WEBVTT - FedEx Aims to Cut $4 Billion 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business, finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.640 Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio 0:00:20.840 --> 0:00:23.720 giving you that lovely setup on FedEx stock at its 0:00:23.760 --> 0:00:26.079 ties up four percent, still with about a one point 0:00:26.079 --> 0:00:30.160 two percent gain on some plans that it is looking 0:00:30.200 --> 0:00:32.559 to cut about four billion dollars in costs and by 0:00:32.600 --> 0:00:36.360 coppying a strategy of its main competitor. We're talking about ups. 0:00:36.400 --> 0:00:38.159 You want to get to it, yeah, but the details 0:00:38.240 --> 0:00:42.559 is Thomas Black, Bloomberg News, Industrial logistics and aerospace reporter 0:00:42.600 --> 0:00:46.320 at Bloomberg News. He joins us on zoom from Dallas. Thomas, 0:00:46.360 --> 0:00:49.280 great to speak with you the news today. Talk to 0:00:49.320 --> 0:00:52.040 us about it cost cuts, merging. What stands out for 0:00:52.080 --> 0:00:56.840 you there is the big transformation of their of their 0:00:56.920 --> 0:01:02.360 company to go from two delivery network to one consolidated 0:01:02.400 --> 0:01:07.520 network over time. That's really the big structural news. The 0:01:07.560 --> 0:01:11.360 cost cuts. It's a big number. Four billion and plus 0:01:11.560 --> 0:01:15.320 two billion more if they can get their network to 0:01:15.400 --> 0:01:17.039 run the way they want to, so it could be 0:01:17.120 --> 0:01:20.520 six billion in total out to their fiscal year twenty 0:01:20.560 --> 0:01:23.440 twenty seven, So big numbers there. It could really move 0:01:23.440 --> 0:01:26.920 the stock. I think the hesitation on the stock move 0:01:27.080 --> 0:01:32.399 maybe because investors want to see them really execute on this. 0:01:32.560 --> 0:01:35.360 There is some execution risk here, so we'll be watching 0:01:35.400 --> 0:01:37.080 for that. I mean, this is all about improving and 0:01:37.160 --> 0:01:41.120 shoring up its margins, right because UPS has easily outpaced 0:01:41.200 --> 0:01:44.240 FedEx when it comes to margins. And to be fair Thomas, 0:01:44.240 --> 0:01:45.960 I feel like when we talk about FedEx and UPS, 0:01:46.000 --> 0:01:50.200 you have to remember they're not really the same operating models, 0:01:50.280 --> 0:01:54.160 are they. They are not. There's a couple of key differences. 0:01:54.200 --> 0:01:58.840 One as UPS does have that one unified network already, 0:01:58.920 --> 0:02:03.360 it's a union workforce, which can work in its favor 0:02:03.520 --> 0:02:08.680 even though the cost for employees is higher. But there's 0:02:08.680 --> 0:02:11.280 a lot of efficiencies that they gain. I think FedEx 0:02:11.360 --> 0:02:13.520 wants to go after some of that. The other thing 0:02:13.520 --> 0:02:15.520 to keep in mind is that FedEx is a much 0:02:15.560 --> 0:02:19.359 bigger airline. They move packages more by air. So right 0:02:19.400 --> 0:02:22.480 now the market is pretty tough there because after the 0:02:22.639 --> 0:02:25.919 COVID sugar high, we're now getting back to a more 0:02:26.040 --> 0:02:28.359 normalized market where you're also seeing a little bit of 0:02:28.400 --> 0:02:31.840 competition from the belly cargo from the airlines as they 0:02:31.960 --> 0:02:36.200 fly more, so that market, the demand there is certainly slack, 0:02:36.240 --> 0:02:38.560 and FedEx is trying to adjust to that. Is that 0:02:38.600 --> 0:02:40.760 the big difference in terms of the margin difference where 0:02:40.840 --> 0:02:43.959 Ups even though it's got unionized workers and it pays 0:02:44.040 --> 0:02:47.040 a lot more to its drivers than FedEx does. Is 0:02:47.040 --> 0:02:49.839 it that FedEx has all of those planes and there's 0:02:49.840 --> 0:02:52.360 a lot more air deliveries that that's why their margins 0:02:52.360 --> 0:02:54.160 are not as good. What has been really the big 0:02:54.200 --> 0:02:57.280 difference that has made the two so different when it 0:02:57.320 --> 0:03:00.240 comes to the margin front. That's part of the reason 0:03:01.040 --> 0:03:05.399 the air business just isn't as a high margin business. 0:03:06.600 --> 0:03:11.960 They also FedEx loses some efficiencies with its contractor model. 0:03:12.000 --> 0:03:16.000 It pays third party contractors to make that last mild 0:03:16.000 --> 0:03:21.080 delivery at its ground unit, and so there's some inefficiency 0:03:21.160 --> 0:03:24.919 handing off packages to those folks and also communicating with 0:03:24.960 --> 0:03:28.280 them to make sure that they have the right vans 0:03:28.320 --> 0:03:31.160 and number vans and drivers there in the morning they 0:03:31.160 --> 0:03:33.920 pick up those packages. They've had a little trouble with that, 0:03:34.040 --> 0:03:37.840 and they're constantly renewing the contracts there and there's some 0:03:37.920 --> 0:03:40.960 churns so they don't have as much control over the 0:03:41.120 --> 0:03:46.160 drivers because the contractors actually hire the drivers. UPS has 0:03:46.200 --> 0:03:48.680 a lot of efficiencies that it captures because a lot 0:03:48.760 --> 0:03:51.880 of times the folks that want to be drivers, first 0:03:51.880 --> 0:03:55.120 they have to work in the sorting center in the warehouse, 0:03:55.160 --> 0:03:59.480 if you will, and load those trucks, and then if 0:03:59.480 --> 0:04:01.560 they do a good job, then they might get hired 0:04:01.560 --> 0:04:04.240 at the driver because they make pretty good money and 0:04:04.280 --> 0:04:06.560 they already know the system and how it works and 0:04:06.560 --> 0:04:08.840 so forth. So there's a lot of efficiencies that they 0:04:08.920 --> 0:04:11.080 gained there. Thomas and Maddie, you might not know this, 0:04:11.120 --> 0:04:12.720 but I actually worked for a day as a UPS 0:04:12.800 --> 0:04:15.200 driver when I was doing a piece here at Bloomberg, 0:04:15.480 --> 0:04:17.720 and it was and the company kept reminding me how 0:04:17.760 --> 0:04:21.160 different it was that UPS. It's all their own workers. 0:04:21.200 --> 0:04:24.520 There's no you know, outsourcing in terms of deliveries, and 0:04:24.560 --> 0:04:26.800 they talked about the importance in that different model. The 0:04:26.800 --> 0:04:29.839 other thing I will say, they were so nuts about data. 0:04:30.040 --> 0:04:34.200 Every move a delivery person or pickup person made, everything 0:04:34.320 --> 0:04:37.400 was tracked and they knew the way to turn, make 0:04:37.480 --> 0:04:39.400 right turns, to you to get stuck at lights. I mean, 0:04:39.480 --> 0:04:42.880 it was pretty obsessive and pretty amazing. But but it 0:04:43.080 --> 0:04:45.960 obviously has made a difference in the company. Yeah, it 0:04:46.000 --> 0:04:48.440 looked really good in Brown too. No, I really didn't, 0:04:48.480 --> 0:04:51.560 but irushed it obviously, I need I need you to 0:04:51.560 --> 0:04:54.120 dig up that video for me. But Thomas, I wonder 0:04:54.160 --> 0:04:56.520 I mean to Carol's point is all of this the 0:04:56.560 --> 0:05:00.200 culmination is at FedEx moving to become a UPS, to 0:05:00.240 --> 0:05:04.479 emulate UPS. I think the main difference is that they're 0:05:04.520 --> 0:05:07.839 going to try to do this without having a unionized workforce. 0:05:07.839 --> 0:05:10.800 They're going to keep those contractors. In fact, there was 0:05:10.800 --> 0:05:13.880 a memo by John Smith, who's head of the ground 0:05:13.960 --> 0:05:17.160 unit right now, telling its contractors, don't worry, we still 0:05:17.200 --> 0:05:19.479 need you. We're still going to use you. So they 0:05:19.640 --> 0:05:24.680 they're still betting on that model. The CEO Rode Supermanium 0:05:24.720 --> 0:05:27.400 talk about having a hybrid model, whether they'll have some 0:05:28.040 --> 0:05:30.960 employees and drivers on the payroll directly and then they'll 0:05:31.000 --> 0:05:34.200 have the contractors. But they're going to try to combine 0:05:34.240 --> 0:05:38.680 them into one unit so that when a customer draws 0:05:38.680 --> 0:05:40.840 off a package, it just goes in a FedEx system 0:05:41.279 --> 0:05:44.000 and pop that on the other end without having In 0:05:44.040 --> 0:05:47.280 some cases you can have two delivery vehicles arrive at 0:05:47.279 --> 0:05:49.680 the same location, one from express and one from ground. 0:05:49.920 --> 0:05:53.479 They want all those packages flowing through the same system. Hey, Thomas, 0:05:53.520 --> 0:05:55.080 how do you make sense to somebody who reports on 0:05:55.120 --> 0:05:57.799 a company that's doing, you know, massive cuts. Four billion 0:05:57.839 --> 0:06:01.159 dollars they're shooting for, and they do promise to raise 0:06:01.200 --> 0:06:03.560 their dividend. Is that kind of saying, hey, guys, we're 0:06:03.560 --> 0:06:05.440 on it, but we're going to make you investors, We're 0:06:05.440 --> 0:06:07.560 looking to make you happy again. How do we see 0:06:07.600 --> 0:06:12.080 that in terms of use of capital? Yeah, that's a 0:06:12.120 --> 0:06:16.760 complex question. They didn't talk about job cuts today really 0:06:16.760 --> 0:06:19.960 at all. They had announced about a ten percent cut 0:06:20.000 --> 0:06:23.320 on some top management folks, and they have been letting 0:06:23.720 --> 0:06:29.279 people go in their freight unit and with their contractor model, 0:06:29.360 --> 0:06:32.320 they really don't have that much control over the drivers 0:06:32.400 --> 0:06:36.479 on the ground. So it hasn't been massive layoffs so far. 0:06:37.360 --> 0:06:39.840 And they didn't talk about that. But then again, they 0:06:39.880 --> 0:06:44.080 are cutting capital expenditures and they're they're shifting some of 0:06:44.080 --> 0:06:47.440 that money toward dividends. They've talked about reducing some of 0:06:47.440 --> 0:06:50.599 that capex as a percentage of sales. And I think 0:06:50.640 --> 0:06:53.680 this is this is a new error for FedEx because 0:06:53.760 --> 0:06:57.840 for many years FedEx was always playing catch up to UPS, 0:06:58.400 --> 0:07:02.640 and UPS was the market leader, and FedEx has gotten 0:07:02.720 --> 0:07:06.039 very close to them on the sales. But I think 0:07:06.040 --> 0:07:07.960 FedEx is saying, you know what, we're going to cool 0:07:08.600 --> 0:07:12.040 cool down on the capex and we might not try 0:07:12.080 --> 0:07:14.800 to over you know, we may not overtake UPS as 0:07:14.840 --> 0:07:17.760 the biggest a career, but we're fine with that because 0:07:17.840 --> 0:07:19.320 we're going to make more money and we're going to 0:07:19.400 --> 0:07:21.680 give some of that back to the shareholders. I think 0:07:21.720 --> 0:07:24.480 that's maybe the pivot point that we're seeing as well. 0:07:24.520 --> 0:07:26.880 But two years ago, I believe FedEx was in a 0:07:26.960 --> 0:07:31.160 better position than UPS, partially because they pivoted quickly during 0:07:31.160 --> 0:07:34.200 the tightness of the labor market to hire a lot 0:07:34.240 --> 0:07:37.320 of workers. To what extent though, did that end up 0:07:37.360 --> 0:07:39.840 being the thing that killed them today, not killed them, 0:07:39.880 --> 0:07:45.080 but impacted their long term profitability. Well, this is where 0:07:45.360 --> 0:07:48.440 those two models really kind of showed how distinct they are. 0:07:48.800 --> 0:07:52.320 FedEx did have a lot of trouble trying to hire 0:07:52.360 --> 0:07:57.240 folks who handle the package packages in the sorting centers, 0:07:57.920 --> 0:08:01.080 and in some cases they would handle all the volume, 0:08:01.600 --> 0:08:05.520 and that was a direct result of all of that 0:08:05.640 --> 0:08:08.960 labor shortage. UPS was a little bit protective because they 0:08:09.040 --> 0:08:12.440 do pay top dollar even for their part time workers. 0:08:12.440 --> 0:08:15.720 They get full benefits, so the UPS didn't have as 0:08:15.800 --> 0:08:20.320 much trouble hiring workers. And but you've got to think 0:08:20.360 --> 0:08:22.680 that these these companies swell up and they and they 0:08:22.920 --> 0:08:26.360 shrink down often right every peak season, they swell up, 0:08:26.800 --> 0:08:30.360 you know, maybe by tens of thousands of workers, and 0:08:30.400 --> 0:08:32.920 then they swell down. So it's not unusual for them 0:08:33.000 --> 0:08:36.280 to flex their workforce, right. UPS does it too, right 0:08:36.360 --> 0:08:38.880 during the holiday season. And I will say that UPS 0:08:38.920 --> 0:08:42.840 will also, you know, if they need be executives during 0:08:43.000 --> 0:08:44.920 the holidays, they'll be out there delivering if that's what 0:08:44.960 --> 0:08:49.080 they need to do they need to Ye. Lately they've 0:08:49.120 --> 0:08:52.000 been hiring what they call personal vehicle drivers, which are 0:08:52.040 --> 0:08:54.160 just people off the street and they hire them and 0:08:54.679 --> 0:08:57.200 you know, give them a uniform and let them deliver packages. 0:08:57.280 --> 0:09:00.559 So that's been a pressure relief vow for them is key. 0:09:00.679 --> 0:09:05.439 It sounds like the uniforms. Y, it was a lot 0:09:05.440 --> 0:09:08.240 of brown. M Thomas Black. Thank you so much for 0:09:08.320 --> 0:09:11.480 minding time for us. We so appreciate it. Yeah, be well. 0:09:11.679 --> 0:09:14.600 Industrial Logistics and Aerospace reporter up Bloomberg News on Zoom 0:09:14.640 --> 0:09:18.320 from Dallas. You're listening to the Bloomberg Business Week podcast. 0:09:18.520 --> 0:09:21.760 Catch us live weekday afternoons from three to six Eastern 0:09:21.920 --> 0:09:25.040 Listen on Bloomberg dot com, the ihard Radio app, and 0:09:25.120 --> 0:09:29.080 the Bloomberg Business App, or watch us live on YouTube. 0:09:29.800 --> 0:09:33.080 Well shares of AI developers C three AI soaring about 0:09:33.160 --> 0:09:35.920 one month ago following a revenue forecast and comments by 0:09:35.920 --> 0:09:38.320 the CEO that we're both upbeat and led to more 0:09:38.360 --> 0:09:41.120 than a handful of analysts raising price targets on the company. 0:09:41.520 --> 0:09:44.000 Last two trading days though a little bit differently and 0:09:44.080 --> 0:09:48.319 I have seen the stock drop nearly forty percent. In fact, 0:09:48.400 --> 0:09:50.640 yesterday it was the most ever in a single day, 0:09:50.679 --> 0:09:54.880 after short seller Kerrisdale Capital alleged serious accounting and disclosure 0:09:54.920 --> 0:09:58.040 issues at the company. The company, meantime put out a 0:09:58.040 --> 0:10:01.320 statement saying the shortseller's letter was a highly creative and 0:10:01.360 --> 0:10:04.480 transparent attempt to diminish the stock price. So let's get 0:10:04.520 --> 0:10:07.160 to it. Joining us right now is Tom Siebel back 0:10:07.200 --> 0:10:09.839 with us. He's the founder, chairman and CEO of C 0:10:10.040 --> 0:10:13.520 three AI and the firm's third largest shareholder. The stock, 0:10:13.559 --> 0:10:16.200 by the way, has almost doubled here in twenty twenty three. 0:10:16.240 --> 0:10:19.440 We must also know Kerrisdale Capital, one of nearly thirty 0:10:19.480 --> 0:10:22.080 short selling firms being pro by the US Justice Department 0:10:22.120 --> 0:10:27.160 over potential trading abuses, and the company's owner, a saying 0:10:27.200 --> 0:10:29.640 earlier this year that the firm had not been contacted 0:10:29.640 --> 0:10:34.240 by any government agency's over investigation. Sadron is the head 0:10:34.280 --> 0:10:37.080 of the company. The chief investment officer, Tom Siebel, thank you, 0:10:37.160 --> 0:10:40.640 thank you so much for being here with us. What 0:10:40.679 --> 0:10:43.079 do you say to the short sellers? Well, first of all, 0:10:43.080 --> 0:10:46.200 how are you? I am great, thank you, how are you? 0:10:46.600 --> 0:10:48.840 I'm doing okay, trying to keep up with the news flow. 0:10:48.880 --> 0:10:51.680 I wish it would get a little quieter. So let's 0:10:51.720 --> 0:10:54.480 get to what the short seller is saying. They're saying 0:10:54.520 --> 0:10:58.200 that you used highly aggressive accounting to inflate your income 0:10:58.280 --> 0:11:01.120 statement metrics in order to meet self side analyst estimates 0:11:01.120 --> 0:11:03.720 for revenue and certain profit metrics, and to conceal a 0:11:03.760 --> 0:11:10.360 significant deterioration in your underlying operations. And they put this 0:11:10.400 --> 0:11:15.000 in a letter to your auditor. What's your response to this, Well, 0:11:15.040 --> 0:11:20.200 I think this was a enormously creative and successful effort 0:11:20.960 --> 0:11:26.280 by a notorious short seller who it's widely reported as 0:11:26.360 --> 0:11:30.480 under investigation by the Department of justice in the sec okay, 0:11:30.520 --> 0:11:34.880 and has drug and alcohol convictions. And it's highly creative, 0:11:35.000 --> 0:11:40.320 highly successful to issue this screed that contains not a 0:11:40.360 --> 0:11:44.600 word of truth. Okay, short the stock published this letter 0:11:45.320 --> 0:11:48.200 knowing that would move the stock. And I think yesterday 0:11:48.200 --> 0:11:50.520 this person made an excess of one hundred million dollars. 0:11:50.520 --> 0:11:56.600 So it was very creative, very successful attempt at what 0:11:56.679 --> 0:12:01.679 appears to be successful stock price manipulation. John the story, 0:12:01.800 --> 0:12:05.240 so tom so the charges or allegations of this short 0:12:05.240 --> 0:12:08.920 seller that's saying that you guys, are you know, presenting 0:12:08.920 --> 0:12:11.520 yourself as being in a high margin SaaS software service 0:12:11.640 --> 0:12:14.959 businesses rather than one based on lower margin consulting. This 0:12:15.040 --> 0:12:18.040 is the letter they put on are you a consulting 0:12:18.080 --> 0:12:21.040 company or are you a software as a service business? 0:12:21.240 --> 0:12:25.000 About eighty five percent of our revenue comes from software 0:12:25.040 --> 0:12:30.120 subscriptions and fifteen to twenty comes from consulting services. This 0:12:30.240 --> 0:12:35.200 person of this short seller alleges that we report to 0:12:35.320 --> 0:12:39.240 get your ninety nine percent profit margins off of our 0:12:39.360 --> 0:12:43.319 largest customer, Advange, which is Baker Hughes. And there is 0:12:43.440 --> 0:12:46.719 nothing in any financial statement that we'll support that. It's 0:12:46.760 --> 0:12:49.800 a complete fiction. And he says because it's ninety nine 0:12:49.840 --> 0:12:53.559 percent margin. There's something must be something wrong with it. Um, Well, 0:12:54.160 --> 0:12:58.040 he's you know, he's subtracting apples from oranges to try 0:12:58.080 --> 0:13:02.160 to come up with some sort of nefarious act. He 0:13:02.240 --> 0:13:08.280 alleges that the fact that we have unbuild receivables is 0:13:08.800 --> 0:13:12.080 very serious, suspicious, and good software companies don't have unbuild 0:13:12.120 --> 0:13:15.520 receivable holes. And in the neglects to mention you know, 0:13:15.600 --> 0:13:20.840 the many many companies like UH Salesforce, Data Dog, IBM, Adobes, 0:13:21.200 --> 0:13:25.600 an Altics, SAP, all of which have many many, you know, 0:13:26.160 --> 0:13:30.360 very large unbuild receivables. Unbuilding receivables is just, um, you know, 0:13:30.480 --> 0:13:33.040 something for which you've recognized revenue for which you haven't 0:13:33.040 --> 0:13:36.480 submitted the invoice yet. It's very common in the industry. 0:13:36.720 --> 0:13:39.400 It's well understood it. And he's trying to imply that 0:13:39.440 --> 0:13:41.600 there's something wrong with that. There's nothing wrong with that. 0:13:41.960 --> 0:13:45.880 It's proper accounting. But the guy succeeded. I mean sometimes 0:13:45.920 --> 0:13:48.760 crime pays, and it's stay off paid off for this 0:13:48.800 --> 0:13:51.680 person in a big way yesterday. So we you know, 0:13:51.760 --> 0:13:54.240 we after our hats are off to him. So Tom 0:13:54.240 --> 0:13:56.120 and I want to get into what you guys are 0:13:56.120 --> 0:13:57.959 doing in terms of AI, because that's initially why we 0:13:58.240 --> 0:14:02.840 asked you to come on UM. In terms of your accounting, 0:14:02.840 --> 0:14:04.720 Deloitte and Touch, they're the one who got the letters. 0:14:04.720 --> 0:14:07.640 You're comfortable with their accounting, You've talked with them. You're 0:14:07.640 --> 0:14:12.160 comfortable with their disclosures. Our disclosures are correct. Our accounting, 0:14:12.200 --> 0:14:16.199 our accounting is absolutely correct. We have we have unqualified 0:14:16.240 --> 0:14:20.400 opinion statements from our independent auditors. We have best practices 0:14:20.440 --> 0:14:23.800 in terms of accounting, in terms of audit committee practices, 0:14:24.160 --> 0:14:27.480 and that I mean, this is just a bunch of poppycock. 0:14:27.800 --> 0:14:31.360 This is a trick that this this character played on 0:14:31.400 --> 0:14:34.320 the market. And you know he made somewhere between a 0:14:34.320 --> 0:14:36.840 one hundred and two hundred million dollars at the expense 0:14:36.880 --> 0:14:41.200 of C three shareholders yesterday and so, and no regulators 0:14:41.200 --> 0:14:43.400 have reached out to you, or that firm hasn't reached 0:14:43.400 --> 0:14:47.240 out to you. Uh, they have not reached out to us. 0:14:47.360 --> 0:14:51.520 And while it's widely reported that these guys are under 0:14:51.560 --> 0:14:55.080 investigation by the SEC and the Department of Justice for 0:14:55.120 --> 0:14:58.840 stock price manipulation, we've not been approached by either those 0:14:58.880 --> 0:15:01.760 regulatary bodies of this firm. And have you been buying 0:15:01.800 --> 0:15:06.560 any of the shares on the downfall um me personally 0:15:06.680 --> 0:15:15.000 or C three uh both. I have not been buying 0:15:15.000 --> 0:15:17.480 stock in the market, as you know, of the stock 0:15:18.240 --> 0:15:21.680 is up about I think one hundred percent year to date, okay, 0:15:21.760 --> 0:15:26.479 and it's been you know, we've reported in earnings announcement 0:15:26.560 --> 0:15:28.640 that you know, business is quite good and the business 0:15:28.680 --> 0:15:32.160 climate is quite good. And my only hope is that 0:15:32.320 --> 0:15:35.480 these that this short seller in particular, and the short 0:15:35.520 --> 0:15:38.560 sellers short sellers out there, hold on to their stock 0:15:38.640 --> 0:15:41.440 because they're going to get in my opinion, they're going 0:15:41.480 --> 0:15:43.760 to get crushed real quickly, and then we'll pivot to 0:15:43.800 --> 0:15:46.240 AI A promise. How do you refute the short seller's 0:15:46.320 --> 0:15:49.960 argument that part of your success and gains is related 0:15:50.040 --> 0:15:52.520 just to the ticker name and the overall hype around 0:15:52.560 --> 0:15:55.480 AI right now, I think, I mean, it's just a 0:15:55.560 --> 0:16:00.520 silly statement. I mean, is I think the name. I mean, 0:16:01.080 --> 0:16:04.440 I think there's no value probably attributed to that. The 0:16:04.480 --> 0:16:07.400 fact that we're in the AI market. I think that, 0:16:07.560 --> 0:16:10.440 you know, a rising scene kind of lifts all boats, 0:16:10.760 --> 0:16:13.920 and so we are clearly a leader in enterprise AI. 0:16:14.360 --> 0:16:18.120 Enterprise AI looks like a half a trillion dollar addressable 0:16:18.160 --> 0:16:21.200 market in not very many years. C three AI is 0:16:21.240 --> 0:16:25.000 in a position to establish, if not the leading position, 0:16:25.080 --> 0:16:28.680 a leading position in that market. So there's no question 0:16:29.120 --> 0:16:32.800 that some of the upward pressure on the stock is 0:16:32.880 --> 0:16:38.119 due to the realization of the size of the addressable 0:16:38.120 --> 0:16:40.760 market opportunity to C three phases and quickly here I 0:16:40.800 --> 0:16:42.720 just wonder, as CEO, how do you not get C 0:16:42.880 --> 0:16:45.480 sick on these market moves because you had all these 0:16:45.560 --> 0:16:48.920 games then obviously a tough couple of days here, what 0:16:49.160 --> 0:16:53.080 is your thinking around strategizing for your long term goals 0:16:53.400 --> 0:16:57.360 despite the market volatility. It's very easy I ignore the 0:16:57.400 --> 0:17:00.400 market and focus on the long term goals. Business is 0:17:00.440 --> 0:17:03.440 to build a great company, have satisfied customers, have a 0:17:03.480 --> 0:17:08.560 cash positive, profitable business, market leadership position, and you know, 0:17:08.640 --> 0:17:11.679 if we do that, we can just look. We have 0:17:11.960 --> 0:17:14.000 I think the last of last quarter or something like 0:17:14.040 --> 0:17:16.440 eight hundred and fifty million dollars in the bank. So 0:17:16.480 --> 0:17:20.239 we are unquestionably an ongoing concern. And I think if 0:17:20.280 --> 0:17:24.119 we focus on the big picture here, stay focused on 0:17:24.160 --> 0:17:27.440 the big picture, I think this will work very very 0:17:27.480 --> 0:17:30.560 well for the shareholders. But we don't really look at 0:17:30.640 --> 0:17:32.800 day to day or minute to minute, or even month 0:17:32.840 --> 0:17:35.320 to month. I think, you know, as far as we're concerned, 0:17:35.320 --> 0:17:38.600 the market could close for five years. But I think 0:17:38.640 --> 0:17:41.560 this is going to I think this is going to 0:17:41.600 --> 0:17:44.040 work out very well for the shareholders, the employees, and 0:17:44.080 --> 0:17:46.680 the customers in the long run. And that's my job. 0:17:46.880 --> 0:17:48.800 So the reason I don't get seasick is I don't 0:17:48.800 --> 0:17:52.639 look at it. So Tom just got about thirty five 0:17:52.720 --> 0:17:55.240 forty seconds here. So I mean, what is the big 0:17:55.240 --> 0:17:56.840 win for you guys in the next six months that 0:17:56.920 --> 0:18:02.040 you say, hey, listen, churtsellers, you've just so got it wrong. Oh, 0:18:02.080 --> 0:18:04.040 I think that if you're on the short side of 0:18:04.040 --> 0:18:06.639 this year. I mean, our business is good, okay, and 0:18:06.680 --> 0:18:09.960 we're in a position, you know, we trans recently transition 0:18:10.040 --> 0:18:12.880 to a consumption based pricing model that's really well received 0:18:12.880 --> 0:18:16.280 by the market. We expect to see, you know, you know, 0:18:16.359 --> 0:18:18.480 as the fad when the fad gets ready to take 0:18:18.480 --> 0:18:21.560 its foot off the brakes, okay, as it relates to 0:18:22.040 --> 0:18:24.639 dealing with inflation, I think you're going to see C 0:18:24.840 --> 0:18:30.000 three as a very rapidly growing, market leading enterprise application 0:18:30.080 --> 0:18:34.400 software company that's profitable, cash positive, and that'll be reflected 0:18:34.400 --> 0:18:37.280 in market evaluation. Tom Sebel, thank you so much. I've 0:18:37.400 --> 0:18:39.440 c three a eyes. We said a lot of analysts 0:18:39.520 --> 0:18:43.480 upgrading the stock last month. You're listening to the Bloomberg 0:18:43.520 --> 0:18:47.440 Business Week podcast. Catch us live weekday afternoons from three 0:18:47.480 --> 0:18:51.080 to six eastre on Bloomberg Radio, the Bloomberg Business App 0:18:51.160 --> 0:18:54.600 and YouTube. You can also listen live on Amazon Alexa 0:18:54.680 --> 0:18:58.080 from our flagship New York station, Just say Alexa playing 0:18:58.160 --> 0:19:07.159 Bloomberg eleven thirty. I'm bring a journal. Yeah, but you 0:19:07.240 --> 0:19:11.840 let me drive? Oh no, no, no, no, who's gonna drive? Honey? Please, 0:19:11.960 --> 0:19:18.440 I'll do the bride gravels. I'm want to drive the question. 0:19:22.160 --> 0:19:25.680 This is the drive to the Clobe. Commmu than well, 0:19:25.760 --> 0:19:30.240 Brither Dawn on Bloomberg Radio. All right, everybody, we've got 0:19:30.320 --> 0:19:32.399 just about seventeen and a half minutes left in today's 0:19:32.400 --> 0:19:35.360 trading session, getting ready to wrap up on this Wednesday. 0:19:35.400 --> 0:19:37.479 Remember it's a holiday short and trading week. We do 0:19:37.480 --> 0:19:41.200 get the jobs report on Friday, um, but financial markets 0:19:41.200 --> 0:19:42.359 here in the US are going to be closed for 0:19:42.400 --> 0:19:45.400 the Good Friday holiday. Having said that, bouncing around here 0:19:45.400 --> 0:19:48.200 on the equity side, gaining the down just about a 0:19:48.280 --> 0:19:51.399 quarter of a percent, high. As Charlie mentioned tech stocks 0:19:51.400 --> 0:19:53.960 in particular, the nastack down the most on a percentage basis, 0:19:54.000 --> 0:19:57.280 But it's really a big focus on what's going on 0:19:57.320 --> 0:19:59.160 in the treasury trade right now. That to year note, 0:19:59.160 --> 0:20:01.280 just to reminder, three seventy eight ten year knit with 0:20:01.320 --> 0:20:03.919 the yield of three twenty nine. So let's get to 0:20:04.080 --> 0:20:06.760 it with our drive to the closed. Guest and with 0:20:06.840 --> 0:20:10.080 Maddie and me is Bill Davis, portfolio manager at Hennessey Funds. 0:20:10.119 --> 0:20:13.480 Bill specifically managing the Hennessy stands at ESG Large cap 0:20:13.560 --> 0:20:17.680 ETF ticker is st n C fun up roughly four 0:20:17.720 --> 0:20:20.399 percent year to day. Bill with us now on the 0:20:20.480 --> 0:20:24.600 phone from Boston. Bill, great to have you here on 0:20:24.680 --> 0:20:26.520 this Wednesday. Tell us a little bit about the fun 0:20:26.640 --> 0:20:28.760 and correct me if I'm wrong. But I think you 0:20:28.760 --> 0:20:30.560 guys made the debut. Was it like when we were 0:20:30.640 --> 0:20:34.600 kind of coming out of the pandemic. Yeah, I think 0:20:34.680 --> 0:20:38.320 Karrol and Maddie that's right. We actually launched the fund 0:20:38.600 --> 0:20:43.879 in the first quarter of twenty twenty one, so s 0:20:43.960 --> 0:20:49.680 TNCs A nicely listed it actively managed ESG Large cap 0:20:49.720 --> 0:20:55.359 ETF and yeah, and we've basically got two years in 0:20:55.480 --> 0:20:59.439 the actual ETF itself and assets under management. What kind 0:20:59.440 --> 0:21:00.840 of flows have you I've been seen, and I'm really 0:21:00.880 --> 0:21:03.159 curious in particular the last let's say six months or 0:21:03.160 --> 0:21:04.800 so and more recently, just to get an idea of 0:21:04.800 --> 0:21:09.680 investors sentiment. Yeah, I would say thats have well. So 0:21:09.760 --> 0:21:12.800 last year we basically even though the market was down 0:21:13.880 --> 0:21:17.080 eighteen percent, I think we were down twelve percent and change, 0:21:17.200 --> 0:21:20.000 and our flows went up by about ten percent. So 0:21:20.040 --> 0:21:23.600 we've got about forty five million in the fund today. 0:21:23.760 --> 0:21:30.000 We are expecting some inflows, some actually potentially significant ones 0:21:30.040 --> 0:21:36.000 really just based on track record and outperformance and risk management, 0:21:36.000 --> 0:21:38.560 and I think this is a market where risk management matters. 0:21:40.680 --> 0:21:42.320 I want to talk about the fact that it is 0:21:42.440 --> 0:21:45.920 an ESG fund, and Carol has flagged this and we've 0:21:45.920 --> 0:21:48.280 talked about it a lot. ESG funds falling out of 0:21:48.320 --> 0:21:51.400 favor a bit, garnering more and more scrutiny, the absence 0:21:51.440 --> 0:21:55.200 of consistency and ESG classification, showing the hurdles investor's face 0:21:55.280 --> 0:21:58.840 when trying to allocate capital, especially given these macro headwinds. 0:21:58.880 --> 0:22:01.919 But against that, backed up, MSCI has said it's planning 0:22:01.920 --> 0:22:04.880 to dramatically reduce the number of funds, it gives top ratings, 0:22:05.160 --> 0:22:08.280 and I wonder how you're feeling about those changes that 0:22:08.280 --> 0:22:10.120 are going to take effect by the end of this month, 0:22:10.160 --> 0:22:13.160 and are you feeling any impact as a result. Yeah, 0:22:13.200 --> 0:22:17.920 so no, short answer, not feeling any impact. I think 0:22:17.960 --> 0:22:22.560 that ESG is a political wedge issue, is largely a 0:22:22.640 --> 0:22:27.520 dead end as a sort of an investor sentiment issue. 0:22:27.560 --> 0:22:32.520 I think that there are a wide swath of investors, institutional, 0:22:32.640 --> 0:22:36.879 high net worth, ultra high net worth, mass, affluent, millennial, 0:22:37.920 --> 0:22:40.280 you know, people with ten dollars to invest and people 0:22:40.280 --> 0:22:43.160 with one hundred million dollars to invest, to care about 0:22:43.200 --> 0:22:45.600 these issues or they don't, right, So, I mean, I 0:22:45.640 --> 0:22:47.879 guest that there's people that don't care about them, but 0:22:47.960 --> 0:22:51.320 the people that do are not being dissuaded by congressional 0:22:51.400 --> 0:22:56.240 inquiries into you know, ESG. I just we have not 0:22:56.320 --> 0:22:59.400 seen any effect whatsoever. And by the way, I actually 0:22:59.440 --> 0:23:02.920 do welcome the idea of additional scrutiny. There are too 0:23:02.920 --> 0:23:07.359 many products that are either me too or you know, 0:23:07.440 --> 0:23:10.680