1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,840 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,520 Speaker 1: or watch us live on YouTube. 6 00:00:24,320 --> 00:00:26,040 Speaker 2: We need to talk about the M and A deal 7 00:00:26,360 --> 00:00:29,480 Speaker 2: that has come out in New York this morning. MRK 8 00:00:29,840 --> 00:00:33,640 Speaker 2: to buy Turns Pharmaceuticals for six point seven billion dollars 9 00:00:34,200 --> 00:00:37,680 Speaker 2: to grow in the blood cancer space. Michelle Davis is 10 00:00:37,720 --> 00:00:40,920 Speaker 2: our senior deals reporter here in New York and is covering. 11 00:00:40,600 --> 00:00:41,479 Speaker 3: This story for us. 12 00:00:41,760 --> 00:00:43,519 Speaker 2: Feel like we should call it M and A Wednesday 13 00:00:43,560 --> 00:00:45,879 Speaker 2: now because the deals no longer happen on Monday anymore. 14 00:00:46,200 --> 00:00:46,400 Speaker 4: You know. 15 00:00:46,440 --> 00:00:48,400 Speaker 5: It's because we have a deal show now, so of 16 00:00:48,400 --> 00:00:52,320 Speaker 5: course that's why they're happening on Wednesday. But yeah, big 17 00:00:52,960 --> 00:00:54,720 Speaker 5: deal for Merk today. It makes a lot of sense 18 00:00:54,720 --> 00:00:57,560 Speaker 5: that they're doing this because they they're best selling drug, 19 00:00:57,600 --> 00:01:00,800 Speaker 5: kay Truda, which contributed half of their last year thirty 20 00:01:00,840 --> 00:01:03,360 Speaker 5: one billion dollars, is also the world's best selling drug 21 00:01:03,560 --> 00:01:05,560 Speaker 5: is going off patent, so they really need to do 22 00:01:06,000 --> 00:01:09,200 Speaker 5: M and A to replenish their pipeline turns is not. 23 00:01:09,600 --> 00:01:13,119 Speaker 5: Its drug is not yet approved, but analysts are saying 24 00:01:13,200 --> 00:01:15,920 Speaker 5: that in a few years, assuming it does get approval, 25 00:01:16,080 --> 00:01:18,200 Speaker 5: it could have peak sales of several billion dollars. And 26 00:01:18,240 --> 00:01:20,959 Speaker 5: so Mark, for Merk, it's a bet that at the 27 00:01:21,040 --> 00:01:22,840 Speaker 5: end of the decade, around the same time that k 28 00:01:22,959 --> 00:01:25,919 Speaker 5: Trude is going off patent, they will have this drug, 29 00:01:26,000 --> 00:01:28,240 Speaker 5: you know, coming in to kind of help fill some 30 00:01:28,280 --> 00:01:28,800 Speaker 5: of that hole. 31 00:01:29,720 --> 00:01:29,959 Speaker 6: Mark. 32 00:01:30,040 --> 00:01:33,560 Speaker 7: What are they saying about their M and A appetite? 33 00:01:33,640 --> 00:01:37,039 Speaker 7: I guess because we you know, we joke that the 34 00:01:37,040 --> 00:01:41,679 Speaker 7: pharmaceutical industry is such a deal heavy industry, pharm of biotech, 35 00:01:41,680 --> 00:01:42,120 Speaker 7: that kind of thing. 36 00:01:42,160 --> 00:01:44,960 Speaker 6: What's Merk saying? Because they do have that key true 37 00:01:44,920 --> 00:01:45,880 Speaker 6: to risk exactly. 38 00:01:45,920 --> 00:01:47,720 Speaker 5: So Mark has been one of the most aggressive when 39 00:01:47,720 --> 00:01:49,480 Speaker 5: it comes to M and A. Earlier this year at 40 00:01:49,520 --> 00:01:52,720 Speaker 5: the JPMorgan Healthcare Conference, the CEO Rob Davis said that 41 00:01:53,000 --> 00:01:55,680 Speaker 5: he wants to do several deals in the tens of 42 00:01:55,760 --> 00:01:58,880 Speaker 5: billion dollar range, and so that means we'll probably see 43 00:01:59,280 --> 00:02:03,280 Speaker 5: more from them. Also interesting to note that Merk's stock 44 00:02:03,440 --> 00:02:05,680 Speaker 5: is up today on the news, and normally in M 45 00:02:05,760 --> 00:02:08,000 Speaker 5: and A the buyer's stock tends to go down on 46 00:02:08,000 --> 00:02:10,280 Speaker 5: an announcement, but the fact that you know, shares their 47 00:02:10,360 --> 00:02:12,760 Speaker 5: up means investors are applauding this and they you know, 48 00:02:12,840 --> 00:02:15,000 Speaker 5: want merk To to keep doing stuff like this. 49 00:02:15,480 --> 00:02:18,200 Speaker 2: So the deals worth six point seven billion dollars. It's 50 00:02:18,200 --> 00:02:20,959 Speaker 2: a fifty three dollars a share in cash, which is 51 00:02:21,000 --> 00:02:24,200 Speaker 2: a six percent premium to turns last clothes. There are 52 00:02:24,280 --> 00:02:27,400 Speaker 2: some analysts out there who say that maybe Mark is 53 00:02:27,440 --> 00:02:31,160 Speaker 2: not spending enough here and this invites other companies to 54 00:02:31,200 --> 00:02:33,520 Speaker 2: come in and make their own bid for turn pharmaceuticals 55 00:02:33,560 --> 00:02:34,120 Speaker 2: as well. 56 00:02:35,000 --> 00:02:37,519 Speaker 5: You know, we will see if that happens. There were 57 00:02:37,600 --> 00:02:40,680 Speaker 5: some bidding wars in pharma last year, with the Metzera 58 00:02:40,800 --> 00:02:42,880 Speaker 5: deal being you know, one of the most notable ones 59 00:02:43,000 --> 00:02:46,960 Speaker 5: that said the stock turns. The stock has increased like 60 00:02:47,040 --> 00:02:50,959 Speaker 5: fifty percent since January on basically no news. So there 61 00:02:51,000 --> 00:02:52,880 Speaker 5: could be an argument that maybe there was some built 62 00:02:52,880 --> 00:02:55,600 Speaker 5: in you know, m and a speculation already into the 63 00:02:56,080 --> 00:03:00,280 Speaker 5: already built baked into the price. But you know, you know, no, 64 00:03:00,600 --> 00:03:02,720 Speaker 5: there are other pharma companies out there who are also 65 00:03:02,760 --> 00:03:06,040 Speaker 5: trying to replenish their pipeline, so it wouldn't be unprecedented. 66 00:03:06,320 --> 00:03:08,560 Speaker 7: Of course, which bankers were on this deal they don't have. 67 00:03:08,720 --> 00:03:11,680 Speaker 7: They didn't list the Acquirer Advisor, but the financial target, 68 00:03:12,040 --> 00:03:16,360 Speaker 7: Centerview Partners and Jefferies, so unusual or not unusual, which is. 69 00:03:16,560 --> 00:03:17,960 Speaker 6: More boutiqui more boutiqui. 70 00:03:18,040 --> 00:03:20,720 Speaker 5: Yeah, Centerview has I mean, they're generally on most of 71 00:03:20,760 --> 00:03:23,160 Speaker 5: these on the cell side, and Jeffries has been doing 72 00:03:23,200 --> 00:03:24,320 Speaker 5: a lot more on the sell side too. 73 00:03:24,400 --> 00:03:26,320 Speaker 7: Yeah. The boutiques, like we used to call them boutiques, 74 00:03:26,360 --> 00:03:28,200 Speaker 7: but in M and A they're not really boutiques anymore, 75 00:03:28,240 --> 00:03:28,600 Speaker 7: are they? 76 00:03:28,720 --> 00:03:29,080 Speaker 3: Exactly? 77 00:03:29,280 --> 00:03:31,360 Speaker 7: They think they've really made a commitment doing real pgat 78 00:03:31,520 --> 00:03:34,920 Speaker 7: and all those guys. Is there any regulatory risk when 79 00:03:34,960 --> 00:03:37,800 Speaker 7: these healthcare deals get done? Or is it just a 80 00:03:37,800 --> 00:03:40,520 Speaker 7: big mark buying a little biotech thing and nobody really cares? 81 00:03:40,520 --> 00:03:42,040 Speaker 6: How's that work? Not as much. 82 00:03:42,120 --> 00:03:45,520 Speaker 5: I mean, the last time we saw something kind of 83 00:03:45,560 --> 00:03:48,880 Speaker 5: splashy get attention was when Amjen tried to buy Horizon 84 00:03:48,960 --> 00:03:51,720 Speaker 5: and that FDC tried to block that deal. They ended 85 00:03:51,800 --> 00:03:54,240 Speaker 5: up settling and the deal went through anyway. But in 86 00:03:54,760 --> 00:03:57,160 Speaker 5: something like this where you know, turns of drug isn't 87 00:03:57,160 --> 00:04:01,440 Speaker 5: even approved and it's biggest competitor is owned by Novardes, 88 00:04:01,880 --> 00:04:05,320 Speaker 5: you know, the competing kind of compound. It seems unlikely. 89 00:04:05,920 --> 00:04:08,480 Speaker 2: So given what Mark has done, in the fact that 90 00:04:08,760 --> 00:04:11,960 Speaker 2: investors like the deals that it's made so far, I'm 91 00:04:12,000 --> 00:04:14,640 Speaker 2: guessing we're going to expect to see more acquisitions from 92 00:04:14,680 --> 00:04:15,960 Speaker 2: Mark in the coming weeks and months. 93 00:04:16,600 --> 00:04:20,800 Speaker 3: That's probably yeah. Definitely stay with us. 94 00:04:20,839 --> 00:04:23,000 Speaker 2: More from Bloomberg Intelligence coming up after this. 95 00:04:26,680 --> 00:04:30,360 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 96 00:04:30,440 --> 00:04:33,160 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and 97 00:04:33,160 --> 00:04:36,440 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 98 00:04:36,480 --> 00:04:40,240 Speaker 1: wherever you get your podcasts, or watch us live on YouTube. 99 00:04:41,160 --> 00:04:43,960 Speaker 7: Let's talk a little media here. Interesting story on the 100 00:04:43,960 --> 00:04:47,800 Speaker 7: Bloomberg terminal. Walt Disney Chief executive officer Josh Tomorrow has 101 00:04:47,839 --> 00:04:51,520 Speaker 7: seen two billion dollar technology bets, Falter one of them 102 00:04:51,920 --> 00:04:54,960 Speaker 7: and raveling entirely just days into his new job. Let's 103 00:04:54,960 --> 00:04:56,600 Speaker 7: see what this means for the Walt Disney Company. We've 104 00:04:56,600 --> 00:04:58,760 Speaker 7: got some other media stuff to talk about, and we 105 00:04:58,920 --> 00:05:01,360 Speaker 7: turned to Keitha Rugana, and she is the media analyst 106 00:05:01,400 --> 00:05:02,400 Speaker 7: for Bloomberg Intelligence. 107 00:05:03,400 --> 00:05:05,600 Speaker 6: Keitha, there's news out regarding Disney. 108 00:05:05,680 --> 00:05:07,320 Speaker 7: Can you talk to us about a couple of these 109 00:05:07,360 --> 00:05:09,120 Speaker 7: deals that seemingly are falling apart here. 110 00:05:10,520 --> 00:05:12,320 Speaker 3: Yeah, this is a big deal, Paul. 111 00:05:12,360 --> 00:05:14,760 Speaker 8: I mean, you know, Josh Tomorrow obviously took the helm 112 00:05:14,800 --> 00:05:17,400 Speaker 8: at Disney just a week ago, and we're seeing this 113 00:05:17,520 --> 00:05:21,720 Speaker 8: Open Ai Sora deal that you know, Disney had kind 114 00:05:21,720 --> 00:05:25,120 Speaker 8: of inked about three months ago. And basically the deal 115 00:05:25,160 --> 00:05:27,600 Speaker 8: here was that this would be a three year licensing 116 00:05:27,640 --> 00:05:30,560 Speaker 8: agreement where Disney would make a one billion dollar equity 117 00:05:30,600 --> 00:05:34,279 Speaker 8: investment into Open Ai and Sora would be allowed to 118 00:05:34,400 --> 00:05:36,840 Speaker 8: use about two hundred of Disney's characters to kind of 119 00:05:36,839 --> 00:05:40,279 Speaker 8: create all of these short form videos which you know, 120 00:05:40,440 --> 00:05:43,240 Speaker 8: users could basically engage with on the Disney Plus platform. 121 00:05:43,680 --> 00:05:45,520 Speaker 8: You know, this was kind of I think Disney's way 122 00:05:45,520 --> 00:05:48,760 Speaker 8: of playing offense defense with you know, the whole rise 123 00:05:48,839 --> 00:05:51,800 Speaker 8: in Ai and kind of if you can't beat them, 124 00:05:51,920 --> 00:05:54,680 Speaker 8: join them, kind of really joining the bandwagon and saying, yes, 125 00:05:54,760 --> 00:05:57,920 Speaker 8: we have a stake here with AI. So this falling 126 00:05:57,920 --> 00:06:02,720 Speaker 8: apart definitely kind of leaves Disney definitely they were blindsided. 127 00:06:03,320 --> 00:06:03,440 Speaker 7: Uh. 128 00:06:03,600 --> 00:06:06,240 Speaker 8: They they've they've been kind of trying to do different 129 00:06:06,279 --> 00:06:09,520 Speaker 8: things in terms of really monetizing their ip creating like 130 00:06:09,560 --> 00:06:14,080 Speaker 8: this really uh this this franchise fandom if you will, right, 131 00:06:14,160 --> 00:06:16,560 Speaker 8: really digging deep into it. That's what Josh Tomorrow has 132 00:06:16,560 --> 00:06:19,640 Speaker 8: spoken both with this opening ideal as well as the 133 00:06:19,680 --> 00:06:21,840 Speaker 8: Epic Games deal that was a deal that actually Josh 134 00:06:21,920 --> 00:06:24,520 Speaker 8: Tomorrow had kind of broken. And just over the past 135 00:06:24,520 --> 00:06:26,720 Speaker 8: few days we've kind of seen you know, a lot 136 00:06:26,720 --> 00:06:29,400 Speaker 8: of news with Epic Games too, and so this really 137 00:06:29,480 --> 00:06:31,800 Speaker 8: kind of now raises the stakes for them to kind 138 00:06:31,800 --> 00:06:34,599 Speaker 8: of find out, you know, hoom else they can partner 139 00:06:34,640 --> 00:06:36,880 Speaker 8: with to kind of deepen that that fan engagement. 140 00:06:37,440 --> 00:06:39,560 Speaker 2: Okay, so he's got his work cut out for him. 141 00:06:39,640 --> 00:06:43,839 Speaker 2: Certainly makes for a busy first week on the job. Gita. 142 00:06:43,880 --> 00:06:45,320 Speaker 2: We also want to talk to you about what's going 143 00:06:45,320 --> 00:06:49,679 Speaker 2: on with Netflix. It's bolstering its live streaming, live streaming 144 00:06:49,760 --> 00:06:53,479 Speaker 2: mega events. There was the BTS Comeback Show, which I 145 00:06:53,480 --> 00:06:56,479 Speaker 2: guess the live show didn't attract as many people as 146 00:06:56,520 --> 00:06:59,200 Speaker 2: people as thought, you know, actually attending the net, but 147 00:06:59,279 --> 00:07:04,080 Speaker 2: the actual streaming of it was a monster hit, wasn't it. 148 00:07:04,080 --> 00:07:06,680 Speaker 8: It was a monster hits. Carlor, You're absolutely right, over 149 00:07:06,800 --> 00:07:10,480 Speaker 8: eighteen million viewers worldwide. And this is again we come 150 00:07:10,520 --> 00:07:13,560 Speaker 8: back to the basic buzzword with in media right now, 151 00:07:13,600 --> 00:07:17,000 Speaker 8: which is engagement. What are all the different ways that 152 00:07:17,040 --> 00:07:19,679 Speaker 8: you can build engagement and you know, again the open 153 00:07:19,720 --> 00:07:22,080 Speaker 8: AI saw a deal with Disney was again a way 154 00:07:22,120 --> 00:07:25,280 Speaker 8: for Disney to build that engagement with their fans. Netflix 155 00:07:25,360 --> 00:07:28,000 Speaker 8: kind of chasing all of these different types of content, 156 00:07:28,080 --> 00:07:30,360 Speaker 8: you know, whether it is sports, whether it is this 157 00:07:30,480 --> 00:07:33,800 Speaker 8: live event the bts come back to, or again trying 158 00:07:33,800 --> 00:07:36,600 Speaker 8: to deepen that engagement, trying to deepen their connection with 159 00:07:36,840 --> 00:07:40,600 Speaker 8: fans as you have more and more sources of you know, 160 00:07:40,680 --> 00:07:46,560 Speaker 8: video basically competing for time spent. Again, huge, You're absolutely right, 161 00:07:46,680 --> 00:07:50,000 Speaker 8: huge event for Netflix really shows how they can kind 162 00:07:50,080 --> 00:07:53,920 Speaker 8: of go after all of these different genres and build 163 00:07:54,040 --> 00:08:00,280 Speaker 8: that scale, build that appointment television kind of buzz and 164 00:08:00,440 --> 00:08:02,720 Speaker 8: and you know, really get a good ROI on their 165 00:08:02,760 --> 00:08:05,600 Speaker 8: investment there by the way, they're increasing their content spending 166 00:08:05,640 --> 00:08:08,480 Speaker 8: four events like this this year by two billion dollars. 167 00:08:08,520 --> 00:08:11,320 Speaker 8: That's a pretty sizable step up. So we're looking at them, 168 00:08:11,880 --> 00:08:14,600 Speaker 8: you know, spending about twenty billion dollars scarlet this year 169 00:08:14,640 --> 00:08:15,200 Speaker 8: on content. 170 00:08:15,480 --> 00:08:15,760 Speaker 5: Wow. 171 00:08:16,280 --> 00:08:19,720 Speaker 7: All right, Githa, it's opening day for my New York Yankees. 172 00:08:19,720 --> 00:08:21,960 Speaker 7: They'll be opening up out in San Francisco this evening 173 00:08:22,000 --> 00:08:23,320 Speaker 7: eight pm Eastern. 174 00:08:23,360 --> 00:08:25,200 Speaker 6: First pitch. I'm not going to be a good game. 175 00:08:25,400 --> 00:08:28,240 Speaker 7: Yep. I'm not going to ESPN and watch this I'm 176 00:08:28,280 --> 00:08:31,720 Speaker 7: not even going to the Yankees' own network. Yes, I'm 177 00:08:31,720 --> 00:08:34,320 Speaker 7: going to Netflix to watch this game tonight. 178 00:08:34,480 --> 00:08:35,559 Speaker 3: Where are we in this world? 179 00:08:35,600 --> 00:08:37,559 Speaker 7: Where are we in this world? Talk to us about 180 00:08:37,840 --> 00:08:40,120 Speaker 7: you know, Netflix has set out we're never getting into sports. 181 00:08:40,120 --> 00:08:42,480 Speaker 7: Well that's gone by the wayside. What do you think 182 00:08:42,480 --> 00:08:43,680 Speaker 7: There's sports strategy is? 183 00:08:45,000 --> 00:08:47,320 Speaker 8: So their sports strategy, Paul, I mean, this is a 184 00:08:47,320 --> 00:08:50,800 Speaker 8: really important point. The sports strategy has been very very calculated, 185 00:08:50,960 --> 00:08:53,600 Speaker 8: very very measured. At a time when we've seen other 186 00:08:53,679 --> 00:08:56,920 Speaker 8: media companies like you know, Disney and Amazon and YouTube 187 00:08:56,960 --> 00:08:59,959 Speaker 8: kind of spend billions and billions of dollars on sports rights, 188 00:09:00,200 --> 00:09:03,640 Speaker 8: Netflix has taken a far more cautious approach, but an 189 00:09:03,640 --> 00:09:06,080 Speaker 8: approach that has really served them well. So they started 190 00:09:06,080 --> 00:09:08,400 Speaker 8: out with this five hundred million dollar deal for you know, 191 00:09:08,520 --> 00:09:12,600 Speaker 8: WWE content. They went out after some NFL Christmas Day games. 192 00:09:12,800 --> 00:09:15,760 Speaker 8: But this World Baseball Classic was actually their first big 193 00:09:15,800 --> 00:09:19,080 Speaker 8: foray into world live sports, you know, an event in Japan, 194 00:09:19,400 --> 00:09:21,080 Speaker 8: and it has really served them well. So you just 195 00:09:21,120 --> 00:09:23,320 Speaker 8: look at the ROI on that event. They spent about 196 00:09:23,320 --> 00:09:26,640 Speaker 8: one hundred million dollars for you know, forty seven games 197 00:09:26,640 --> 00:09:29,600 Speaker 8: and they got something like thirty one million global viewers. 198 00:09:29,679 --> 00:09:33,160 Speaker 8: Really a huge, huge viewing record for them, and again 199 00:09:33,280 --> 00:09:36,800 Speaker 8: just shows how you know, by making really calculated bets 200 00:09:37,160 --> 00:09:40,400 Speaker 8: again you can kind of build that buzz and for them, 201 00:09:40,480 --> 00:09:42,840 Speaker 8: really build that critical engagement metric. 202 00:09:43,559 --> 00:09:46,000 Speaker 2: Yeah, that is pretty incredible, and I guess part of 203 00:09:46,040 --> 00:09:48,520 Speaker 2: it is also to build up the Netflix brand outside 204 00:09:48,559 --> 00:09:50,240 Speaker 2: of the US, where sports rights have gotten to the 205 00:09:50,240 --> 00:09:52,920 Speaker 2: point where it's prohibitive, but you look at the rest 206 00:09:52,920 --> 00:09:55,160 Speaker 2: of the world and it's it's a little bit more doable. 207 00:09:56,400 --> 00:09:59,440 Speaker 8: Absolutely So if you're just looking this year at sports right, 208 00:09:59,520 --> 00:10:04,000 Speaker 8: scarlet companies are spending about over forty billion dollars just 209 00:10:04,080 --> 00:10:06,880 Speaker 8: this year across the board for US sports rights, and 210 00:10:06,920 --> 00:10:09,600 Speaker 8: we're only looking at that going up further and further. 211 00:10:09,679 --> 00:10:11,960 Speaker 8: As you know, the NFL looks to high, high kits fees, 212 00:10:11,960 --> 00:10:13,320 Speaker 8: the NBA looks to highkits fees. 213 00:10:13,520 --> 00:10:14,319 Speaker 3: So yes, they do. 214 00:10:14,440 --> 00:10:18,800 Speaker 8: They are making this really smart move by diversifying going 215 00:10:18,800 --> 00:10:21,720 Speaker 8: across the board, and it's paying off. That's what's so 216 00:10:21,760 --> 00:10:22,320 Speaker 8: great about it. 217 00:10:22,800 --> 00:10:23,000 Speaker 5: To me. 218 00:10:23,640 --> 00:10:28,920 Speaker 7: The defining moment will be when Netflix takes a Sunday 219 00:10:28,960 --> 00:10:34,160 Speaker 7: package from the NFL, the NFL and Githa. I think 220 00:10:34,160 --> 00:10:36,560 Speaker 7: that's that day is coming. What do you think? 221 00:10:37,800 --> 00:10:39,679 Speaker 8: I also think it is coming. So they've already kind 222 00:10:39,720 --> 00:10:41,880 Speaker 8: of dabbled with that, Paul. You know, they've done the 223 00:10:41,920 --> 00:10:44,120 Speaker 8: Christmas Day Games again. They had some of the highest 224 00:10:44,160 --> 00:10:46,760 Speaker 8: viewerships ever for the Christmas Day Games, something like thirty 225 00:10:46,760 --> 00:10:47,640 Speaker 8: five million viewers. 226 00:10:48,559 --> 00:10:48,760 Speaker 6: Yeah. 227 00:10:48,840 --> 00:10:53,920 Speaker 8: Anyway, So I also think that they are definitely, you know, 228 00:10:54,000 --> 00:10:55,839 Speaker 8: probably going to go for a digital package. I mean, 229 00:10:55,840 --> 00:10:58,840 Speaker 8: I mean, the NFL wants to go there. They know 230 00:10:58,960 --> 00:11:02,320 Speaker 8: that majority of the viewership is migrating to streaming and 231 00:11:02,360 --> 00:11:04,480 Speaker 8: it would be stupid for them not to kind of 232 00:11:04,520 --> 00:11:06,959 Speaker 8: sell a digital package. So I definitely think it's going 233 00:11:07,000 --> 00:11:08,280 Speaker 8: to happen sooner rather than later. 234 00:11:10,080 --> 00:11:12,920 Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this. 235 00:11:16,320 --> 00:11:20,000 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 236 00:11:20,080 --> 00:11:23,160 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 237 00:11:23,200 --> 00:11:26,480 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 238 00:11:26,559 --> 00:11:29,680 Speaker 1: you get your podcasts, or watch us live on YouTube. 239 00:11:30,600 --> 00:11:35,720 Speaker 7: Chewey forecast is sales for the year that beat analyst expectations, 240 00:11:36,200 --> 00:11:38,520 Speaker 7: stocks a pretty bigger ten twelve percent. Here today that's 241 00:11:38,559 --> 00:11:41,120 Speaker 7: good news. Here, let's break it down with Diana prost Opine, 242 00:11:41,400 --> 00:11:44,440 Speaker 7: Consumer staples analyst Bloomberg Intelligence. She joins us live here 243 00:11:44,440 --> 00:11:47,640 Speaker 7: in our Bloomberg Interactive Broker studio. So, Chewy, what did 244 00:11:47,720 --> 00:11:49,040 Speaker 7: you learn on their earnings call? 245 00:11:49,480 --> 00:11:52,880 Speaker 9: Yeah, I mean they have been doing pretty well both 246 00:11:52,920 --> 00:11:58,559 Speaker 9: on the top line and profitability. There's no complaints from investors, 247 00:11:58,640 --> 00:12:00,520 Speaker 9: or at least they shouldn't be for eat quarter. 248 00:12:00,920 --> 00:12:03,120 Speaker 6: So I'm just looking at the stock here. 249 00:12:03,160 --> 00:12:05,120 Speaker 7: The stock's up again about twelve percent today, but it 250 00:12:05,200 --> 00:12:07,520 Speaker 7: is down twenty percent year to date and then about 251 00:12:07,520 --> 00:12:09,840 Speaker 7: twenty percent over the trailing twelve months. What's the investment 252 00:12:09,920 --> 00:12:13,840 Speaker 7: call here for Chewy? What are the growth drivers top 253 00:12:13,840 --> 00:12:14,760 Speaker 7: line for this company? 254 00:12:15,000 --> 00:12:20,080 Speaker 9: Yes, so it's their ability to grab consumers. Once you 255 00:12:20,280 --> 00:12:24,520 Speaker 9: enter I guess the Chewy you know environment, it's difficult 256 00:12:24,520 --> 00:12:27,920 Speaker 9: for you to leave. They have about eighty eighty four 257 00:12:28,040 --> 00:12:32,079 Speaker 9: percent of their revenue comes from authorship, so it's pretty 258 00:12:32,160 --> 00:12:33,120 Speaker 9: much you set it up. 259 00:12:33,160 --> 00:12:34,800 Speaker 3: It's subscription based pretty much. 260 00:12:35,240 --> 00:12:38,480 Speaker 9: So you set it up and every so often you 261 00:12:38,559 --> 00:12:41,199 Speaker 9: get your goodies at your doorsteps. 262 00:12:41,240 --> 00:12:44,040 Speaker 7: So did they compete against the Amazons of the world, 263 00:12:44,080 --> 00:12:47,640 Speaker 7: the Walmarts of the world, the pets dot com they do. 264 00:12:48,080 --> 00:12:51,079 Speaker 9: Yeah, so you know, they have about a third of 265 00:12:51,200 --> 00:12:57,280 Speaker 9: the e commerce you know, market share in the United States. 266 00:12:57,760 --> 00:13:00,800 Speaker 9: They compete with Amazon as around the same. 267 00:13:01,160 --> 00:13:02,840 Speaker 7: Well, there are not many companies out there that can 268 00:13:02,880 --> 00:13:05,040 Speaker 7: say they have a third of a market where you 269 00:13:05,080 --> 00:13:07,280 Speaker 7: compete against an Amazon and a Walmart and things. 270 00:13:07,040 --> 00:13:08,079 Speaker 3: Like that exactly. 271 00:13:08,280 --> 00:13:11,000 Speaker 9: And the thing with Chew is that they have expanded 272 00:13:11,440 --> 00:13:15,160 Speaker 9: beyond merchandise, beyond food and now you can get your 273 00:13:15,520 --> 00:13:18,079 Speaker 9: you know, your pharmacy, you can get you know, your 274 00:13:18,160 --> 00:13:23,120 Speaker 9: vet needs. They actually have vet locations, eighteen vet locations. 275 00:13:23,120 --> 00:13:25,120 Speaker 3: They're starting to do that. 276 00:13:25,200 --> 00:13:28,160 Speaker 9: They see that that engages customers more. 277 00:13:28,760 --> 00:13:30,720 Speaker 3: So that is, you know, an upside for them. 278 00:13:31,040 --> 00:13:33,240 Speaker 6: So how is that business? 279 00:13:33,280 --> 00:13:36,240 Speaker 7: I have no idea because it's all kinds of pet 280 00:13:36,280 --> 00:13:38,840 Speaker 7: food in general, then stuff like toys and all that 281 00:13:38,880 --> 00:13:39,440 Speaker 7: kind of stuff. 282 00:13:39,880 --> 00:13:42,480 Speaker 6: What's the terriff situation for those that kind of stuff. 283 00:13:42,559 --> 00:13:45,240 Speaker 9: So it seems that they have been able to navigate 284 00:13:45,320 --> 00:13:49,600 Speaker 9: that obviously, you know, some of the pressure they pass 285 00:13:49,800 --> 00:13:55,439 Speaker 9: that through consumers. They're seeing a net sales per active consumer, 286 00:13:55,480 --> 00:13:58,640 Speaker 9: which is kind of like you know, they're pricing grow 287 00:13:58,760 --> 00:14:00,000 Speaker 9: in the low single digits. 288 00:14:00,400 --> 00:14:01,679 Speaker 3: So they are comfortable with that. 289 00:14:03,160 --> 00:14:06,400 Speaker 9: You know, the scale and the price on the product 290 00:14:06,400 --> 00:14:08,960 Speaker 9: mix that they have allows them to kind of like 291 00:14:09,040 --> 00:14:11,760 Speaker 9: get the hit on the margin without you know, showing 292 00:14:11,800 --> 00:14:12,600 Speaker 9: it to us. 293 00:14:13,200 --> 00:14:16,719 Speaker 7: This was a obviously a COVID stock that just like 294 00:14:16,720 --> 00:14:18,560 Speaker 7: like a peloton a little bit. But this has obviously 295 00:14:18,600 --> 00:14:21,920 Speaker 7: done much better post How do people view this? Is 296 00:14:21,920 --> 00:14:25,600 Speaker 7: this a kind of a consumer staple kind of name? 297 00:14:26,560 --> 00:14:27,400 Speaker 7: How do you think about that? 298 00:14:27,680 --> 00:14:31,320 Speaker 9: I would say it's a it's a you know, it's 299 00:14:31,360 --> 00:14:34,240 Speaker 9: a retailer, you know, the way that I will see it. 300 00:14:35,120 --> 00:14:39,000 Speaker 9: You know, going back to the you know, pandemic and 301 00:14:39,040 --> 00:14:42,800 Speaker 9: COVID they actually had obviously this was a very favorite 302 00:14:42,840 --> 00:14:46,800 Speaker 9: stock because everybody was at home. And then you know, 303 00:14:46,840 --> 00:14:50,760 Speaker 9: the cohorts that were acquired during the pandemic they kind 304 00:14:50,800 --> 00:14:52,960 Speaker 9: of reduced and that was kind of like a story 305 00:14:52,960 --> 00:14:55,760 Speaker 9: of twenty twenty four. It was difficult for them to 306 00:14:55,880 --> 00:14:59,840 Speaker 9: grow consumers because you know, the cohort was so massive 307 00:15:00,240 --> 00:15:03,920 Speaker 9: that it was pretty much the you know, they couldn't 308 00:15:04,000 --> 00:15:05,920 Speaker 9: keep up with you know, they couldn't keep a lot 309 00:15:05,920 --> 00:15:09,520 Speaker 9: of those consumers. But that has turned around and they 310 00:15:09,560 --> 00:15:13,280 Speaker 9: are seeing you know, significant growth. We actually expect that 311 00:15:13,520 --> 00:15:15,920 Speaker 9: most of the growth in sales is probably going to 312 00:15:15,960 --> 00:15:18,360 Speaker 9: come from active consumers rather than pricing. 313 00:15:18,720 --> 00:15:20,520 Speaker 7: I mean, I look at you know, I know nothing 314 00:15:20,560 --> 00:15:22,240 Speaker 7: about this business, but I look at the first place 315 00:15:22,280 --> 00:15:23,640 Speaker 7: I look for when I look at p and LS 316 00:15:23,640 --> 00:15:26,040 Speaker 7: at free cash flow. Great free cash flow here, I 317 00:15:26,040 --> 00:15:28,160 Speaker 7: mek got seven hundred million dollars in for calendar or 318 00:15:28,200 --> 00:15:30,560 Speaker 7: twenty six, maybe eight to fifty projected for calendar or 319 00:15:30,560 --> 00:15:31,000 Speaker 7: twenty seven. 320 00:15:31,040 --> 00:15:32,720 Speaker 3: What do they do with the free cash flow they 321 00:15:32,800 --> 00:15:33,720 Speaker 3: invested in the business. 322 00:15:33,800 --> 00:15:39,040 Speaker 9: They're growing scale, obviously, they're opening vets. That is something 323 00:15:39,040 --> 00:15:43,400 Speaker 9: that they haven't pretty much experienced. They're actually in, you know, 324 00:15:43,520 --> 00:15:46,880 Speaker 9: investing outside of the United States. You know, they're trying 325 00:15:46,880 --> 00:15:50,920 Speaker 9: to get into Canada. They're given some of that back 326 00:15:51,000 --> 00:15:54,000 Speaker 9: and share repurchases, but we don't necessarily expect it to 327 00:15:54,040 --> 00:15:54,880 Speaker 9: be significant. 328 00:15:56,280 --> 00:15:57,800 Speaker 3: You know, in twenty twenty six, what's. 329 00:15:57,680 --> 00:16:01,720 Speaker 7: The big what's the margin analysis you guys do as 330 00:16:01,760 --> 00:16:06,120 Speaker 7: analysts and investors, where's the leverage in the income statement 331 00:16:06,160 --> 00:16:09,360 Speaker 7: that maybe improve margins because there's a retailer type margins. 332 00:16:09,440 --> 00:16:12,000 Speaker 6: Yeah, what can they do? Really? 333 00:16:12,640 --> 00:16:15,920 Speaker 9: I mean there are actually it seems that you know, 334 00:16:16,360 --> 00:16:20,960 Speaker 9: they're working a lot with leverage, operating leverage. You know, 335 00:16:21,040 --> 00:16:23,960 Speaker 9: in their distribution centers they seem to be you know, 336 00:16:24,000 --> 00:16:28,360 Speaker 9: they are automated, so that has been building scale, you know, 337 00:16:28,480 --> 00:16:32,840 Speaker 9: trying to get consumers to buy more premium brands. They 338 00:16:32,840 --> 00:16:35,960 Speaker 9: have private label which they wanted to grow it to 339 00:16:36,120 --> 00:16:39,480 Speaker 9: like the main teens. That is going to add about 340 00:16:39,560 --> 00:16:43,120 Speaker 9: five hundred basis points to gross margin and you know, 341 00:16:43,240 --> 00:16:48,640 Speaker 9: other non merchandise revenue, so that is usually higher profit 342 00:16:48,760 --> 00:16:49,760 Speaker 9: than merchandise. 343 00:16:50,720 --> 00:16:53,800 Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this. 344 00:16:57,760 --> 00:17:01,440 Speaker 1: You're listening to the Bloomberg Intelligence Plot. Catch us live 345 00:17:01,520 --> 00:17:04,600 Speaker 1: weekdays at ten am. He's done on Applecarclay, and Android 346 00:17:04,640 --> 00:17:07,919 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 347 00:17:08,000 --> 00:17:11,120 Speaker 1: you get your podcasts, or watch us live on YouTube. 348 00:17:11,800 --> 00:17:14,360 Speaker 2: All right, let's check in with Justin Priden right now. 349 00:17:14,400 --> 00:17:18,119 Speaker 2: He is vice president of consulting Services at Revenue Management Solutions, 350 00:17:18,160 --> 00:17:21,600 Speaker 2: and he's also an attendee at the Bloomberg Intelligence Farm, 351 00:17:21,720 --> 00:17:25,560 Speaker 2: Food and Fuel conference where they are talking about rising costs, 352 00:17:25,600 --> 00:17:29,159 Speaker 2: especially fertilizer costs, what that means for agriculture, and what 353 00:17:29,160 --> 00:17:34,480 Speaker 2: that means down the line for food operators, restaurant trends. Justin, 354 00:17:34,560 --> 00:17:37,439 Speaker 2: thank you so much for joining us. Tell me about 355 00:17:37,520 --> 00:17:40,880 Speaker 2: what you've discussed at this conference and how you think 356 00:17:40,920 --> 00:17:45,040 Speaker 2: about what that means for restaurant menus and the restaurant industry. 357 00:17:46,680 --> 00:17:49,480 Speaker 4: Paul Scarlett, thank you so much for having me, and again, 358 00:17:49,520 --> 00:17:52,000 Speaker 4: the conference has been wonderful about talking about some of 359 00:17:52,080 --> 00:17:56,399 Speaker 4: those input pieces that's really fundamental to restaurants and what 360 00:17:56,440 --> 00:17:58,639 Speaker 4: their costs they're seeing in the bottom line when it 361 00:17:58,680 --> 00:18:01,840 Speaker 4: comes to the products on their menus. At Revenue Management Solutions, 362 00:18:01,880 --> 00:18:03,879 Speaker 4: we're always working to keep our clients ahead of the 363 00:18:03,920 --> 00:18:06,520 Speaker 4: curve and be proactive when it comes to those cost 364 00:18:06,560 --> 00:18:08,920 Speaker 4: inputs that they can meet the guests where they're at 365 00:18:09,119 --> 00:18:10,720 Speaker 4: when it comes to what items are on the menu, 366 00:18:10,800 --> 00:18:13,119 Speaker 4: their prices and all these pieces, and a lot of 367 00:18:13,119 --> 00:18:16,240 Speaker 4: the topics that have been really important at this conference 368 00:18:16,320 --> 00:18:19,040 Speaker 4: is what these what the downstream effects are going to 369 00:18:19,840 --> 00:18:22,440 Speaker 4: or what the initial effects here are going to cause 370 00:18:22,440 --> 00:18:24,520 Speaker 4: for those menus when it comes to costs and what 371 00:18:24,600 --> 00:18:27,359 Speaker 4: comes to operators are going to be reacting to in 372 00:18:27,359 --> 00:18:28,520 Speaker 4: that food and beverage industry. 373 00:18:29,320 --> 00:18:32,479 Speaker 7: All right, here's the term I dislike slash hate the 374 00:18:32,520 --> 00:18:34,800 Speaker 7: most in the food business over the last six months, 375 00:18:34,920 --> 00:18:37,679 Speaker 7: and that is protein. When did they start using protein 376 00:18:37,720 --> 00:18:39,440 Speaker 7: as opposed to just saying, hey, do you want chicken 377 00:18:39,480 --> 00:18:40,040 Speaker 7: on your salad? 378 00:18:40,119 --> 00:18:40,800 Speaker 2: It sounds better? 379 00:18:41,200 --> 00:18:44,600 Speaker 6: I don't know, So talk to us about that, I mean, 380 00:18:45,400 --> 00:18:46,640 Speaker 6: justin protein. 381 00:18:46,680 --> 00:18:49,720 Speaker 7: Tell us why it's become an issue or a topic 382 00:18:49,760 --> 00:18:52,080 Speaker 7: within the restaurant and food industry and how we should 383 00:18:52,080 --> 00:18:52,600 Speaker 7: think about it. 384 00:18:53,800 --> 00:18:55,239 Speaker 4: Paul, I hear you there, and it's so fun as 385 00:18:55,280 --> 00:18:59,159 Speaker 4: a restaurant or originally myself, just calling it protein and 386 00:18:59,200 --> 00:19:01,440 Speaker 4: going there just doesn't sounds good, right. It's not something 387 00:19:01,480 --> 00:19:03,480 Speaker 4: that you think about when you're on the menu and 388 00:19:03,520 --> 00:19:06,520 Speaker 4: think about, hey, I really feel like a protein section today. 389 00:19:07,520 --> 00:19:11,000 Speaker 4: But really it's become a major piece, and it's always 390 00:19:11,040 --> 00:19:12,920 Speaker 4: been a major piece of menus. I mean we see 391 00:19:13,000 --> 00:19:15,879 Speaker 4: right now roughly about eighty five percent just of menu 392 00:19:15,960 --> 00:19:19,280 Speaker 4: items making up that just the core chicken, beef, ork 393 00:19:19,359 --> 00:19:21,720 Speaker 4: type of items. So it's always been there. But the 394 00:19:21,800 --> 00:19:23,560 Speaker 4: real focus on it right now is a is you're 395 00:19:23,560 --> 00:19:26,600 Speaker 4: starting to see a lot of trends focus on protein 396 00:19:26,720 --> 00:19:30,040 Speaker 4: rich or a lot of protein within the diet. These 397 00:19:30,040 --> 00:19:32,760 Speaker 4: are becoming even more important to consumers. Some of the 398 00:19:32,800 --> 00:19:35,919 Speaker 4: generational shift too, you're starting to see is that it's 399 00:19:35,920 --> 00:19:38,080 Speaker 4: even more important to the millennials who are in the 400 00:19:38,080 --> 00:19:40,560 Speaker 4: market now and really becoming some of the chief spenders 401 00:19:40,600 --> 00:19:44,040 Speaker 4: from now and moving forward, really looking for protein as 402 00:19:44,080 --> 00:19:46,359 Speaker 4: a deciding factor and how they're choosing restaurants and how 403 00:19:46,359 --> 00:19:50,439 Speaker 4: they're choosing their items. Also, just some trends with gop 404 00:19:50,600 --> 00:19:52,640 Speaker 4: one and what you're seeing in dietary trends is really 405 00:19:52,720 --> 00:19:57,200 Speaker 4: focused back on protein being a core of that decision process. 406 00:19:57,200 --> 00:19:59,520 Speaker 4: For guests on menus, I think a recent survey we 407 00:19:59,560 --> 00:20:02,280 Speaker 4: saw again three top reasons. It's good for my health, 408 00:20:02,280 --> 00:20:04,480 Speaker 4: it's satisfying, and it's something that I need as part 409 00:20:04,520 --> 00:20:07,359 Speaker 4: of my active lifestyle. And that just keeps increasing as 410 00:20:07,400 --> 00:20:10,199 Speaker 4: we ask guests out there for menus and just what 411 00:20:10,200 --> 00:20:12,400 Speaker 4: we're seeing as items come to menus. 412 00:20:13,200 --> 00:20:16,040 Speaker 2: Justin I want to ask you about some trendy food 413 00:20:16,119 --> 00:20:19,680 Speaker 2: that has become like kind of the thing that everyone wants. 414 00:20:19,760 --> 00:20:22,440 Speaker 2: It's certainly showing up all over social media, whether it's 415 00:20:22,520 --> 00:20:25,520 Speaker 2: Macha out of Japan or Asia overall, Ube out of 416 00:20:25,560 --> 00:20:28,320 Speaker 2: the Philippines. Do buy chocolate, that's a big thing. 417 00:20:28,440 --> 00:20:29,480 Speaker 6: Well, you're way ahead of me on this. 418 00:20:29,680 --> 00:20:30,440 Speaker 3: Well, I mean this is. 419 00:20:30,400 --> 00:20:33,359 Speaker 2: What's all over Instagram. And these things photograph really well, 420 00:20:33,480 --> 00:20:37,280 Speaker 2: and they also lead to increased demand from consumers, and 421 00:20:37,359 --> 00:20:40,119 Speaker 2: restaurants are kind of meeting this demand by incorporating it 422 00:20:40,240 --> 00:20:44,280 Speaker 2: into their menus. Is this something that restaurants do with 423 00:20:44,400 --> 00:20:46,480 Speaker 2: an eye to like just do it for a couple 424 00:20:46,560 --> 00:20:50,199 Speaker 2: of weeks before going back to their normal menu, or 425 00:20:50,240 --> 00:20:52,159 Speaker 2: is it something that they incorporate permanently. 426 00:20:53,359 --> 00:20:55,200 Speaker 4: Well, I think you're seeing more and more of those 427 00:20:55,240 --> 00:20:57,080 Speaker 4: trendy types of pieces to mendew if you want to 428 00:20:57,119 --> 00:20:59,719 Speaker 4: call them trendy, but they're also following a lot of 429 00:20:59,720 --> 00:21:03,160 Speaker 4: that global taste and that unique taste piece to cause 430 00:21:03,200 --> 00:21:05,679 Speaker 4: buzz around items and a buzzer bus of the menu 431 00:21:06,359 --> 00:21:09,200 Speaker 4: to be able to bring folks in again. Right now, 432 00:21:09,400 --> 00:21:11,360 Speaker 4: as you're starting to see affordability as a total thing 433 00:21:11,400 --> 00:21:13,800 Speaker 4: for guest visits and transactions being more of a fight 434 00:21:13,880 --> 00:21:16,680 Speaker 4: for share as guests are coming in not necessarily maybe 435 00:21:16,720 --> 00:21:20,960 Speaker 4: new occasions utilizing what's there, what's really current, what's good, 436 00:21:21,119 --> 00:21:24,520 Speaker 4: those short term promotions, the social media aspects and the 437 00:21:24,560 --> 00:21:28,360 Speaker 4: photographing let the camera eat first type of principle of 438 00:21:28,400 --> 00:21:31,640 Speaker 4: being able to take sea food that's really exciting. You're 439 00:21:31,680 --> 00:21:35,040 Speaker 4: seeing that get leveraged a lot as global cuisine as 440 00:21:35,040 --> 00:21:37,440 Speaker 4: some of those trends are really there and again resonating 441 00:21:37,440 --> 00:21:41,480 Speaker 4: with millennials, but again across all folks. As whether it's 442 00:21:41,520 --> 00:21:43,760 Speaker 4: a mainstam menus, there's a real balance. I think you're 443 00:21:43,760 --> 00:21:45,960 Speaker 4: seeing more of that short term type of menu options 444 00:21:45,960 --> 00:21:49,840 Speaker 4: come in promotions and then whether that has staying power 445 00:21:49,920 --> 00:21:51,800 Speaker 4: or how that balance is with what you might consider 446 00:21:51,840 --> 00:21:54,320 Speaker 4: the core of the menu, the things that you're known for, 447 00:21:54,480 --> 00:21:57,199 Speaker 4: what you come in for. So it's that balance of 448 00:21:57,240 --> 00:21:59,639 Speaker 4: getting the folks coming in for excitement and for the 449 00:21:59,680 --> 00:22:00,840 Speaker 4: things that they know and always look. 450 00:22:01,480 --> 00:22:06,159 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 451 00:22:06,359 --> 00:22:09,840 Speaker 1: and anywhere else you get your podcasts. Listen live each 452 00:22:09,840 --> 00:22:13,600 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 453 00:22:13,720 --> 00:22:17,240 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 454 00:22:17,680 --> 00:22:20,600 Speaker 1: You can also watch us live every weekday on YouTube 455 00:22:21,000 --> 00:22:23,240 Speaker 1: and always on the Bloomberg terminal.