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Speaker 3: Hi, everyone, Welcome to the Bloomberg Business Week Weekend Podcast.
Speaker 3: Tim is off this week and Bloomberg's Matt Millard joining
Speaker 3: in on many of our conversations in his first trading
Speaker 3: week of August. As for the past week, we got
Speaker 3: a lot of earnings, more news out of the White
Speaker 3: House ongoing on trade and tariffs, and also want actions
Speaker 3: to ease some of those geopolitical tensions that are out there.
Speaker 3: For the latest on all of it, head to the
Speaker 3: Bloomberg and Bloomberg dot Com. Now with all the financial updates,
Speaker 3: we were able this past week to get an in
Speaker 3: depth view from the c suite and updates on the
Speaker 3: global consumer, on generators, on energy management, on tasers, on spirits,
Speaker 3: on sports and security, and so much more. There was
Speaker 3: a lot that we were able to get a deep
Speaker 3: dive into now coming up in the next two hours,
Speaker 3: we've got the CFOs of Wayfair and Latin America e
Speaker 3: commerce giant Mericardo Libre, and we've also got the CEOs
Speaker 3: at Axon and Jederak. All of that to come. We
Speaker 3: start with a stock that rallied big time on its
Speaker 3: earnings results. We were talking about Axon Enterprise. Shares of
Speaker 3: the company surged after delivering robust second quarter earnings, raising
Speaker 3: its full year outlook, and receiving a price target boost
Speaker 3: to one thousand dollars from Bank of America. Rick Smith
Speaker 3: is the company's founder and CEO, who reminded us that
Speaker 3: the company, formerly known as Taser, now does a lot more.
Speaker 4: Yeah, that's why we changed the name of the company
Speaker 4: to Axon a few years ago, because it is a
Speaker 4: sledgehammer brand associated with our lessling the weapons.
Speaker 5: That's where we started.
Speaker 4: That got us into body cameras to basically help protect
Speaker 4: the public and police by preserving a factual record of
Speaker 4: what they did. And then from there we got into
Speaker 4: cloud software to manage all the data, and then the
Speaker 4: business just exploded. So today we're the market leader in
Speaker 4: car video. You know, obviously body cameras, record management systems,
Speaker 4: and drones and robotics through their partnerships or first party
Speaker 4: things that we do were i think the largest virtual
Speaker 4: reality training business and public safety, and now we're also
Speaker 4: expanding into adjacent markets. Any enterprise that has a security
Speaker 4: function has to be able to communicate with their local police,
Speaker 4: and you can either do that through an old school
Speaker 4: nine to one one call, or we have a number
Speaker 4: of tools on our platform that allow you, for example,
Speaker 4: if you're a school or a business, to share your
Speaker 4: security cameras in an emergency with police. So if you
Speaker 4: have something like an active shooter, you're not trying to
Speaker 4: describe it over the phone, you can immediately give video
Speaker 4: access to law enforcement at your control. You can shut
Speaker 4: it off when it's not necessary. And then of course
Speaker 4: we're layering artificial intelligence on across of this entire enormous
Speaker 4: network of sensors so that we can, you know, try
Speaker 4: to make everybody a little bit safer, but also doing
Speaker 4: it in a way that you know, is.
Speaker 5: Very cautious about privacy.
Speaker 4: To make sure we're doing this in a way that
Speaker 4: doesn't create you know, out of control surveillance.
Speaker 6: Rick, your i mean, your investors, will know, analysts will know,
Speaker 6: but not everyone is familiar with your founding story, which
Speaker 6: is intensely personal. Give us a quick recap of that,
Speaker 6: and tell me if you still see the company's mission,
Speaker 6: which is cutting police gun deaths as realistically achievable, and
Speaker 6: say this decade.
Speaker 5: Yeah, so I started this.
Speaker 4: I was in business school in Europe and I was
Speaker 4: having dinner with some people there who were you know.
Speaker 4: We were all talking about our hometown, and they said
Speaker 4: I would never go to America because of all the
Speaker 4: gun violence, and I said, well, hold on, it's not
Speaker 4: like you see on television. And then one of them
Speaker 4: asks me, do you know anybody who's been shot and killed?
Speaker 4: And as I thought about it, well, yeah, there's two
Speaker 4: guys from my high school football team, and look, we
Speaker 4: weren't super close friends.
Speaker 5: But that's not the point. The point of it was
Speaker 5: that all of.
Speaker 4: Us, I mean, I bet each of you know people
Speaker 4: in your immediate circle who've been shot and killed. This
Speaker 4: is a problem that touches everybody. And by the time
Speaker 4: I added it up, I think I know five or
Speaker 4: six people who've been shot and killed. And that just
Speaker 4: struck me as a bizarre state of the universe. That
Speaker 4: the way we protect ourselves in the nineteen nineties much
Speaker 4: less twenty twenty five is shooting bullets at people. We
Speaker 4: were doing that with like pirates in the sixteen hundreds,
Speaker 4: and so we're on a mission to make the bullet
Speaker 4: obsolete by creating better technology, basically something similar to Captain
Speaker 4: Kirk's phaser.
Speaker 5: From Star Trek Fame. That's what we're out to.
Speaker 4: Build, because if we have that weapon, it would no
Speaker 4: longer make sense to shoot anybody.
Speaker 5: And yeah, we were getting pretty close.
Speaker 4: Not it's not wireless like Captain Kirks, but we are
Speaker 4: approaching a level of reliability where we now have countries
Speaker 4: outside of the US talking about using the taser instead
Speaker 4: of a gun. In the US, we wouldn't suggest that,
Speaker 4: but we can't suggest that the taser is gaining the
Speaker 4: point where you would use it first. It would become
Speaker 4: your primary weapon and the gun would be more of
Speaker 4: a backup only for the most extreme cases.
Speaker 5: And if we achieve that, then yeah, we.
Speaker 4: Think we can cut gun deaths in American policing by
Speaker 4: fifty percent by twenty thirty three is our goal.
Speaker 3: So tell me about the numbers where you are seeing
Speaker 3: that as a result of your device, is that things
Speaker 3: are getting better, at least for police folks and security folks.
Speaker 4: Well, we have not yet bent the curve, meaning we're
Speaker 4: not seeing the numbers coming down, because the overall trend
Speaker 4: is still slowly inching upward, although this year it's lower
Speaker 4: than last year. But I think it's premature for us
Speaker 4: to claim that that is our effect.
Speaker 5: Yet.
Speaker 4: We do know that over the past thirty years I've
Speaker 4: been doing this, there's around three hundred thousand uses where
Speaker 4: police could have been legally justified to use lethal force
Speaker 4: but they were able to resolve it with the taser instead.
Speaker 4: This next two years is going to really be critical
Speaker 4: because up until now taser weapons have been largely used
Speaker 4: not really in the most critical situations. They would use
Speaker 4: it to capture somebody who is potentially violent but not
Speaker 4: an immediate risk.
Speaker 5: We've introduced a couple of.
Speaker 4: Key technologies that we're testing now in the field, and
Speaker 4: I can go into detail if you're interested, that we
Speaker 4: think move our effective reliability up into the ninety nine
Speaker 4: percent area, at which point then we think it becomes
Speaker 4: reasonable that the police would begin using taser as their
Speaker 4: primary first weapon, always keeping the taser the gun as
Speaker 4: a fallback.
Speaker 6: Rick, you mentioned business school in Europe. I guess you
Speaker 6: went to school in Belgium before Chicago, but you studied
Speaker 6: first neuroscience at Harvard. How does that kind of background
Speaker 6: influence your decisions today at a company that you know
Speaker 6: touches so many nerves.
Speaker 4: Yeah, well, I mean the whole name of the company, Axon,
Speaker 4: is a little bit of neurobio geek speak, because the
Speaker 4: Axon is the name of the long nerve fibers that
Speaker 4: connect your brain to your muscles, and indeed it touches
Speaker 4: a number of ways.
Speaker 5: When I first wrote.
Speaker 4: My college application and actually showing my son I had
Speaker 4: a copy of it, they asked, what do you want
Speaker 4: to do with your life? And I said I wanted
Speaker 4: to build robotic limbs. And it was like Luke Skywalker's
Speaker 4: you know, robotic can. I love this idea of a
Speaker 4: machine that can interface to the human body and almost
Speaker 4: become a part of you. Then, after this incident, and
Speaker 4: I mean my interest rising in gun violence, I took
Speaker 4: a different turn. Instead of building a machine that your
Speaker 4: brain could control, I build machines that control your body
Speaker 4: through your nervous system.
Speaker 5: I mean, that's what Ataser does.
Speaker 4: We plug in, we tune this electricity so that it
Speaker 4: overwhelms communication, and you have something that looks like a seizure.
Speaker 4: Because we're flooding your nervous system with electrical energy. Your
Speaker 4: muscles lock up. It is a temporary effect, but extremely debilitating.
Speaker 4: And then if we think about the other parts of
Speaker 4: our business. When we got into the camera business, we
Speaker 4: realized the cameras themselves are kind of kind of interesting,
Speaker 4: but it's not nearly the business that if we can
Speaker 4: connect all these sensors together and begin to think of
Speaker 4: this like a giant neural network, like for a police
Speaker 4: department like an NYPD with a thirty five thousand officers,
Speaker 4: what if we could begin to have live data feeds
Speaker 4: that would enable command and control in more real time,
Speaker 4: so we could identify, Hey, this situation is escalating, Let's
Speaker 4: send reinforcements before the officer even calls over the radio.
Speaker 4: Or we might even identify things like, hey, this situation
Speaker 4: over here is spinning out of control. If you think
Speaker 4: about all the horrible policing situations like George Floyd over
Speaker 4: the past ten years, I believe now that any one
Speaker 4: of those could be detected with AI running on the
Speaker 4: audio video feed of a camera and that is a
Speaker 4: capability that we're building now.
Speaker 5: We do have live feeds now, but to have live.
Speaker 4: Feeds being AI monitored in real time, that'll happen in
Speaker 4: the next twelve months, and I think that's going to
Speaker 4: be a huge boon to make policing more effective, safer,
Speaker 4: and to help agencies identify if a situation spinning out
Speaker 4: of control so they can intervene now instead of prosecuting
Speaker 4: somebody tomorrow. You know, if something wrong is happening.
Speaker 3: How much of your business's governments and I'm just curious.
Speaker 3: It does feel like there's going to be some municipalities
Speaker 3: under pressure in terms of funding, and I'm just curious
Speaker 3: how that could play into or impact demand at your company.
Speaker 4: Yeah, so we're still majority government business, but the fastest
Speaker 4: growing segment is enterprise. The enterprise security is two to
Speaker 4: three times larger than public you know, policing in the
Speaker 4: United States in terms of manpower, and so there's a
Speaker 4: huge opportunity there. But if I come back to your
Speaker 4: question about municipal policing, you know, we've member of the
Speaker 4: two thousand and eight financial crisis and others, and what
Speaker 4: we have found is if you look at a police agency,
Speaker 4: the majority of their spend is on cops, cars and gas.
Speaker 4: That's like ninety percent of their spend. So their tech
Speaker 4: spend is a relatively small portion of their overall budget.
Speaker 4: And when budgets get compressed, what we see is they
Speaker 4: really look to technology where they're saying, look, we need
Speaker 4: to get more efficient. We can't just throw bodies at things.
Speaker 4: And I'll give you one example. Our first major AI
Speaker 4: product using generatord ai is a service called Draft one,
Speaker 4: and what we do very simply. We take your body
Speaker 4: camera footage, we feed it through an AI model, and
Speaker 4: we actually just use the audio. We don't even need
Speaker 4: the video, We use the audio track, and we do
Speaker 4: the first draft of your police report because it turns out,
Speaker 4: you know, police interactions are pretty standard. You know, hell man,
Speaker 4: what's your name? Data birth, you know why I stopped you,
Speaker 4: and you can from that extract the information that we
Speaker 4: need to put the structured report narrative together. It's about
Speaker 4: the eighty percent completion and that basically means we're cutting
Speaker 4: the amount of time police spent on bureaucracy by up
Speaker 4: to sixty or seventy percent, which is either not doing
Speaker 4: more work.
Speaker 6: Huge because only fourteen percent of police departments across the
Speaker 6: nation are actually fully staffed, and in the most recent survey,
Speaker 6: seventy five percent of police who responded said they do
Speaker 6: want AI to help them out. It seems like, and
Speaker 6: this is not a pun on your neuroscience degree, but
Speaker 6: seems like a no brainer.
Speaker 7: It's a little bit of all.
Speaker 5: I'm a little biased, but I think so, Hey.
Speaker 8: Just thirty seconds.
Speaker 3: I'm curious because we talked about I think robotics kind
Speaker 3: of came up, and you talked about your interest.
Speaker 6: Empire strikes back the last scene, you know, Luke skywalkers
Speaker 6: his hand.
Speaker 3: Yes, Like, is robotics something that you guys are thinking
Speaker 3: in terms of security going forward? Is that an area
Speaker 3: that you guys might stay.
Speaker 5: Tuned, stay tuned.
Speaker 4: The solution to the American gun violence problem, in my
Speaker 4: personal belief, is we've got to change the game. And
Speaker 4: what I mean by that is today, when an act
Speaker 4: of shooter shows up, they have no illusions they're going
Speaker 4: to come out of it alive. They want to go
Speaker 4: down in some sick twisted vision of a glorious gun
Speaker 4: battle with the police.
Speaker 5: In a couple of years, we are.
Speaker 4: Going to deny them that if you show up with
Speaker 4: a gun somewhere, we will zip in very quickly with
Speaker 4: a robot using less lethal force. You'll be arrested and
Speaker 4: under control very quickly. And we're going to deny them
Speaker 4: the entire sort of motivation to get in gun fights.
Speaker 4: And I think we can do things with drones and
Speaker 4: robotics that you can never do with people, and we
Speaker 4: can do it without having to resort to lethal force.
Speaker 4: So stay tuned. We're making a big play in that space.
Speaker 8: Sounds like you got to come back real soon. So appreciated,
Speaker 8: So appreciate it.
Speaker 3: Rick Smith be well, founder and CEO of ex On
Speaker 3: joining us on this Tuesday. And as we mentioned, we're
Speaker 3: seeing that stock move in a big way following me
Speaker 3: its latest results.
Speaker 8: Let me just pull it up for.
Speaker 9: You can add that guy to the list of guests.
Speaker 8: Don't take it.
Speaker 7: I steal from your show and use on my show.
Speaker 8: Have that co host anymore? Done?
Speaker 10: All right?
Speaker 6: I want a story? I mean what an incredit? The
Speaker 6: stock chart is amazing. Now the story behind it when
Speaker 6: he started that company in nineteen ninety three, well, he's
Speaker 6: been at this for thirty two years.
Speaker 8: I love these people who come have different backgrounds.
Speaker 3: It's like doctors who are engineers who are looking at
Speaker 3: the body in a different payment.
Speaker 8: Here he is in terms of.
Speaker 3: His background and understanding how the brain works and the
Speaker 3: impact on things.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
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Speaker 3: This past week, shares of Wayfair sword following earnings. The
Speaker 3: online retailer reported second quarter results that were much stronger
Speaker 3: than expected. Our Bloomberg Intelligence team pointing out that the
Speaker 3: company's shares have surged around seventy percent this year on
Speaker 3: a strong first half, saying that the bottom for the
Speaker 3: company may be behind it and that it's positioned for
Speaker 3: sustained growth despite teriff related uncertainties. For more on the
Speaker 3: specialty retailer Wayfair, which calls itself quote the destination for
Speaker 3: all things home, we caught up with Wayfair chief financial
Speaker 3: officer Kate Gulliver. She joined us from Boston.
Speaker 11: I think you really saw two key things happening. So first,
Speaker 11: on the top line, our share gains continued to manifest
Speaker 11: and really accelerate, and that led to that five percent
Speaker 11: top line, six percent, you know, adjusting for the German
Speaker 11: business comp So that's pretty exciting for us. And then
Speaker 11: what you saw is a really nice flow through of
Speaker 11: that revenue to adjusted EBIT, you know, crossing that two
Speaker 11: hundred mark two five of adjusted EBIT. And I think
Speaker 11: that really shows the strength of the model efficiency of
Speaker 11: the cost takeouts over the last several years. So to
Speaker 11: have the nice revenue momentum the share gains paired with
Speaker 11: that cost efficiency. You know, for many quarters we said
Speaker 11: you should see that really significant flow through when that happened,
Speaker 11: and indeed that manifested in the second quarter.
Speaker 6: Kate, whenever I ask someone about the stock price and
Speaker 6: it doesn't look great, they always say, well, we're focused
Speaker 6: on doing business here and we don't care about the shares.
Speaker 6: But you got to care about them on some level,
Speaker 6: especially as a CFO. So you know, they've You've had
Speaker 6: an incredible year. Year to date, you're up like sixty
Speaker 6: six percent, but if I bring the chart out to
Speaker 6: you know, the COVID highs, you still have a long
Speaker 6: way to get back there. I think you're down seventy
Speaker 6: some percent from your twenty twenty one highs.
Speaker 7: Is that going to.
Speaker 6: Happen you think at wayfair or was that just you know,
Speaker 6: like la la land levels in the pandemic.
Speaker 11: Well, now we're focused on operating the business. But you know, Lelly,
Speaker 11: let me come back it a little bit for you,
Speaker 11: because you know, the reason you probably hear that answer
Speaker 11: is at the end of the day, we do believe that,
Speaker 11: you know, the valuation and sort of where investors see
Speaker 11: the business should over the long run follow the performance
Speaker 11: that we drive here at the comp and so our
Speaker 11: focus actually really is on how do we continue to
Speaker 11: take share and how do we continue to flow through
Speaker 11: that revenue into adjusted EBITTA dollars, into free cash flow
Speaker 11: growth and into you know metric that we look at
Speaker 11: where we call owners' earnings, which is that EBITA less
Speaker 11: our capex expense, less our stock based compensation. And we
Speaker 11: do want to continue to build on that over time,
Speaker 11: and we think we can and as we continue to
Speaker 11: grow the top line, as we continue to grow those
Speaker 11: adjusted EBITA dollars, you know, I firmly believe that the
Speaker 11: valuation will follow.
Speaker 7: Yeah, revenue just go ahead. Can it get back to that?
Speaker 6: Or was that just like everybody locked in at home
Speaker 6: and the government throwing money at American citizens. Is that
Speaker 6: why revenue climbed so high during the pandemic or can
Speaker 6: you get back.
Speaker 5: To that level?
Speaker 11: Yeah, so if you think about the category itself, obviously
Speaker 11: the category itself had a very you know, unique period
Speaker 11: during the pandemic where growth accelerating the category in twenty
Speaker 11: twenty and into twenty twenty one. The categories had significant
Speaker 11: pullback since then, in twenty two, twenty three, twenty four,
Speaker 11: and even still a bit in twenty five. We would
Speaker 11: say we think the category is sort of flat to
Speaker 11: slightly down, you know, low single digits in the past quarter.
Speaker 11: So the category is still under quite a bit of pressure.
Speaker 11: Can the category return to a normalized level of growth?
Speaker 11: Of course, right, the category and a normalized period grows,
Speaker 11: you know, sort of three to four percent the overall
Speaker 11: home goods category, and we do believe that we can
Speaker 11: return to double digit growth over time, you know, where
Speaker 11: we significantly outpace the category. That's what we did for
Speaker 11: the majority of our history, you know, significantly preceding the pandemic,
Speaker 11: and it's what we expect to do. You know, as
Speaker 11: the category returns to normalization. So, you know, can we
Speaker 11: ever get to the revenue that we had during the pandemic. Absolutely,
Speaker 11: we're quite confident in our ability to do that.
Speaker 3: You mentioned earlier about cost efficiencies of the model what specifically.
Speaker 11: Yeah, So over the last few years, we've been quite
Speaker 11: focused on a few things. One has been improving our
Speaker 11: overall sort of total overhead cost structure that manifests and
Speaker 11: that SOTG and a line in the P and L,
Speaker 11: and I would think about that as really our fixed
Speaker 11: cost basis. The majority of that line is labor, and
Speaker 11: so we have had a number of restructurings where we've
Speaker 11: reduced labor cost and that has shown up in that line.
Speaker 11: And we've said that where that line is right now,
Speaker 11: you know, at that three sixty to three hundred and
Speaker 11: seventy million dollar point, it should be able to hold
Speaker 11: there for some time even as we continue to grow
Speaker 11: the top line, we get ongoing efficiency from labor and
Speaker 11: as we you know, sort of continue to see the
Speaker 11: benefits of some of the growth investments that we've made.
Speaker 11: So that's one big area of cost management. We also
Speaker 11: have been improving our sort of structural gross margin. So
Speaker 11: we took out you know, cost in our supply chain,
Speaker 11: and that's really helped our gross margin. And we've added
Speaker 11: some supplier services like supplier advertising, which have helped improve
Speaker 11: that gross margin as well. We've reinvested, you know, a
Speaker 11: significant portion of that back in the customer experience and
Speaker 11: the form of price and the form of delivery experience.
Speaker 11: And so we've held that gross margin thirty to thirty one,
Speaker 11: but structurally been able to drive it higher and instead
Speaker 11: give it back to the consumer and then float that
Speaker 11: through and ultimately you know, cover off on that fixed
Speaker 11: cost basis.
Speaker 6: I wonder how you deal with tariffs because you have
Speaker 6: so many suppliers. But you know, furniture making in the
Speaker 6: United States of America has is far from its from its.
Speaker 9: Peak these days.
Speaker 6: So do you get suppliers to kind of eat that
Speaker 6: are you taking some of it into your margin? And
Speaker 6: how much are you passing on to the consumer?
Speaker 11: Yeah, you know, we talked about actually, you know in
Speaker 11: May when Carol and I spoke before, was that we
Speaker 11: thought the benefits of our marketplace model would help us
Speaker 11: manage the tariffs. And that's because we are able, you know,
Speaker 11: as you point out, Matt, we source from over twenty
Speaker 11: thousand suppliers right, So we were able to have a
Speaker 11: very wide range of goods with suppliers from all over
Speaker 11: the world, including some from the US, and we're able
Speaker 11: to then position within a given class or category, say
Speaker 11: like this chair that I'm sitting on now, We're able
Speaker 11: to position the products that we believe are best for
Speaker 11: the consumer, so most price competitive can get to her quickly,
Speaker 11: you know, are high quality. We're able to position that
Speaker 11: first in the sort order among many very similar products.
Speaker 11: So if a product gets relatively more expensive, other products
Speaker 11: will then move up within the sort order, so the
Speaker 11: consumer is able to see the product that is most
Speaker 11: price competitive. And that means there's a tension within the
Speaker 11: marketplace where suppliers actually want to maintain their price competitiveness.
Speaker 11: They do not want to lose that volume, particularly in
Speaker 11: a category as we spoke about earlier, that's you know,
Speaker 11: been under pressure for some time and you're seeing that
Speaker 11: pan out. So what we said on the call was
Speaker 11: on a like for like basis for the products that
Speaker 11: are on those first few pages of the sort order.
Speaker 11: When you search for, you know, sort of lounge chair,
Speaker 11: you're going to continue to see and you are seeing
Speaker 11: prices relatively stable on those first few pages, and that
Speaker 11: means that the products that the consumers are buying, they're
Speaker 11: not yet seeing you know, pricing changes flow through. And
Speaker 11: I do think that's due to the you know, breadth
Speaker 11: of suppliers that we work with and the competitive nature
Speaker 11: of the marketplace.
Speaker 3: We are talking with Kate Gulliver. She's the chief financial
Speaker 3: officer of Wayfair, joining us from Boston. Hey, Kate, so
Speaker 3: what do you know about the type of shopping that
Speaker 3: consumers are doing? You know, when they're buying, are they
Speaker 3: buying more items? Are they buying fewer items? Are they
Speaker 3: give us some idea in terms of some of the
Speaker 3: trends that you're seeing in terms of the actual shopping
Speaker 3: going on.
Speaker 8: Yeah, that's a great question.
Speaker 11: So when we think about our average order value or AOV,
Speaker 11: that's really comprised of three different pieces. One is like
Speaker 11: for like pricing, like you just spoke about, One is
Speaker 11: items per order to the question you just asked, and
Speaker 11: then last piece is mix. And we actually are seeing
Speaker 11: a little bit movement on items for order and mix.
Speaker 11: So an items for order, we're seeing a little bit
Speaker 11: of increase, nothing you know, major, but sort of moderate.
Speaker 11: But where we're really seeing momentum is on mix and
Speaker 11: what we mean there is that, you know, we're seeing
Speaker 11: mixing in brands of ours that are actually sort of
Speaker 11: higher values. So Paragold, which is our highest end our
Speaker 11: luxury brand. We're seeing ongoing really nice momentum there. Our
Speaker 11: specialty retail brands, so all Modern Jos in Maine, Birch Lane. Again,
Speaker 11: these are operated a little bit above that mass segment
Speaker 11: that the Wayfair dot com business operates at. Those are
Speaker 11: also seeing nice momentum. And then our B to B
Speaker 11: business where we sell you know, to professionals and the trade,
Speaker 11: we're seeing nice momentum there. All of these are much
Speaker 11: higher ticket values than the sort of core Wayfare dot
Speaker 11: com business. The other thing I'd add is, you know,
Speaker 11: we're obviously newer to the physical retail game. We have
Speaker 11: our first sort of large format waste store opened a
Speaker 11: little over a year ago, and we're seeing nice momentum
Speaker 11: in categories like storage and org and small kitchen accessories
Speaker 11: in the physical space as well.
Speaker 3: Do you want to keep continuing to add in terms
Speaker 3: of the physical stores. I know you guys have some
Speaker 3: more expansion going on.
Speaker 11: Yeah, no, great question. We're thrilled with the performance of
Speaker 11: that Chicago store. Really two key things that we see there.
Speaker 11: One is the halo effects, so the sales that we
Speaker 11: get in the surrounding region from having the store there.
Speaker 11: And then two, within the store, you know, we're seeing
Speaker 11: nice momentum categories that you'll maybe sort of underpunch a
Speaker 11: little bit online, like storage and or kitchen accessory, small
Speaker 11: appliance is that kind of thing, And so as we
Speaker 11: look at it, we see significant opportunity from a growth
Speaker 11: perspective in expanding stores. We've actually announced three additional leases.
Speaker 11: Two will open in twenty twenty six, one in Atlanta
Speaker 11: and one in Denver. That's our first store in sort
Speaker 11: of the Mountain West region, so we're very excited about that.
Speaker 11: And then early twenty seven we have a store opening
Speaker 11: in Yonkers, New York. So you know, you can see
Speaker 11: it's starting to build some of the momentum here. I
Speaker 11: will I'll be a little close again for you guys.
Speaker 6: Yeah, hey, okay, I wonder about your view on rates,
Speaker 6: because you know, maybe if you're buying just one chair
Speaker 6: or a side table, you can afford that, but I'm
Speaker 6: sure a lot of Americans are putting stuff on a
Speaker 6: plan or borrowing money, and today the ten years pretty low.
Speaker 7: But the idea I think is that rates tend to
Speaker 7: go are going to tend to go up from here.
Speaker 7: What's your view?
Speaker 11: Yeah, you know, I would actually say in our business,
Speaker 11: actually the average order size is only around three hundred dollars,
Speaker 11: so well, you know, rates have an impact on the
Speaker 11: consumer overall, in terms of the housing market, in terms
Speaker 11: of our purchasing with us, it's largely not financed.
Speaker 8: All right, Can I leave it.
Speaker 3: They're always fun to check in with you and get
Speaker 3: a really great view of what's going on with the consumer.
Speaker 3: KP Well Kick Olliver. She's the chief financial officer of Wayfair.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 2: flagship New York station, Just say Alexa Play Bloomberg. Eleven thirty.
Speaker 3: Shares, a Mercato Libre, Latin America's biggest company by market cap,
Speaker 3: fell as much as eight point three percent this past
Speaker 3: week on the day it gave a financial update. Company
Speaker 3: second quarter earnings fell short of estimates, a consequence to
Speaker 3: rising cost tied to an expansion a free shipping policy
Speaker 3: in Brazil. Still, revenue growth remained strong, and executives doubled
Speaker 3: down on their plans to keep expanding across the region.
Speaker 3: Mercado Libre chief financial officer Martin de los Santos expects
Speaker 3: growth opportunities ahead. He joined me alongside Bloomberg's Matt Miller
Speaker 3: and Bloomberg new senior editor Nina Treatman.
Speaker 12: Yes, we had a great quarter, really in terms of
Speaker 12: the results that we delivered revenues Lubay thirty four percent
Speaker 12: a year, the deliver operating income a recular operating income
Speaker 12: of eight hundred and twenty five million got us More
Speaker 12: important than that, We continue to grow our new surveys
Speaker 12: both on our.
Speaker 13: Commerce and fintech platform.
Speaker 12: Our buyers on the commerce platform rule by twenty five
Speaker 12: percent year a year.
Speaker 13: On fintech's Rule Bay thirty percent.
Speaker 12: Great book double year and year GMB, which is a
Speaker 12: volume to accected America Oliver Group by twenty nine percent
Speaker 12: in Brazil thirty two percent in Mexico. In both cases
Speaker 12: we continue to gain market share, So very good, you know,
Speaker 12: very strong operating metrics, and like you said, this particular
Speaker 12: quarter was a quarter of investments. We opened two new
Speaker 12: food filming centers to add to the more than thirty
Speaker 12: four film centers that we have throughout the region. We
Speaker 12: also made a big change in terms of lowering the
Speaker 12: free shipping threshold in Brazil, which is a strategic move
Speaker 12: that we have been doing for many years and it's
Speaker 12: paying off very nicely. And also we got due to
Speaker 12: invest in a credit card, but very excited normally about
Speaker 12: the results. More important than that about the future and
Speaker 12: the opportunity that we had ahead of us, both in
Speaker 12: commerce as well as filtech.
Speaker 14: You mentioned Brazil threshold for free shipping in Brazil as
Speaker 14: one of the contributors. I think to you missing estimates
Speaker 14: for net profit as well as core earning. So I'm
Speaker 14: just wondering, as a CFO of a fast growing business,
Speaker 14: how do you think about profitability and how do you
Speaker 14: manage the short versus versus long term?
Speaker 13: That's I mean. We talked about this, Nina, I remember
Speaker 13: talking to you a few quarters ago.
Speaker 12: Does it we try to balance, right, We try to
Speaker 12: balance short term profitability with the growth opportunities that we
Speaker 12: have ahead of us.
Speaker 13: So we want to make sure that we do not
Speaker 13: miss those opportunities.
Speaker 12: When you look at commerce penetration of e commerce in
Speaker 12: Latin America, it's roughly mid teams and fifteen percent, compared
Speaker 12: to maybe twenty five percent, thirty or forty percent in
Speaker 12: China hour in the US, So there's plenty of room
Speaker 12: to continue growing the fintex side of the business.
Speaker 13: The same thing happened.
Speaker 12: Most people in Latin America have not been financially included
Speaker 12: by the financial system, so that we see a large
Speaker 12: opportunity to expand our footprint on the fintech side of
Speaker 12: the business on Marcalo Pao. So at the same time,
Speaker 12: to capture our opportunity, it requires investments. Some of those
Speaker 12: investments might put some short term pressure, but I think
Speaker 12: this is a good example. We lower the free free
Speaker 12: shipping threshold. It does put pressure in the short term,
Speaker 12: but we have approve and over time, and we've been
Speaker 12: doing this since twenty seventeen when we introduced free shipping
Speaker 12: in Brazil.
Speaker 13: At that time, the free.
Speaker 12: Shiping threshold was one hundred and twenty rareites. We brought
Speaker 12: it down to eighty and now we brought it down
Speaker 12: to twenty. So we have proved all the time that
Speaker 12: by lowering the free shipping threshold, we eliminate the most
Speaker 12: you know, the most frictional point in terms of acquired
Speaker 12: buying things online for people. So we're eliminating that friction
Speaker 12: really generates a lot more volume and then eventually that
Speaker 12: translates into profits. So I think it's it's a strategy
Speaker 12: that has paying out to us, and the long term
Speaker 12: investors of Magalivera understand it, and we're already comfortable with
Speaker 12: the investments that we're doing.
Speaker 14: You mentioned Brazil. It's of course an interesting market just
Speaker 14: in the current terror of debates that we're seeing with
Speaker 14: the Brazilian government so far holding out to Trump and
Speaker 14: basically not giving in on the Trump TERRAF suggestions for Brazil.
Speaker 14: Just wondering and how far are you seeing that play
Speaker 14: out in terms of consumer confidence and consumer spending. Are
Speaker 14: you seeing any impacts in countries like Brazil. I know
Speaker 14: you're also doing business in Mexico and other countries, all
Speaker 14: of which will face higher terrors as part of the
Speaker 14: US renegotiation of terrors around the world.
Speaker 13: Yes, this is something that we are monitoring closely.
Speaker 12: Obviously, we do not export into the US, so there's
Speaker 12: no direct impact on our business, but it can have
Speaker 12: secondary effects on the economy.
Speaker 13: As you mentioned, we have not seen that so far.
Speaker 12: As I mentioned earlier, we are growing by twenty nine
Speaker 12: percent our GMB in Brazil. As that the management, which
Speaker 12: is amount of money investing of our users, investor mar
Speaker 12: delivery more than doub in Brazil. In ear year, our
Speaker 12: credit card book has grown by one hundred and eighteen percent.
Speaker 12: The profitability of the asset quality of our credit book
Speaker 12: continues to be very solid in Brazil. So we have
Speaker 12: not seen any you know, any deterioration on macro, on consumption,
Speaker 12: but obviously it's something that we are monitoring closely.
Speaker 7: Our team Gundia Matt Miller here in the studio with
Speaker 7: the ladies.
Speaker 6: I was really blown away by the growth at Mercado
Speaker 6: Credito and I wonder if you're watching closely for signs
Speaker 6: of credit stress there, because I think you had like
Speaker 6: ninety percent growth.
Speaker 13: That's correct, that's correct. Thank you for a question.
Speaker 12: Yeah, obviously, when we look at credit, we take it
Speaker 12: very seriously. We are very careful in the way we
Speaker 12: manage credit. But the way I used to run the
Speaker 12: great business before taking the position of CFO. So the
Speaker 12: first thing we look at is the health of our book.
Speaker 12: We saw that mpls and we disclosed this number the
Speaker 12: lowest record lower number in those since we've been disclosed
Speaker 12: in the metric. The NAYMA, which is a measure of profitability,
Speaker 12: is also improving quarter on quarter.
Speaker 13: So we see very healthy signs in terms of our
Speaker 13: book and a profitability.
Speaker 12: So the reason why you're seeing ninety one percent growth
Speaker 12: in our credit book is because we are seeing good
Speaker 12: results in terms of our models predicting default rates and
Speaker 12: the quality of our predite book continues to be very healthy.
Speaker 12: If we need different what will slow down because you know,
Speaker 12: we're very conscious with the way we will manage our
Speaker 12: credit business.
Speaker 3: We're talking with Martin de los Santos. He's the CFO
Speaker 3: of Mercado Libre joining us from Uruguay. We should also
Speaker 3: point out that this is the largest company we to
Speaker 3: point Latin America's most valuable company if you think about
Speaker 3: market caps, so really significant. We were talking about fintech
Speaker 3: and you know, you were talking about kind of the
Speaker 3: health of that portfolio. But what can you tell us more, Martine,
Speaker 3: when it comes to the mix of customers that are
Speaker 3: in that portfolio.
Speaker 12: I think what we're seeing is we're seeing all the
Speaker 12: different type of customers within the economics segments of the populations.
Speaker 12: Keep in mind that we acquire most of our users,
Speaker 12: most of our credit users from the marketplace and all
Speaker 12: types of people using our marketplace, so we have the
Speaker 12: advantage of having the distribution of medicalivery, but also they
Speaker 12: buying information that those people have on our marketplace, and
Speaker 12: we use that information through AI and machine learning.
Speaker 13: Models to escore people, and we have models that are
Speaker 13: very accurate at predicting credit risks. So you will find
Speaker 13: people of all kinds of.
Speaker 12: Social levels within our ecosystems that are like half of
Speaker 12: the people that we offer grade too, we offer credit
Speaker 12: for the first time they never had access to create.
Speaker 12: But also the other half are people that praperly moving
Speaker 12: their fintech business to us because we offer it much
Speaker 12: better user experience than the traditional banks.
Speaker 14: Martin one question in terms of earnings, I noted that
Speaker 14: you also pointed out the impact of the Argentine peso
Speaker 14: on your results. Of course, we've seen HOVMLA make various
Speaker 14: changes in in Argentina in recent months, including making changes
Speaker 14: to the companies to the country's currency, which has resulted
Speaker 14: to in basically the spread between the official and inofficial
Speaker 14: rate falling apart. Just wondering how that's impacting your business
Speaker 14: and specifically also are you changing your hedging strategy for Argentina.
Speaker 12: Yeah, I think that the headleft of Argentia that we
Speaker 12: continue to see a big recovery. I mean unique viers
Speaker 12: in Argentina group by thirty percent your year, our GMB
Speaker 12: group by seventy five percent in local currency or thirty
Speaker 12: five percent in dollars, the items sold on the platform
Speaker 12: group by forty six percent, so very strong recovery. As
Speaker 12: we see inflation coming down, consumption improving, and also as
Speaker 12: you mentioned, the FX market be normalized also helps our business.
Speaker 12: They opened the economy, so we are bringing more products
Speaker 12: from the US into Argentina as well. So most you know,
Speaker 12: most of the business are performed extremely well in Argentina
Speaker 12: and we're very happy with the way things going for
Speaker 12: our business there.
Speaker 6: You mentioned, Martine, you ran credit before at Mayer Coutolibre,
Speaker 6: you ran also strategy into it and you were at
Speaker 6: Paine before that, so you know strategy up and down.
Speaker 6: I want to know about your strategy regarding ad revenue,
Speaker 6: because it was also searched like up thirty eight percent.
Speaker 6: Is that a profit center for you, a future profit
Speaker 6: center or do you view that more as a tool
Speaker 6: to drive your core marketplace growth?
Speaker 13: Yeah? Other times in business is roughly a one billion
Speaker 13: dollar business.
Speaker 12: He's rowing at thirty eight percent, as you mentioned, and
Speaker 12: he said, you's a profit business for the company, but
Speaker 12: it has tremendous potential going forward.
Speaker 13: If you look at the number of people interacting with
Speaker 13: our ecosystem.
Speaker 12: Last year, we had more than one hundred million people
Speaker 12: buying on Marcaire have sixty eight millium monthly active users
Speaker 12: of our fintech platform.
Speaker 13: So in terms of a number of eyeballs within Latin.
Speaker 12: America, we are the third largest pund regional platform and
Speaker 12: has a great opportunity to continue distributing advertising. We also
Speaker 12: can leverage all the one first part the information that
Speaker 12: we have on our users or to target marketing campaigns.
Speaker 12: So we see a big, big, very large opportunity. I
Speaker 12: think it's more future to the past and advertising business.
Speaker 12: We're are just getting started, but as you mentioned, we
Speaker 12: have been growing very rapidly for the past several years.
Speaker 13: There's plenty of growth going forward.
Speaker 8: Martin just got about twenty seconds.
Speaker 3: We always liked to when we've got lucky enough to
Speaker 3: have someone like yourself a global CEO, how would you
Speaker 3: describe the global outlook?
Speaker 8: And just quickly.
Speaker 12: Yeah, I think well, obviously, we operate in Latin America
Speaker 12: and depending on the countries, some countries have some tough
Speaker 12: micro situations and some others might be in a very
Speaker 12: conditioned we're talking about Argentina recovering. But at the end
Speaker 12: of the day, I think in our business in particular,
Speaker 12: the trend of people moving online is so much stronger
Speaker 12: than macro that we have plenty of opportunities ahead of us.
Speaker 12: And the same thing on fintech. Right where we're operating America,
Speaker 12: where petuation of fintech products is very very low, well
Speaker 12: play a big role in dos of cerating financial inclusion
Speaker 12: throughout the region.
Speaker 13: So we're very optimistic of Lisa our recent So glad.
Speaker 8: We could get some time with you.
Speaker 3: Martin de la Santo ceo Mercado Libro Cfo, excuse me,
Speaker 3: Mercado Libreke gave him a little bit of a promotion.
Speaker 8: Anina Trupman, thank.
Speaker 2: You, you're listening to the Bloomberg Business Weekdaily Podcast. Catch
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Speaker 9: On YouTube plenty.
Speaker 3: Ahead on our second hour of the weekend edition of
Speaker 3: Bloomberg Business Week. From Sports to Spirits, more insights from
Speaker 3: the C suite, the CEO of the NBA basketball team
Speaker 3: Dallas Maverick stopping by. Plus we talk bourbon, gin rye
Speaker 3: Ready to drink cocktails, and Yes, tariffs with the CEO
Speaker 3: of US Spirits brand Craft Co. First up this hour.
Speaker 3: As we mentioned earlier, it was another uber busy earnings week.
Speaker 3: In fact, Uber and Lyft both reported those details on
Speaker 3: the Bloomberg and at Bloomberg dot Com. One company though
Speaker 3: that came out with results recently and it has definitely
Speaker 3: been on our radar, is Generak. It's a power equipment
Speaker 3: company and maker of residential and industrial generators and battery
Speaker 3: storage systems that's now expanding into the data center space
Speaker 3: with plans to power them with diesel generators, a segment
Speaker 3: potentially valued at several billion dollars for the company. The stock,
Speaker 3: by the way, jumped about twenty percent following its latest
Speaker 3: financial update, and is up about twenty five percent year
Speaker 3: to date. Aaron Yuchtfeld is the chairman, president and CEO
Speaker 3: of Generak. He joined us along with Bloomberg's Matt Miller.
Speaker 9: Yeah, it's never a dull moment when you talk about
Speaker 9: backup power.
Speaker 10: You know, every time I travel, I get on a plane,
Speaker 10: you sit down next to somebody, you do the Okay,
Speaker 10: what do you do?
Speaker 3: What are you?
Speaker 5: You know, what's your job?
Speaker 9: Where do you work?
Speaker 10: I talk about Generak, and all of a sudden, you know,
Speaker 10: people are like, well, that's a product we have to have.
Speaker 10: You know, I think what we've come to find just
Speaker 10: as Americans, you know, we struggle with power quality in
Speaker 10: this country and we have for many decades.
Speaker 9: This is not a new issue.
Speaker 10: I think, you know, what's worrisome is just the number
Speaker 10: of outages that are happening and how long they're lasting.
Speaker 10: And this is a growing problem both for homeowners as
Speaker 10: well as businesses.
Speaker 6: Yeah, so how much air and of your business is
Speaker 6: you know, you know, me and Carol out in the suburbs,
Speaker 6: and how much of it is a company you know,
Speaker 6: mid size or even larger looking to back up its data.
Speaker 10: Yeah, about sixty percent of what we do is in
Speaker 10: the residential market, so that would be you know, out
Speaker 10: in the suburbs, you know, for homeowners who are looking
Speaker 10: for a solution for their family, for their property, protect
Speaker 10: those things.
Speaker 9: Businesses, you know, this is a business decision. Right With homeowners,
Speaker 9: it's a little b different.
Speaker 10: It's a little bit more emotional, right, just the loss
Speaker 10: of power and what can happen in your home. Certainly
Speaker 10: there's there's things that can go wrong, there's damage that
Speaker 10: can happen to your house, but largely, you know, that's
Speaker 10: an emotional decision. Whereas a business, the loss of revenue,
Speaker 10: spoilage of inventory, you know, some kind of interruption of
Speaker 10: a critical process, especially as things get more critical with
Speaker 10: in business, with power the need for that. We see
Speaker 10: about forty percent of our business leaning that way. But
Speaker 10: that is a very large opportunity for us, and in
Speaker 10: particular in some of the bigger applications where we play
Speaker 10: up in the data center market, it's you know, an
Speaker 10: incredibly hot space.
Speaker 8: We'll dig into that for.
Speaker 3: Us, Aaron, like, how much growth are you seeing in
Speaker 3: that space? How many calls are you getting about that?
Speaker 3: Give us an idea of some of the demand and
Speaker 3: what that kind of gives you an indication of how
Speaker 3: much more that market could be for you guys.
Speaker 9: Yeah, the market for data centers.
Speaker 10: I mean, obviously you guys cover this, you know, very broadly. Yeah,
Speaker 10: it's massive, right, Like I mean, the capital spending that
Speaker 10: is going into these facilities and all the equipment that
Speaker 10: goes alongside of them is enormous, and of course the
Speaker 10: power needs themselves are enormous. You can imagine the backup power, right,
Speaker 10: these are critical installations. If the facilities go down, we
Speaker 10: don't have access to cloud, we don't have access to
Speaker 10: some of these critical things that are happening in data centers.
Speaker 10: So every single data center that goes in has emergency
Speaker 10: backup power. And so we're a relatively new entrant to
Speaker 10: this market. Our product lines have been smaller. We've served
Speaker 10: small business and smaller data centers for many many years.
Speaker 10: The telecommunications space and an examples, we provide backup power
Speaker 10: to a lot of the major wireless carriers out there.
Speaker 9: So this is a bit of a new space for us.
Speaker 9: We just entered it in April.
Speaker 10: We opened up our order book and we've already booked
Speaker 10: one hundred and fifty million dollars worth of new business.
Speaker 10: We talked about that last week on our call. I
Speaker 10: think that was part of the reaction that you saw
Speaker 10: in the stock. But we're seeing just an incredible amount
Speaker 10: of demand for these types of products.
Speaker 6: I'm always interested in where you're building these things, and
Speaker 6: I guess you have a new facility in beaver Dam,
Speaker 6: Wisconsin that's supposed to open up space to build those
Speaker 6: big diesel generators, more of the big diesel generators in Oshkosh.
Speaker 6: Tell us about your manufacturing footprint, because tariffs are obviously
Speaker 6: a huge issue these days.
Speaker 10: Absolutely, and you know, we've been long standing US manufacturer.
Speaker 10: We just opened our sixth facility in the state of Wisconsin.
Speaker 10: We have seven here state. Side those six facilities in Wisconsin,
Speaker 10: a good chunk of those facilities are focused on these
Speaker 10: larger units and on the commercial and industrial products, so
Speaker 10: those products for backing up businesses. But we're also a
Speaker 10: global company. We have facilities worldwide. We have a facility
Speaker 10: in China, facility in India, Brazil. We have three facilities
Speaker 10: in Europe too, in Italy, one in Spain, have another
Speaker 10: facility down in Mexico. So you know, We're a global company,
Speaker 10: but we see the demand for backup power growing really
Speaker 10: across the globe, but we see what's going on here
Speaker 10: in the US.
Speaker 9: The addition of the.
Speaker 10: Beaver Damp facility was a critical part of expanding additional
Speaker 10: capacity for these systems because the growth is just it's
Speaker 10: enormous right now.
Speaker 7: How much so I look at cars all the time.
Speaker 6: Ford builds more cars in America for sale in America
Speaker 6: than any other producer. You'd think that would help them
Speaker 6: avoid tear, but in the end they get absolutely crushed
Speaker 6: with tariffs on steel, tariffs on aluminum, tariffs on form
Speaker 6: made parts, tariff's on magnets out of China, and it
Speaker 6: really makes up then more of a tariff hit than
Speaker 6: somebody building a car in Japan or somebody building a
Speaker 6: car in South Korea for export. Do you get hit
Speaker 6: with those kind of nickel and dime tariffs.
Speaker 5: Too, we do.
Speaker 10: We use a lot of steel, we use a lot
Speaker 10: of aluminum, We use a lot of copper in every
Speaker 10: single gen set. So in fact, you know, it's interesting
Speaker 10: you brought up the emotive automotive industry, Matt, because it's
Speaker 10: it's a real good proxy for you know, a lot
Speaker 10: of our input costs, you know, in terms of the components,
Speaker 10: in terms of the commodities, the things that we're exposed to.
Speaker 10: So you know, we have a lot of those similar exposures.
Speaker 10: And I think just like Ford and others, Yeah, we're
Speaker 10: trying to do what we can to minimize the impact
Speaker 10: of tariffs, but it's difficult.
Speaker 9: I mean, we've all developed over the.
Speaker 10: Last you know, forty fifty sixty years, global supply chains, right,
Speaker 10: I mean there are there are areas of the world
Speaker 10: where you know, certain components, certain commodities are only available, right,
Speaker 10: you just they're just not widely available in other parts
Speaker 10: of the world. So it's going to take time to
Speaker 10: recalibrate those supply chains and to try and create a
Speaker 10: more domestic manufacturing base. And I get it. I understand
Speaker 10: the need to do that, in particular around things that
Speaker 10: are you know, associated with defense, maybe pharmaceuticals, things that
Speaker 10: are truly critical. I'm not sure, you know, when you
Speaker 10: look at the broader base of things that we're putting
Speaker 10: tariffs on that, you know, like tennis shoes and Barbie dolls,
Speaker 10: if that's you know, maybe the right place to do it.
Speaker 10: You know, I think we've got to be selective and
Speaker 10: we've got to be strategic in how we use tariffs.
Speaker 10: But I know the administrations, you know, working through all
Speaker 10: of that, with all these different trade partners.
Speaker 6: Some things, I mean, like magnets are rare earth out
Speaker 6: of China. We're never producing those here. It's like not
Speaker 6: an option, not in decades, so challenging.
Speaker 7: And you you must use those. Are you getting enough?
Speaker 9: We are?
Speaker 10: You know, we're fortunate that we have some we have
Speaker 10: the ability to kind of substitute for some of those
Speaker 10: super rarer the elements that I think are are really
Speaker 10: critical in aerospace and defense, not as not as critical
Speaker 10: maybe in the automotive, and you know, in smaller quantities
Speaker 10: they are, but we have access to them today. But
Speaker 10: of course that's a concern because as you noted, you know,
Speaker 10: there are only a few areas of the world where
Speaker 10: you can get those types of materials and those types
Speaker 10: of components. So it presents a really I mean, it's
Speaker 10: a it's a very complicated situation, very complicated conversation. I
Speaker 10: understand what we're trying to do, but again, I think
Speaker 10: we've got to be we've got to be super strategic
Speaker 10: about how we implement these these trade agreements and these tariffs.
Speaker 3: We are talking with Aaron Yechtfeld. He is chairman, president
Speaker 3: and CEO of GENERAK. Hey, a couple of things that
Speaker 3: you said, and I want to follow up on. You
Speaker 3: are mostly selling here in the United States, but you
Speaker 3: did talk about what you guys are doing around the world. Aaron,
Speaker 3: does it make sense to pivot even more so international
Speaker 3: with the energy storage solutions to places like Europe and
Speaker 3: China given that the US policies are now less friendly
Speaker 3: to something like solar.
Speaker 10: Well, those are big markets to begin with, right So
Speaker 10: you know, obviously we want to be successful with our
Speaker 10: energy products, you know, the storage products in particular battery products.
Speaker 10: You know, Europe is a very well established market. The
Speaker 10: US is a good market as well. But obviously the
Speaker 10: policy changes that you know we've now codified here recently
Speaker 10: are going to have an impact on the US market
Speaker 10: for solar and for storage now. A lot of the
Speaker 10: things we're looking at, though, even with the loss of
Speaker 10: those incentives and the loss of support here in the US.
Speaker 10: You know, the economics of putting a solar system on
Speaker 10: your rooftop depending on where you live, as the cost
Speaker 10: of energy continues to rise. This is one of the
Speaker 10: things we've talked about when we started up talking today
Speaker 10: about the quality of power. The cost of power is
Speaker 10: another element here that needs to be talked about, because
Speaker 10: as power costs go up and the cost of these
Speaker 10: technologies around solar and storage continue to come down, the economics,
Speaker 10: the payback, the raw economics of investing in your own
Speaker 10: power production on your rooftop or a geothermal loop or
Speaker 10: however you want to produce your own power and store
Speaker 10: some of that power, continue to improve, and the loss
Speaker 10: of support. You know, it may impact the industry for
Speaker 10: a year or two, but it will get back on
Speaker 10: track because again, power prices are going up.
Speaker 3: Yeah, it does feel like we're headed towards the power war,
Speaker 3: certainly here in the United States, considering the amount of
Speaker 3: power needed to really support all the AI that's going on.
Speaker 3: Having said that, you talk about these loss of these
Speaker 3: residential tax credits. You've got some new home stand by generators,
Speaker 3: my understanding is coming to market. Is that going to
Speaker 3: help offset though, some of the loss that you are
Speaker 3: seeing from those residential tax credits, especially when it comes
Speaker 3: to your storage business.
Speaker 9: Yeah, absolutely so.
Speaker 10: On the energy storage side, the loss of the credits.
Speaker 10: That's going to impact that business here short term, our
Speaker 10: home stand by business. That business doesn't it's never benefited
Speaker 10: from tax credits to begin with. So you know, it's
Speaker 10: the kind of thing that you again, if you and
Speaker 10: Matt out in the suburbs, you've got you want one
Speaker 10: of these products to back up your home so that
Speaker 10: you know, you protect your property, protect your family. There, unfortunately,
Speaker 10: were no tax credits available, even though the administration when
Speaker 10: when President Trump was on the campaign trail, you know,
Speaker 10: he had mentioned maybe perhaps offering a generator tax credit.
Speaker 10: We're still waiting on that. We think that'd be smart policy,
Speaker 10: but we haven't seen it yet. It certainly wasn't in
Speaker 10: the One Big Beautiful Bill. Those products don't have tax credits.
Speaker 10: We do have a new product line coming out which
Speaker 10: has got some great features and benefits packed in it.
Speaker 10: But those are the kinds of products that you know,
Speaker 10: again you're really buying and investing in those products to
Speaker 10: protect your home, to protect your family, to protect your
Speaker 10: business from a power outage.
Speaker 3: Now, and what I really meant is those news products
Speaker 3: kind of offsetting anything you're losing from the energy storage
Speaker 3: business because of the loss of the tax credits. One
Speaker 3: other thing I want to ask you about data centers.
Speaker 3: What about the imminent launch that you guys are expecting
Speaker 3: of large diesel generations for data centers, What can you
Speaker 3: tell us about capacity? How much do you guys have
Speaker 3: for that and are you investing to boost that capacity?
Speaker 3: And what is the pipeline of new orders looking like?
Speaker 10: Yeah, so the pipeline's very strong. You know, again about
Speaker 10: one hundred and fifty million already booked in backlog. In
Speaker 10: terms of capacity raw capacity here, you know, kind of
Speaker 10: globally about about a five hundred million dollar capacity number
Speaker 10: for twenty twenty six. So if we get the orders
Speaker 10: we think we can, you know, we can have a
Speaker 10: really great year next year as a way to increase
Speaker 10: our marcial and industrial business. But we're already thinking about
Speaker 10: twenty twenty seven beyond. You know, this is a market
Speaker 10: that again you kind of have to go back to
Speaker 10: what do you see in terms of capex spending for
Speaker 10: data centers? Is this going to be as truly a bubble?
Speaker 10: You know, something that in the next year or two
Speaker 10: you're going to see a retrenchment or a retlacement of
Speaker 10: all the that spending or is this secular? Right, is
Speaker 10: this going to go on for the next decade? And
Speaker 10: we we definitely, like others, believe that this is this
Speaker 10: is certainly a longer term trend and one worth leaning into.
Speaker 10: So we're already starting to think about adding capacity, uh
Speaker 10: so that we can take that five hundred million dollars
Speaker 10: number to something much higher than years ahead.
Speaker 7: For me, it's the residential products because.
Speaker 3: This is like Matt just wants a diesel generator. Tell you, well,
Speaker 3: if you're you know, what we do here is just
Speaker 3: what Matt needs to buy.
Speaker 7: And that's what it's not not even me.
Speaker 6: But if you're like a hedge fun guy and you
Speaker 6: just made your first you know, a couple of million,
Speaker 6: and you're putting up a place and you know Mill Brooks,
Speaker 6: you can be next to me, show Mik you want
Speaker 6: to have a sweet diesel generator?
Speaker 13: Are out back?
Speaker 10: Well, well, I'll tell you you know what people don't
Speaker 10: think about, right, Like if you if you think about
Speaker 10: your home today and right so you talk about that
Speaker 10: the hedge fund manager or or you know, anybody else
Speaker 10: who's who's got a home, the amount of technology that's
Speaker 10: entered your own home, right, think about it, like like
Speaker 10: from security cameras to just the you know, it's from
Speaker 10: control of all of your you know, a lot of
Speaker 10: your audio visual equipment you're lighting, but a lot of
Speaker 10: the you know, the safety equipment that goes in your homes,
Speaker 10: your security systems. These systems are non operational when the
Speaker 10: powers out. We get notes from people who are like,
Speaker 10: you know, look, I didn't even realize that my garage
Speaker 10: door wouldn't open. You know, I've got a garage door opener.
Speaker 10: The powers out, I can't even back my car out
Speaker 10: of the garage. You know, everybody if you if your
Speaker 10: power's out and you want to open the garage or
Speaker 10: you got to reach up and grab that red handle. Right,
Speaker 10: nobody wants to do that ever in your garage because
Speaker 10: you don't know what's going to happen next.
Speaker 9: Right, So people are like, I just I didn't think
Speaker 9: about it. I didn't think my some pump when you're
Speaker 9: some pump.
Speaker 3: My husband keeps doing all these systems, like are lights
Speaker 3: I had to turn on with like these technical systems
Speaker 3: and everything nothing switches or anything anymore, And it's like
Speaker 3: I fear for when the lights go out. I don't
Speaker 3: live in suburbia, I live just outside New York City,
Speaker 3: but we talk about.
Speaker 7: It's so much.
Speaker 6: We talked about even the food in your refrigerator, but
Speaker 6: the deer and the freezer downstairs, you know, and what
Speaker 6: happens if you can't heat the pool and the fall.
Speaker 6: You know, you need to have what what is the
Speaker 6: hottest product, Aaron? What is the thing that you know,
Speaker 6: the dude at the end of the call to sack
Speaker 6: absolutely has to have.
Speaker 7: What are you selling out of?
Speaker 10: Well, I'll tell you it's our twenty six kiloot home
Speaker 10: stand by generator, which can cover your entire house, a
Speaker 10: good sized home, for everything you need.
Speaker 9: It's basically if the utility.
Speaker 10: Goes down, you don't even notice that that that the
Speaker 10: utility is not present, right, I Mean you see a
Speaker 10: momentary uh loss of power, and then the generator starts
Speaker 10: up and you can you can basically run in definitely
Speaker 10: on a natural gas pipeline or if you have propane
Speaker 10: at your home, you know you're gonna be able to.
Speaker 9: Last a long time on a generator. And I think
Speaker 9: one of the things.
Speaker 10: The other thing that we're seeing huge trend right is
Speaker 10: people who have home medical equipment GLP one drugs GLP one,
Speaker 10: drugs have to be refrigerated. So if you lose refrigeration
Speaker 10: with medications, certain kinds of medications spoil very quickly. And
Speaker 10: so you know this these trends, these overarching trends. For again,
Speaker 10: you know, a lot of the medical infrastructure is starting
Speaker 10: to move into the home. We see Americans who are
Speaker 10: trying to stay independent and stay in their homes much
Speaker 10: much longer. But a power outage when you know, when
Speaker 10: you get older, in your sixties or seventies and you
Speaker 10: lose power, it's a very different situation than if you're
Speaker 10: a younger American thirties and forties. You know, it's the
Speaker 10: indoor camping. You get out the monopoly, you know, and
Speaker 10: everybody has fun and it's great until you know, everybody
Speaker 10: gets sick of that after about an hour. But if
Speaker 10: you're older, I mean the danger that comes from not
Speaker 10: being able to regulate temperature, the loss of some of
Speaker 10: the function of some of these medical devices, just not
Speaker 10: having the lights operate. As you mentioned, Carol, I mean,
Speaker 10: those are very serious situations for older Americans, and that
Speaker 10: is a huge part of our demographic for homestand by generators.
Speaker 8: Yeah, moose from being a wine scenary to a staple cellar.
Speaker 8: Matt stop iron. He's now googling what you just suggested,
Speaker 8: and so you know there might be a purchase coming
Speaker 8: here some day in Matt's future. Aaron, thank you so much.
Speaker 8: Aaron Yeckfeld.
Speaker 3: He is Chairman, president and CEO of Generak. Delighted to
Speaker 3: have him here on Bloomberg Business Week Daily.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
Speaker 2: each weekday starting at two pm Eastern on Apple car
Speaker 2: Play and Android Auto with the Bloomberg Business App. You
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Speaker 2: New York station, Just Say Alexa played Bloomberg eleven thirty
Speaker 2: well four.
Speaker 3: Months after the Dallas Mavericks fans held a mock funeral
Speaker 3: for the franchise outside it's arena following the trade of
Speaker 3: star forward Luka Doncic, they rushed back to the team's
Speaker 3: home court to celebrate what they hope will be its rebirth.
Speaker 3: It happened just about a month ago as about six
Speaker 3: thousand people watch from the stands of the American Airline
Speaker 3: Center as the team selected Duke University's Cooper Flag with
Speaker 3: the top pick in the NBA's draft. Well, we've got
Speaker 3: a lot to talk about, and we've got the perfect guest,
Speaker 3: Rick welts Us. He's the CEO of the Dallas Mavericks.
Speaker 3: And we also have with us Bloomberg News Texas Pure
Speaker 3: Chief Julie Fine, both of them in our Dallas bureau. Julie, Rick,
Speaker 3: great to have you here with Tim and myself. Rick
Speaker 3: got to start with Cooper Flag. You were with them
Speaker 3: when he first got to Dallas. The team has such
Speaker 3: a slim slim chance of getting that first draft pick.
Speaker 3: How has he kind of melded into the organization so far?
Speaker 15: Would you call a slim chance one point eight percent
Speaker 15: super slim? A chance, super slim. He's been great. He
Speaker 15: arrived in town with his parents, his brother, grandparents. You know,
Speaker 15: he's a testament to great parenting. I experienced that at
Speaker 15: Golden State my last job with Steph Curry on what
Speaker 15: great parenting can mean.
Speaker 9: He's the most.
Speaker 15: Decorated eighteen year old in the history of the game
Speaker 15: of basketball at this point, coming in with incredibly high expectations,
Speaker 15: but really everything you could see being around him for
Speaker 15: a few days, from mindset, from attitude, from work ethic,
Speaker 15: everything you can see gives you a lot of hope
Speaker 15: he's going to be everything that basketball fans expect him
Speaker 15: to be and maybe.
Speaker 9: A little more.
Speaker 16: You know, Rick, he comes here to Dallas after a
Speaker 16: pretty tumultuous time for the franchise at this point from
Speaker 16: a business sense, are you doing okay? Did you lose
Speaker 16: season ticket holders? How about sponsorships?
Speaker 15: So I got here January first. You know, I'm here
Speaker 15: because Dallas is such an amazing market. The history of
Speaker 15: fans support here is just incredible. We have an expression
Speaker 15: here mas Fans for Life, and I walked into that
Speaker 15: trying to, you know, just being thrilled to represent the
Speaker 15: Mavericks in this market. But trading Luca, which happened on
Speaker 15: February first, pretty much broke the internet. And it was
Speaker 15: not something that our fans expected and not certainly not
Speaker 15: something that they embrace. And so we went through one
Speaker 15: hundred days of grieving, you know, with our fan base
Speaker 15: understanding what this kid meant to Dallas. But you know,
Speaker 15: now with Cooper here, I think the focus again on
Speaker 15: the future. Sponsors are probably ringing our phone a little
Speaker 15: bit more than we've ever had before. Season ticket holders
Speaker 15: are back in greater numbers than they were last.
Speaker 9: Season, so so far, so good.
Speaker 16: You know, we talked a little bit earlier about time
Speaker 16: and forgiveness after something like that happens. I mean, now,
Speaker 16: when you look back a few months later and moving forward,
Speaker 16: how do you feel feeling great?
Speaker 15: You know, We're going to start the season with three
Speaker 15: number one historic three number one picks Anthony Davis, Kyrie Irving,
Speaker 15: and Cooper Flag all number one in the NBA draft.
Speaker 15: A third another future Hall of Famer in addition to
Speaker 15: Anthony and Kyrie is Clay Thompson. We're feeling great about
Speaker 15: the team that we're going to feel next year. We're
Speaker 15: feeling great about the momentum that Cooper has brought.
Speaker 9: To the Mavericks.
Speaker 1: Rick Apart from winning, how else can you continue to
Speaker 1: rebuild or redevelop that trust between the organization and the
Speaker 1: fan base.
Speaker 9: You know, I think that's a great question.
Speaker 15: I think what I'm walking into is an organization that
Speaker 15: probably has set the standard in terms of community engagement.
Speaker 15: Not rehashing the past, but the Mavericks had a pretty
Speaker 15: existential crisis six seven years ago when there were a
Speaker 15: lot of media coverage of what was really a broken
Speaker 15: culture here at the Mavericks. Since Marshall came in as
Speaker 15: chief executive officer at the time and spent the last
Speaker 15: six seven years rebuilding the relationship between fans, civic organizations,
Speaker 15: religious organizations, government organizations in Dallas and the Mavericks. It
Speaker 15: became a point of pride again to be associated with
Speaker 15: the Mavericks, so.
Speaker 9: That reservoir of it will still exists.
Speaker 15: We're going to combine that with that time tested formula
Speaker 15: of time and winning, and I think it gives us
Speaker 15: a reason to be super optimistic by the way out
Speaker 15: of time when we're talking about building a brand new
Speaker 15: arena and entertainment district in the city of Dallas that'll
Speaker 15: be home for the Mavericks for decades to.
Speaker 3: Come, and Vick, we want to talk about the arena.
Speaker 3: I got to go back though, to Luca, and I'm
Speaker 3: just curious, like we've all done things where we're like,
Speaker 3: if I could do that over and you talked about
Speaker 3: the one hundred days of grieving.
Speaker 8: Do you have any regrets or did you learn.
Speaker 3: Anything, especially you know based on your fan reaction, But
Speaker 3: first of all, any regrets in making the trade.
Speaker 15: You can't have fear or regrets in this business, right,
Speaker 15: It's all about how you move forward, and you know,
Speaker 15: so it doesn't really serve a purpose to have regrets.
Speaker 15: What I will say I learned about the depth of
Speaker 15: the connection between Mavericks fans and this team, and that
Speaker 15: to me was glass half full because I knew we
Speaker 15: could restore that over time. I didn't think it would
Speaker 15: happen quite as quickly, perhaps as it's happened.
Speaker 9: I would also say I'm.
Speaker 15: Incredibly proud of how the organization presented itself for Luca's
Speaker 15: first game back at American Airline Center when he was
Speaker 15: a Los Angeles Laker. I think if you watch that game,
Speaker 15: it was an opportunity for fans to say thank you.
Speaker 15: I think you saw the emotion on Luca's face, You
Speaker 15: saw the way that night unfolded and tributes to Luca.
Speaker 15: I think he'll always be such a big part of
Speaker 15: the history here, and you know, we wish him nothing
Speaker 15: but good luck, but we also hope we beat his
Speaker 15: team every time we play him.
Speaker 9: So do well, but not too well.
Speaker 17: We get it.
Speaker 8: You know, I want to touch back on the stadium.
Speaker 16: Your current lease is up in twenty thirty, so I
Speaker 16: know you're looking for new spaces. How committed are you
Speaker 16: to do it in the city of Dallas.
Speaker 15: So we've publicly said that we are going to exhaust
Speaker 15: every opportunity to place the new Mavericks Arena in the.
Speaker 9: City limits of Dallas.
Speaker 15: That's one hundred percent of our focus right now, working
Speaker 15: with the city manager's office and the Mayor's office identifying
Speaker 15: potential sites, evaluating those sites for how they work for transportation,
Speaker 15: how they work for accessibility to our season ticket base.
Speaker 9: So we're in it all the way with Dallas.
Speaker 15: I expect we're going to be successful in finding that location.
Speaker 16: When do you think you will have an announcement by
Speaker 16: that when we've located this. Are you putting a deadline
Speaker 16: on yourself?
Speaker 9: Well, I know, six years sounds like a long time.
Speaker 9: In my view, we're on the clock.
Speaker 8: It takes this long to build.
Speaker 15: A project of the magnitude that we're talking about building.
Speaker 15: This isn't just an arena. This is a thirty five
Speaker 15: to forty acre entertainment district. It'll have hotels, it'll have
Speaker 15: all kinds of restaurant options, it'll have other things that
Speaker 15: fans are going to do when they attend a Mavericks game,
Speaker 15: and it'll be the most amazing place ever to watch
Speaker 15: an NBA baut football game. So we're on the clock.
Speaker 15: We're hoping that by the end of this calendar year,
Speaker 15: at the latest first quarter next year, that we'll be
Speaker 15: able to have a flag in the ground, if you'l
Speaker 15: excuse the expression of where the new Mavericks arenas rick.
Speaker 1: The building of stadiums throughout the country has been a
Speaker 1: pretty fraught process over the last couple of decades. In Buffalo,
Speaker 1: the state of New York kicked in funds for a
Speaker 1: new stadium. Kansas City is working on state funding, but
Speaker 1: in both instances, taxpayers had a lot to say about
Speaker 1: billionaires getting their money. Is this stadium going to be
Speaker 1: a private project?
Speaker 9: Well, certainly the majority of it be a private project.
Speaker 15: It depends on where we land, what the challenges are
Speaker 15: going to be from a transportation and infrastructure standpoint. I
Speaker 15: think one very fair ask everywhere in projects like this
Speaker 15: is that the city or whatever the governmental entity is
Speaker 15: assists in helping fans get there and helping create an
Speaker 15: infrastructure that.
Speaker 9: Works really well.
Speaker 15: But I don't expect the level of funding that you've
Speaker 15: seen in some of the other projects, and we're not
Speaker 15: asking for that. We actually haven't asked for anything. At
Speaker 15: this point, it's going to be very site specific on
Speaker 15: the things that the city could do or is prepared
Speaker 15: to do. It'll have to be something that's very acceptable
Speaker 15: to the city government of Dallas.
Speaker 8: Whatever that might be, all right, accept acceptable. Excuse me?
Speaker 3: So do you think that they might change the whole
Speaker 3: state if you will when it comes to gambling. And
Speaker 3: I only bring that up because Bloomberg News did talk
Speaker 3: with Patrick Dumont and when he first bought the club,
Speaker 3: he wants to see gambling in the state. They're spending
Speaker 3: money on lobbyists. We know gambling is illegal in Texas.
Speaker 3: But you talked about this new stadium, this new arena
Speaker 3: being an incredible entertainment space. Would gambling? Would you like
Speaker 3: to see gambling be a.
Speaker 11: Part of it?
Speaker 15: The two are absolutely not connected in any way. This
Speaker 15: project going forward is one hundred percent focused on creating
Speaker 15: a sports entertainment district that does not include a casino
Speaker 15: or gambling component. Were full speed.
Speaker 5: Ahead with that.
Speaker 15: That's the Sands Corporation, This is the Dallas Mavericks, and
Speaker 15: we're we have a project that we envision that does
Speaker 15: not include any sort of gambling component.
Speaker 16: You know, Oftentimes when you talk about the NBA, then
Speaker 16: you go to the WNBA, and I frequently hear people saying, Oh,
Speaker 16: the WNBA is having a moment. The WNBA has been
Speaker 16: around for a while, but now there's a lot of
Speaker 16: new eyes on it, and of course Page Becker's here
Speaker 16: in Dallas along with Cooper Flag. But with your experience
Speaker 16: working in the WNBA, what's your reaction to what we
Speaker 16: are seeing now in terms of the growth.
Speaker 15: You know, I'm smiling because I can't you know how
Speaker 15: I feel about the WNBA. I was at the NBA
Speaker 15: League Office and was critical part of launching the WNBA.
Speaker 15: I love everything that's happening right now. I will say,
Speaker 15: you know, taking a step back, this is a twenty
Speaker 15: eight year overnight success. Okay, this isn't something that just happened.
Speaker 15: And I'm so happy for the players, the executives, the
Speaker 15: coaches that over the last twenty eight years have built
Speaker 15: a foundation that has allowed a Caitlin Clark and a
Speaker 15: Page Beckers to come in now and ignite the kind
Speaker 15: of interest and enthusiasm there is around the WNBA.
Speaker 16: You know, we're seeing now with all leagues media rights
Speaker 16: in the way of the future I mean the MAVs.
Speaker 16: You have a local you show the games locally, but
Speaker 16: you also have MAVs MAVs TV. What do you envision
Speaker 16: the future of media being for basketball.
Speaker 15: Well, juliare hitting on the biggest local issue that we
Speaker 15: have right now in the economics of the NBA. That said,
Speaker 15: we're also next year launching a brand new national television
Speaker 15: agreement that more than triples the rights fees that teams
Speaker 15: will receive based on the new partnerships we have at
Speaker 15: the NBA. But at the national level, but locally, the
Speaker 15: model's broken. The regional sports network model is broken, and
Speaker 15: whether you're in baseball, hockey, or basketball, every team right
Speaker 15: now is trying to find a way to replicate kind
Speaker 15: of economics and take those valuable local broadcasts.
Speaker 9: We haven't done it yet.
Speaker 15: At the Mavericks, we have a director consumer offering MAVSTV,
Speaker 15: which has more subscribers than any other comparable system in
Speaker 15: the NBA. We also have two over the air broadcasters,
Speaker 15: but it doesn't begin to replicate the economics. It does
Speaker 15: for reach, which is great. We got to figure it out,
Speaker 15: and we haven't figured it out yet.
Speaker 1: Hey, Rick, before we let you go, we touched on
Speaker 1: media just now. We've touched on the new stadium, and
Speaker 1: we've touched on, of course the players. What else is
Speaker 1: the organization and what are you doing at the organization
Speaker 1: to raise your valuation and to grow the business?
Speaker 9: Very briefly, well, I think a lot of that is
Speaker 9: frankly top down.
Speaker 15: I think the NBA is the best managed league in
Speaker 15: sports with Adam Silver and Mark Tatum. I think our
Speaker 15: players Association is the most progressive with Andrea Gadala David
Speaker 15: Kelly running that and a a lot of the evaluation
Speaker 15: is really driven by what the NBA is as a league,
Speaker 15: and I think I've never been more excited. But this
Speaker 15: is my forty seventh year of involvement in the NBA.
Speaker 15: What's happening internationally with the NBA right now is just
Speaker 15: different than the opportunity that any of the other traditional
Speaker 15: American sports have. And I'm so excited that our league
Speaker 15: is focused on growing the sport of basketball and the
Speaker 15: business of the NBA internationally. Those things that tripling of
Speaker 15: national television revenue, those are the things that are big,
Speaker 15: big components of driving valuations that you know are eye
Speaker 15: popping these days.
Speaker 3: Well, good luck with the season. Rick thank you so
Speaker 3: much for finding so much time for us. On this Monday,
Speaker 3: Rick Ueldt, CEO of the Dallas Mavericks, joining our Bloomberg
Speaker 3: News Texas buer chief Julie Fine. They are both in
Speaker 3: Dallas and Tim and I back here at Bloomberg headquarters
Speaker 3: in New York City.
Speaker 8: Rick, be well, thank you, thank you.
Speaker 2: You are listening to the bloom Business Weekdaily podcast. Catch
Speaker 2: us live weekday afternoons from two to five pm Eastern
Speaker 2: Listen on Apple CarPlay and Android Auto with the Bloomberg
Speaker 2: Business app, or watch us live on YouTube.
Speaker 1: So I promised some alcohol, Carol. So some good news
Speaker 1: in the world of spirits for those investors who are
Speaker 1: at least long Davide Compari Milano. This is the barrent
Speaker 1: company of Campari, Appaol, Grand Marnier, while Turkey and more
Speaker 1: reported better than expected profit and revenue for the first
Speaker 1: half of the year. Not out of the woods yet though,
Speaker 1: and it's because of tariffs.
Speaker 3: I was thinking about Grand Monier and Margarita. I think
Speaker 3: it can make it like extra special.
Speaker 1: Sorry, Yeah, so you didn't listen to any of that.
Speaker 1: All you were thinking about was that one.
Speaker 3: I know, Okay, fine, I know tariff's trainer front and center.
Speaker 8: We're going to talk about that.
Speaker 1: I want to bring in Ali Anderson. She's CEO of
Speaker 1: Craft Co. It's a company that has a portfolio that
Speaker 1: includes more than two dozen spirits and liqueurs think Bourbon, Gin,
Speaker 1: Ready to Drink, cocktails and more. The company also does
Speaker 1: co packing for other brands. Ali's back with us from Alexander, Virginia. Ali,
Speaker 1: how are you.
Speaker 17: I'm doing great today. How are you Caroll and Tim?
Speaker 1: We're doing pretty well. I know Carol wants a drink
Speaker 1: after this week. Hey, I want to start with tariffs
Speaker 1: because you're known as a company that doesn't import, and
Speaker 1: you do your own distilling here in the US. As
Speaker 1: a result of the tariffs that have been placed on
Speaker 1: imports of liquor from around the world, have you seen
Speaker 1: an increase in your domestic sales?
Speaker 17: Well, I would like to say that I have, but
Speaker 17: the reality is that when the tariffs, the threat of tariffs,
Speaker 17: especially the back and forth on that, what it did
Speaker 17: was it caused US distributors to use up that budget
Speaker 17: to purchase those imports out of fear that they wouldn't
Speaker 17: be able to get those going forward, or get those
Speaker 17: at a different at a higher price, So that didn't
Speaker 17: leave a whole lot of budget for craft suppliers like
Speaker 17: me to be able to get our products out there.
Speaker 17: So I think it's shaking out right now. I think
Speaker 17: we have lots of signs of hope on the horizon,
Speaker 17: but it definitely constrained things for a long time and
Speaker 17: does continue to you know, with affect our suppliers as well, Allie.
Speaker 3: Allie, drill down a little bit. What does that mean
Speaker 3: in terms of the restrictions that you guys have had
Speaker 3: or your suppliers what specifically.
Speaker 17: Well, things like packaging bottles which we do get overseas,
Speaker 17: glass bottles. We actually saw this coming and switched up
Speaker 17: our suppliers a little bit, and so imported barrels are
Speaker 17: another one. We actually would like to export more of
Speaker 17: our barrels. That's not going to be as easy to do,
Speaker 17: as you know, but even equipment abroad for us, there's
Speaker 17: some changes to our can line that we'd like to make,
Speaker 17: and some of that means we've got to look for
Speaker 17: different suppliers. So you know, we're flexible, we're nimble, We're
Speaker 17: able to do that. I recognize that not all suppliers
Speaker 17: are able to do that, but you know, we're seeing
Speaker 17: it and we're feeling it, but we're also adapting.
Speaker 8: To it as well.
Speaker 1: So you know, it's funny because I always I don't
Speaker 1: say I always forget, but you know, when I say
Speaker 1: something is actually made in the US, the things that
Speaker 1: you're bringing up are a lot of international. Whether that's barrels,
Speaker 1: whether it's parts of the machinery that you need, whether
Speaker 1: it's parts of the cans. What is what portion is
Speaker 1: actually made in the US.
Speaker 17: Well, for us, it's it's it's everything is main in
Speaker 17: the US. It's Bourbon we do. We do mainly Bourbon.
Speaker 1: All your ingredients, all your ingredients from the US too.
Speaker 17: The ours are definitely ours are, but that doesn't have
Speaker 17: to be the case. Right You could import rye from
Speaker 17: Europe if you wanted. We don't happen to do that,
Speaker 17: but yeah, you absolutely could. Now for us, we're you know,
Speaker 17: we get our labels, We keep as much local as
Speaker 17: we can from our boxes to our labels, our quarks,
Speaker 17: but big things like glass that can be a little tougher.
Speaker 3: I'm also curious about consumer spending. You guys are a
Speaker 3: great window into that, and we've gotten a couple reads.
Speaker 3: We even got some consumer sentiment from the Umish University
Speaker 3: of Michigan. We did see sentiment actually go to a
Speaker 3: five month high. A lot of that had to do
Speaker 3: with the rally that we saw recently in stocks. We
Speaker 3: saw inflation expectations easing. What's your read on the consumer
Speaker 3: right now?
Speaker 17: I think the consumer is fatigued. The consumer, you know,
Speaker 17: they want value, they want bang for the buck. They
Speaker 17: expect us to be very transparent with not just how
Speaker 17: things are made, but you know, they want to know
Speaker 17: if you're selling a four pack, they want to know
Speaker 17: what goes into that. They're very savvy and they're tired,
Speaker 17: I think of you know, we hear a lot about
Speaker 17: shrinkflation as well. I think they're fatigued by that. So
Speaker 17: that's one thing that we definitely try to keep in
Speaker 17: mind when we're developing new products.
Speaker 1: We had this discussion on our editorial call today about
Speaker 1: whether or not we should consider alcohol a staple or
Speaker 1: a consumer discretionary item, and I guess it depends on
Speaker 1: It kind of depends on what the way you think
Speaker 1: about a drink after work.
Speaker 9: I don't know.
Speaker 1: I think it's person dependent. How do you view it
Speaker 1: as somebody who creates this product. Do you view it
Speaker 1: as something that, especially in the part of the market
Speaker 1: that you play in, do you view it as something
Speaker 1: that people will buy regardless of how the economy is,
Speaker 1: or is it a treat.
Speaker 5: I think it.
Speaker 17: Depends on the situation. It depends on so many factors,
Speaker 17: you know, socio political economic factors.
Speaker 4: For one.
Speaker 17: It depends on how you're raised, where you come from,
Speaker 17: what your experience is, and how you view something like alcohol.
Speaker 17: Like we're seeing all kinds of trends with the low
Speaker 17: and no proof right people trying to make different lifestyle choices.
Speaker 17: So I think it's definitely situational with your relationship to spirits,
Speaker 17: to drinking, to alcohol, to how you celebrate, to how
Speaker 17: you mourn, to how you transition through life.
Speaker 1: Are you doing any nowhere low right now?
Speaker 13: We are.
Speaker 17: We've got Thatchers organic liqueurs, which we're super proud to
Speaker 17: be organic. That's kind of a hard certification to get.
Speaker 17: So we've got organic liquors that are low proof, and personally,
Speaker 17: I like, you know, just a seltzer like a Lacroix
Speaker 17: and a bit of Thatcher's elderflower is a great way
Speaker 17: to just have a little bit of spirit, but not
Speaker 17: have to you know, drink a hunter Proof whiskey either.
Speaker 17: Now there's a place for that, don't get me wrong,
Speaker 17: but yeah, we do debble in that. We recently reduce
Speaker 17: the proof on our cannon cocktails because that's what the
Speaker 17: consumer wanted, right, They're looking to be more sessionable, to
Speaker 17: enjoy for a little bit longer, and so we listen
Speaker 17: to that and delivered.
Speaker 3: Well, that's what I wanted to ask you. Your portfolio,
Speaker 3: as Tim mentioned in the lead to you more than
Speaker 3: two dozen spirits and liqueurs bourbon gin Rye ready to
Speaker 3: drink a lot. And you are thinking about the lower
Speaker 3: no alcohol market.
Speaker 8: Where's the growth? Where are you spending time in terms
Speaker 8: of and you want.
Speaker 3: To spend time, not only time, but money and effort.
Speaker 3: When it comes to product development.
Speaker 17: The growth is really in innovation, whatever that at, whatever
Speaker 17: your category is. What customers want is to be dazzled.
Speaker 17: They want something new. Like I said, they're fatigued. Sure,
Speaker 17: they're fatigued by price, but they all also want something
Speaker 17: new to try. So I think if you're you know,
Speaker 17: if you're primarily into canned cocktails, I think you should
Speaker 17: be innovating around flavors. What's the culinary scene doing. Are
Speaker 17: you paying attention to that? What are you picking up
Speaker 17: from that? If you're into high end whiskeys, which we
Speaker 17: very much are, we're looking at what kind of different
Speaker 17: finishes can we do, what kind of different blends can
Speaker 17: we do with higher aged whiskeys, because the consumers definitely
Speaker 17: want different, They want to continue to be kind of
Speaker 17: entertained at the shelf by what we're doing.
Speaker 1: I mentioned that you do copacking. Can you explain that
Speaker 1: side of the business and what you're hearing from clients?
Speaker 8: If you watch Shark Tank, you would know what co
Speaker 8: packers do.
Speaker 5: But I know I know what it is.
Speaker 8: Sorry, go ahead?
Speaker 9: Wow, Well they always do.
Speaker 8: They're like, do you have a co packer yet? Or
Speaker 8: I've got a Copackerr girl, no, go.
Speaker 17: Packing is Honestly, it's a new part of our business.
Speaker 17: But when we looked at what our strengths were, it
Speaker 17: was in product development. We've developed products for the Lions,
Speaker 17: products for the Orlando of Magic. We're pretty great at
Speaker 17: being nimble and developing new things for When people come
Speaker 17: to us and say, you know, I'd like to do this,
Speaker 17: we say, great, tell us more. We think we can
Speaker 17: help you out with that, and so copacking is our
Speaker 17: response to utilizing our capacity. We had a little bit
Speaker 17: of excess capacity and being able to say, what do
Speaker 17: you want to create, we can help you navigate that.
Speaker 17: You know, alcohol is one of the most highly regulated
Speaker 17: industries in the United States. It's not easy to navigate that,
Speaker 17: and so we're able to kind of shirpa new brands,
Speaker 17: New the World brand through the process using our experience
Speaker 17: in our resources as well.
Speaker 3: You mentioned regulatory what might the come from the administration
Speaker 3: potentially that might help or hurt you guys beyond maybe
Speaker 3: what we've talked about tenff cent traade.
Speaker 17: Yeah, you know, I'm definitely not a policy expert here.
Speaker 17: What I'm just looking to do is really urge President
Speaker 17: Trump and the negotiators just very quickly resolve the terrace.
Speaker 17: You know, there's one point seven million workers that depend
Speaker 17: on a very vibrant US spirit industry. That's farmers, that's
Speaker 17: hospitality workers, that's drivers, that's us Right. I'm reopening my
Speaker 17: tap room here in September, and I want to be
Speaker 17: able to do that successfully. I want people to come
Speaker 17: through those doors and be able to drink American spirits.
Speaker 3: Well you mentioned workers. What are you seeing when it
Speaker 3: comes to the US labor market. Are you guys hiring,
Speaker 3: are you holding on to workers? Are you trimming back
Speaker 3: your workforce?
Speaker 8: What can you tell us?
Speaker 17: I'm hiring right now? Like I said, I'm opening our
Speaker 17: tap room which has been closed now for several months
Speaker 17: by our own decision. We really just wanted to reimagine
Speaker 17: it to be something that was more in line with
Speaker 17: what craftc is and who we are. But we're definitely,
Speaker 17: you know, looking to hire hourly staff. We just hired
Speaker 17: a tap room manager, We're hiring line cooks, bartenders, so
Speaker 17: we're definitely in a growth mode. But yeah, is it
Speaker 17: a little difficult to find to find that right fit
Speaker 17: in the labor force? Yeah, it is just a little bit.
Speaker 1: What kind of pricing powers do you have with your
Speaker 1: product line?
Speaker 17: Well, we're very diverse, So we've got very high end
Speaker 17: Whiskey's one hundred and fifty dollars plus all the way
Speaker 17: down to canned cocktails which are twelve ninety nine for
Speaker 17: a four pack. So you know, there's something for everybody
Speaker 17: in our line, and I think that speaks to where
Speaker 17: everybody is right now. Economically, you can find something for
Speaker 17: a deal for sure.
Speaker 8: Going to leave it there.
Speaker 9: Good stuff.
Speaker 3: Always appreciate getting some time with you, Ali. Take care
Speaker 3: and have a good weekend. Ali Anderson, she's CEO of
Speaker 3: craft Co. As we mentioned, they have quite a portfolio
Speaker 3: spirits and the cores. Yeah, fun stuff, a great insight
Speaker 3: into an industry as well as a smaller business. She
Speaker 3: joined us from Alexandria, Virginia.
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