through the IPO,

1079
00:56:42,160 --> 00:56:44,360
Speaker 19: getting us a really strong balance sheet so that we

1080
00:56:44,440 --> 00:56:47,960
Speaker 19: could come out of the IPO and could deal with

1081
00:56:48,040 --> 00:56:50,520
Speaker 19: issues like the pandemic to where we are now, which

1082
00:56:50,600 --> 00:56:53,719
Speaker 19: is a leading company. The next five years of her

1083
00:56:53,800 --> 00:56:59,759
Speaker 19: journey are about scaling and becoming that true global platform

1084
00:56:59,840 --> 00:57:03,200
Speaker 19: that can grow top line in a twenty percent range,

1085
00:57:03,239 --> 00:57:07,280
Speaker 19: can continue to innovate and continue to drive the kinds

1086
00:57:07,320 --> 00:57:10,960
Speaker 19: of margins and the incremental margin growth that we've been driving. Historically,

1087
00:57:11,840 --> 00:57:14,920
Speaker 19: we told investors that incremental margins as a percentage of

1088
00:57:14,920 --> 00:57:18,280
Speaker 19: growth bookings growth will be seven plus percent, and consistently

1089
00:57:18,280 --> 00:57:21,360
Speaker 19: we've come in above that because we've been innovating but

1090
00:57:21,480 --> 00:57:23,680
Speaker 19: at the same time been disciplined at the bottom line.

1091
00:57:23,720 --> 00:57:26,160
Speaker 19: I'm looking for a partner who can deliver kind of

1092
00:57:26,240 --> 00:57:28,959
Speaker 19: the next chapter of our growth, just like Nelson did.

1093
00:57:29,560 --> 00:57:30,920
Speaker 18: Ubertotot also to speak.

1094
00:57:31,520 --> 00:57:34,640
Speaker 17: So let's talk about the executives wit, the broader executives.

1095
00:57:34,680 --> 00:57:38,000
Speaker 17: Weit in that next chapter. Your CTO left back in

1096
00:57:38,040 --> 00:57:41,400
Speaker 17: twenty twenty one was not replaced. How are you thinking

1097
00:57:41,440 --> 00:57:44,960
Speaker 17: about that role? Is there anyone particular in mind?

1098
00:57:45,440 --> 00:57:50,840
Speaker 19: We actually our tech team is led by three different leaders.

1099
00:57:51,160 --> 00:57:55,400
Speaker 19: Sin Jeep Jaine, who's our chief product officer, really think

1100
00:57:55,440 --> 00:57:57,560
Speaker 19: about the rider app, driver app.

1101
00:57:57,360 --> 00:57:58,640
Speaker 18: Eater app, etc.

1102
00:57:59,360 --> 00:58:05,800
Speaker 19: Gus who's thinking about the core services, customer service, safety, insurance.

1103
00:58:05,560 --> 00:58:06,040
Speaker 18: Et cetera.

1104
00:58:06,360 --> 00:58:09,960
Speaker 19: And then Albert Greenberg, who runs the infrastructure. You know,

1105
00:58:10,200 --> 00:58:13,360
Speaker 19: we are at a core a technology company, and instead

1106
00:58:13,360 --> 00:58:16,000
Speaker 19: of having one tech leader, we have three tech leaders,

1107
00:58:16,920 --> 00:58:22,280
Speaker 19: and that team has come together to drive outsize innovation.

1108
00:58:22,440 --> 00:58:25,520
Speaker 19: When you look at driver upfront fares, when you look

1109
00:58:25,520 --> 00:58:29,600
Speaker 19: at our Uber teens product, when you look at taxi hailables,

1110
00:58:29,720 --> 00:58:33,800
Speaker 19: low cost, our entry into new verticals, there's no company

1111
00:58:33,800 --> 00:58:37,000
Speaker 19: in the industry that's innovating at our speed or scale.

1112
00:58:37,240 --> 00:58:39,360
Speaker 19: And it's thanks thanks to the tech leaders that we

1113
00:58:39,400 --> 00:58:39,919
Speaker 19: have in house.

1114
00:58:39,960 --> 00:58:40,439
Speaker 18: At this point.

1115
00:58:41,760 --> 00:58:44,480
Speaker 14: To our global radio and television audience, you're listening to

1116
00:58:44,520 --> 00:58:49,040
Speaker 14: our conversation with the CEO, Dara Koshushahi following that earning sprint.

1117
00:58:49,040 --> 00:58:51,000
Speaker 14: You know, Dara, A look at the court of gone,

1118
00:58:51,440 --> 00:58:55,640
Speaker 14: number of trips, gross brookings, active drivers, demand and supply

1119
00:58:55,760 --> 00:59:00,320
Speaker 14: side all at records, strong gross booking forecast. Why isn't

1120
00:59:00,320 --> 00:59:04,040
Speaker 14: that enough to kind of raise expectations for adjusted a

1121
00:59:04,040 --> 00:59:06,240
Speaker 14: bit DON next year? You'd said in February, I believe

1122
00:59:06,440 --> 00:59:07,720
Speaker 14: it'd be around five billion.

1123
00:59:09,240 --> 00:59:11,440
Speaker 19: Well, I'm not a stock analyst. I can focus on

1124
00:59:11,520 --> 00:59:16,840
Speaker 19: running the company. And we guided for Q three adjusted

1125
00:59:16,880 --> 00:59:20,040
Speaker 19: EBITDAL well above street estimates. We got her for nine

1126
00:59:20,160 --> 00:59:23,960
Speaker 19: hundred and seventy five million to a billion twenty five,

1127
00:59:25,040 --> 00:59:28,840
Speaker 19: which was a substantial increase versus expectations out there.

1128
00:59:29,280 --> 00:59:30,800
Speaker 18: And consistently, if you look.

1129
00:59:30,640 --> 00:59:34,560
Speaker 19: At our track record, we've put out targets, we've consistently

1130
00:59:34,560 --> 00:59:38,880
Speaker 19: beaten those targets, you know, by anywhere five ten plus percent.

1131
00:59:39,440 --> 00:59:43,200
Speaker 19: And we intend to beat that five billion dollar target,

1132
00:59:43,240 --> 00:59:45,919
Speaker 19: just as we've beaten every single target that we put

1133
00:59:46,920 --> 00:59:51,240
Speaker 19: in front of our investor. So we think continued discipline, execution,

1134
00:59:52,200 --> 00:59:56,120
Speaker 19: strong top line growth, increased margins and more of the

1135
00:59:56,160 --> 00:59:59,240
Speaker 19: same along with innovation is going to get us well

1136
00:59:59,280 --> 01:00:00,640
Speaker 19: beyond the five BILLI million dollars.

1137
01:00:01,360 --> 01:00:04,600
Speaker 14: The innovation piece really interesting. I liked Emily's question about

1138
01:00:04,640 --> 01:00:07,920
Speaker 14: the tech leadership. M's been all around San Francisco and

1139
01:00:07,960 --> 01:00:10,720
Speaker 14: a cruise. I've been all around San Francisco in a Weyman,

1140
01:00:10,760 --> 01:00:13,680
Speaker 14: and I appreciate for our audience around the world. Jumping

1141
01:00:13,720 --> 01:00:17,280
Speaker 14: in a robotaxi with no driver is not yet a reality,

1142
01:00:17,800 --> 01:00:20,120
Speaker 14: but for lots of people that I asked on thread's

1143
01:00:20,160 --> 01:00:23,240
Speaker 14: Twitter LinkedIn, that's their question for you, Dara, when is

1144
01:00:23,360 --> 01:00:26,640
Speaker 14: Uber going to take that fleet of autonomous vehicles as

1145
01:00:26,680 --> 01:00:27,640
Speaker 14: more of a priority.

1146
01:00:29,120 --> 01:00:33,440
Speaker 19: Well, we are very bullish on autonomous It's taking time.

1147
01:00:33,520 --> 01:00:36,000
Speaker 19: We have to make sure that the technology is saved

1148
01:00:36,400 --> 01:00:41,160
Speaker 19: and we're partnering amongst all of the significant verticals that

1149
01:00:41,200 --> 01:00:43,720
Speaker 19: we have. What are the unique aspects of Uber is

1150
01:00:44,160 --> 01:00:46,440
Speaker 19: not only are we global, not only are we the

1151
01:00:46,640 --> 01:00:50,480
Speaker 19: largest platform with the biggest audience one hundred and thirty

1152
01:00:50,560 --> 01:00:54,200
Speaker 19: seven million consumers coming to us every single month, but

1153
01:00:54,320 --> 01:01:00,920
Speaker 19: we operate in every significant vertical for autonomous passenger vehicles

1154
01:01:01,000 --> 01:01:05,480
Speaker 19: with Uber delivery, food and grocery delivery, delivery with eats,

1155
01:01:05,840 --> 01:01:08,640
Speaker 19: and then freight as well. Autonomous trucks are absolutely going

1156
01:01:08,680 --> 01:01:12,440
Speaker 19: to be a big part of our future. And if

1157
01:01:12,480 --> 01:01:15,240
Speaker 19: you look at each one of those verticals, we're partnering

1158
01:01:15,240 --> 01:01:20,920
Speaker 19: with leading companies Waymo for example in passenger vehicles, neuro

1159
01:01:21,240 --> 01:01:26,760
Speaker 19: and Serve, amongst others in delivery, and then in trucking

1160
01:01:26,760 --> 01:01:30,360
Speaker 19: of course Aurora, with which we have a strategic investment

1161
01:01:30,400 --> 01:01:33,720
Speaker 19: as well. So we absolutely believe that autonomous is going

1162
01:01:33,760 --> 01:01:36,920
Speaker 19: to be part of the future and we are working

1163
01:01:37,000 --> 01:01:43,600
Speaker 19: to expose our leading marketplace to autonomous technology as it

1164
01:01:43,680 --> 01:01:45,640
Speaker 19: develops in a safe, efficient manner.

1165
01:01:46,400 --> 01:01:50,720
Speaker 17: Well, speaking of another kind of technology, artificial intelligence instacarts

1166
01:01:50,720 --> 01:01:53,440
Speaker 17: now out with the chatbot door dash as well. Is

1167
01:01:53,480 --> 01:01:55,640
Speaker 17: there an Uber bought in the works.

1168
01:01:56,440 --> 01:01:59,120
Speaker 19: There's definitely going to be an Uber bought in the works.

1169
01:01:59,120 --> 01:02:01,440
Speaker 19: But I tell you that we have been working with

1170
01:02:01,480 --> 01:02:07,080
Speaker 19: machine learnings, artificial intelligence systems deep learning systems for.

1171
01:02:07,200 --> 01:02:08,600
Speaker 18: Years and years and years.

1172
01:02:08,680 --> 01:02:11,720
Speaker 19: Every time you get matched up with a car or

1173
01:02:11,760 --> 01:02:15,080
Speaker 19: get matched up with a courier, there are mL algorithms

1174
01:02:15,080 --> 01:02:19,080
Speaker 19: that are making that match. The pricing that happens time

1175
01:02:19,120 --> 01:02:23,960
Speaker 19: and day and distance. All of that is driven by

1176
01:02:24,200 --> 01:02:28,160
Speaker 19: machine learning algorithms. So that has been going on. Those

1177
01:02:28,200 --> 01:02:30,720
Speaker 19: algorithms only get better. In the data sets that we

1178
01:02:30,760 --> 01:02:34,000
Speaker 19: work with are the largest data sets globally, and the

1179
01:02:34,000 --> 01:02:36,200
Speaker 19: more data we have, the smarter we get, the more

1180
01:02:36,280 --> 01:02:40,520
Speaker 19: personal we can get. We are now focused more on

1181
01:02:40,680 --> 01:02:47,240
Speaker 19: productivity applications, so for example, introducing GitHub copilot for our developers,

1182
01:02:47,520 --> 01:02:52,600
Speaker 19: or helping summarize situations for customer service agents so that

1183
01:02:52,640 --> 01:02:55,480
Speaker 19: they already know context of what's going on with a

1184
01:02:55,520 --> 01:03:00,720
Speaker 19: particular customer and how they can help. We will absolutely

1185
01:03:00,920 --> 01:03:03,840
Speaker 19: put our AI agents out there to help the consumer,

1186
01:03:04,280 --> 01:03:07,080
Speaker 19: but also don't forget about the driver drivers who are

1187
01:03:07,160 --> 01:03:12,520
Speaker 19: driving on our marketplace. They also want help. Where should

1188
01:03:12,600 --> 01:03:15,480
Speaker 19: I go, what rod should I accept, et cetera. So

1189
01:03:15,560 --> 01:03:19,440
Speaker 19: we're also working on AI to power drivers and couriers

1190
01:03:19,440 --> 01:03:22,280
Speaker 19: so that they can make smarter decisions every day, to

1191
01:03:22,360 --> 01:03:25,600
Speaker 19: be able to earn flexibly, but to maximize their earnings

1192
01:03:25,600 --> 01:03:26,360
Speaker 19: based on their time.

1193
01:03:27,080 --> 01:03:29,240
Speaker 17: So hang on, just to double down, there is an

1194
01:03:29,360 --> 01:03:32,080
Speaker 17: uber chat bought something that you're working on right now.

1195
01:03:32,960 --> 01:03:35,960
Speaker 19: We're working on it right now, absolutely, but it's a

1196
01:03:36,200 --> 01:03:39,640
Speaker 19: very very small part of the AI ecosystem and.

1197
01:03:39,760 --> 01:03:44,320
Speaker 14: Ver our global radio and television audience is listening to Uber.

1198
01:03:44,280 --> 01:03:45,760
Speaker 4: CEO Dara Kushashahi.

1199
01:03:46,440 --> 01:03:49,560
Speaker 14: Dara Uber is as close as anything the US and

1200
01:03:49,640 --> 01:03:53,000
Speaker 14: Europe has to an everything app, something akin to what

1201
01:03:53,040 --> 01:03:57,160
Speaker 14: you might see in Southeast Asia. So I'm curious how

1202
01:03:57,240 --> 01:04:01,040
Speaker 14: closely you're paying attention to your cross town neighbor, mister

1203
01:04:01,160 --> 01:04:04,480
Speaker 14: Musk and what X is doing within everything app.

1204
01:04:05,880 --> 01:04:08,680
Speaker 19: Well, it's difficult to take your eyes off of what

1205
01:04:08,840 --> 01:04:11,439
Speaker 19: Musk is doing or read about what Elon is doing,

1206
01:04:11,680 --> 01:04:14,120
Speaker 19: and we do so because we want to learn and listen.

1207
01:04:14,120 --> 01:04:17,960
Speaker 19: It's pretty fun, but we are leading in terms of

1208
01:04:18,000 --> 01:04:21,720
Speaker 19: building out a super app. Remember to then in Southeast Asia,

1209
01:04:21,800 --> 01:04:26,640
Speaker 19: we have a very significant strategic investment in grab. Grab

1210
01:04:27,000 --> 01:04:33,560
Speaker 19: has has mobility delivery payments on their app, Kareem in

1211
01:04:33,600 --> 01:04:36,439
Speaker 19: which we have a big investment in middally same thing

1212
01:04:36,880 --> 01:04:41,880
Speaker 19: mobility delivery payments payments as well. So we're very very

1213
01:04:41,920 --> 01:04:46,040
Speaker 19: familiar with a super app concept and in the West,

1214
01:04:46,200 --> 01:04:49,840
Speaker 19: I do think Uber is the closest to achieving that

1215
01:04:50,000 --> 01:04:52,520
Speaker 19: super app. We want to be that operating system for

1216
01:04:52,600 --> 01:04:56,000
Speaker 19: your everyday life. Wherever you're going, whatever you want to

1217
01:04:56,000 --> 01:04:57,920
Speaker 19: get delivered, Uber is going to be there for you.

1218
01:04:57,960 --> 01:05:00,920
Speaker 19: And I think that we are steadily moving along the

1219
01:05:01,000 --> 01:05:04,560
Speaker 19: super at path, which is why we're gaining category or

1220
01:05:04,560 --> 01:05:09,160
Speaker 19: position against the competitors, both in mobility and delivery while

1221
01:05:09,200 --> 01:05:11,320
Speaker 19: delivering margins and being profitable as well.

1222
01:05:12,480 --> 01:05:16,280
Speaker 17: Curious if freight is part of that super app plan, Dara.

1223
01:05:16,320 --> 01:05:19,040
Speaker 17: I mean even you pointed out today that that is

1224
01:05:19,360 --> 01:05:21,840
Speaker 17: the weakness in the business. It does seem to be

1225
01:05:21,880 --> 01:05:24,480
Speaker 17: a drag on the business. What's the plan there to

1226
01:05:24,560 --> 01:05:25,880
Speaker 17: sell it, to spin it off?

1227
01:05:26,960 --> 01:05:29,000
Speaker 19: Well, the plan is to build at this point. So

1228
01:05:29,520 --> 01:05:33,120
Speaker 19: fred is absolutely suffering from the same kinds of trends

1229
01:05:33,160 --> 01:05:37,280
Speaker 19: that you see in terms of delivery of things in

1230
01:05:37,360 --> 01:05:41,240
Speaker 19: retail generally is a bit weaker than spend on services.

1231
01:05:41,640 --> 01:05:44,040
Speaker 19: You saw Yellow for example, big trucking firm go out

1232
01:05:44,040 --> 01:05:49,160
Speaker 19: of business yesterday. There's a lot of difficulty in terms

1233
01:05:49,200 --> 01:05:52,080
Speaker 19: of freight, in terms of freight raids, and freight is

1234
01:05:52,200 --> 01:05:55,360
Speaker 19: fighting its way through that. But we continue to innovate.

1235
01:05:55,600 --> 01:06:00,720
Speaker 19: Even today. The way that shippers connect to trucker is

1236
01:06:00,760 --> 01:06:03,360
Speaker 19: incredibly outmotive. There's a lot of paper, there is so

1237
01:06:03,440 --> 01:06:08,520
Speaker 19: much data. The pricing, the routing, etc. Is based on

1238
01:06:08,560 --> 01:06:12,040
Speaker 19: technology that was built twenty twenty five years ago. As

1239
01:06:12,120 --> 01:06:15,160
Speaker 19: we continue to innovate and as we continue to focus

1240
01:06:15,200 --> 01:06:19,960
Speaker 19: on algorithmic pricing making that perfect match between a shipper

1241
01:06:20,000 --> 01:06:22,240
Speaker 19: and a trucker, we think over per the time we

1242
01:06:22,240 --> 01:06:24,200
Speaker 19: can build an asset of great value. So at this

1243
01:06:24,280 --> 01:06:27,680
Speaker 19: point it's heads down. The team is executing in a

1244
01:06:27,720 --> 01:06:31,640
Speaker 19: tough environment. Our losses are decreasing. We think the second

1245
01:06:31,680 --> 01:06:33,720
Speaker 19: half on a bottom line basis, is going to be

1246
01:06:33,760 --> 01:06:36,600
Speaker 19: significantly better than the first half, and next year we're

1247
01:06:36,640 --> 01:06:37,840
Speaker 19: going to get back to growth.

1248
01:06:38,520 --> 01:06:41,480
Speaker 14: Thanks to Bloomberg's Emily Chang in that conversation with Uber

1249
01:06:41,560 --> 01:06:44,280
Speaker 14: CEO Dara koshra Shahi.

1250
01:06:46,960 --> 01:06:50,040
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1251
01:06:50,080 --> 01:06:53,840
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1252
01:06:53,920 --> 01:06:57,680
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1253
01:06:57,840 --> 01:06:59,760
Speaker 2: at Matt Miller nineteen seventy three.

1254
01:07:00,280 --> 01:07:03,000
Speaker 1: An on Fall Sweeney I'm on Twitter at Ptsweeney. Before

1255
01:07:03,040 --> 01:07:06,160
Speaker 1: the podcast, you can always catch us worldwide at Bloomberg Radio.