Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: podcast turning stories. As Bailey was just talking about, it's
Speaker 1: on the retailers, it's Target, it's TJX. Some decent numbers,
Speaker 1: kind of in line, I guess you'd call it, but
Speaker 1: definitely some cautious outlooks. Let's kind of get a sense
Speaker 1: of what that means for these retailers and what it
Speaker 1: means for the consumer overall. Sor't going to round table
Speaker 1: this same a couple of smart voices. Jen Bartashi's senior
Speaker 1: industry analysts with Bloomberg Intelligence. She joins us, as does
Speaker 1: Bloomberg macro strategist Vince Cignarella, both on the phone here.
Speaker 1: So Jen, let's start with you here. What's your takeaway
Speaker 1: from a couple of big retailers, Target and TJX.
Speaker 3: Yeah, it's good morning, Paul. Really, the takeaway is that
Speaker 3: there's no news good news actually in this market, and
Speaker 3: that everybody understands that the consumer discretionary spending is continuing
Speaker 3: to soften. I think that one of the things that
Speaker 3: we're looking at with Target is how well they're going
Speaker 3: to be able to manage that, And one of the
Speaker 3: positives this morning was really about how they've reduced their
Speaker 3: inventory and they seem to be positioned to be able
Speaker 3: to respond a little bit more quickly than they have
Speaker 3: historically to changes in that consumer spending.
Speaker 4: Well, Jen, the inventory story seemed to be this overhanging
Speaker 4: for both Target and tj MAX for the entirety of
Speaker 4: last year. Is that problem in the past now or
Speaker 4: is there any remnants of it?
Speaker 3: Really that pattern that that problem is really in the past.
Speaker 3: I think both of the retailers have really reduced their inventory,
Speaker 3: especially in critical areas. So for example, with Target, their
Speaker 3: inventory is down sixteen percent, but it's down twenty five
Speaker 3: percent in discretionary categories, and TJX is also really worked
Speaker 3: to offload the excess inventory that they had, so the board,
Speaker 3: I think in the retail space, inventory is really pretty
Speaker 3: well positioned as we go into the summer months and
Speaker 3: more importantly into the critical back to school and back
Speaker 3: to college seasons, which it's hard to talk about already,
Speaker 3: but it is just around the corner.
Speaker 1: My last back to college is starting at Start in
Speaker 1: the fall after four. This is my fourth and last.
Speaker 1: Thank goodness, Vince Agnirella, love to get your thoughts here.
Speaker 1: What are you hearing out there on the street? You know,
Speaker 1: we see these retailers today and they're to me reasonably cautious.
Speaker 1: That drives of some of the ego data we've seen.
Speaker 1: And there, what are you hearing out there as it
Speaker 1: relates to the consumer inflation? How's everybody doing?
Speaker 5: Everybody's sort of so so to be honest, I mean,
Speaker 5: I think the interesting point when you're talking about the
Speaker 5: retailers and you're talking about reducing inventories, think about just
Speaker 5: a short time ago we were talking supply chain and
Speaker 5: balances and people couldn't get product. One of the things
Speaker 5: that's troubling, and I think just the whole economic space
Speaker 5: and what people are talking about is their huge search
Speaker 5: and consumer credit outstanding. We're seeing very large consumer credit balances.
Speaker 5: It's positive for the credit card companies and when you
Speaker 5: see big games for people like MasterCard, Annex, etc. And visa.
Speaker 5: You know, in normal times that's a positive, but in
Speaker 5: times like this, I think we look at that as
Speaker 5: a negative, and that consumers are stretched in terms of
Speaker 5: disposable income visa, the inflation, and more and more purchases
Speaker 5: are being basically bought on time, if you will, and
Speaker 5: that's just borrowing from economic growth in the future. And
Speaker 5: you know, I think markets and traders are still thinking
Speaker 5: that we are potentially going to see a recession before
Speaker 5: this year's out.
Speaker 4: Vince, following up on that story, the timeline here is
Speaker 4: really interesting because and Jen correct me if I'm wrong here,
Speaker 4: but both Home Depot and Target kind of said, look,
Speaker 4: we're expecting some sort of pullback in the consumer. It's
Speaker 4: not here yet, but it's coming, and it feels like
Speaker 4: it's a narrative we've heard from last year. So in
Speaker 4: terms of timing, e Vince, we know a lot of
Speaker 4: people are pricing in that final economic recession by the
Speaker 4: end of the year. But where are the signs of
Speaker 4: the consumer pullback.
Speaker 5: Well, I mean we're naturally not seeing them in I mean,
Speaker 5: if you look across the board, you look at the
Speaker 5: housing market, especially in the tri State there, it's off
Speaker 5: the charts. Where there's no inventory, so pricing it's totally
Speaker 5: a seller's market. People are paying well above ask and
Speaker 5: they're continuing to do that simply just to get a home.
Speaker 5: We're not seeing inventory because of high interest rates. So
Speaker 5: in a way, you know, I am a major critic
Speaker 5: of that said, because I think they've totally missed the
Speaker 5: whole idea of monetary policy. Just raising interest rates without
Speaker 5: reducing money is not being more than changing the price
Speaker 5: of money. It's not actually reducing demand, so that money
Speaker 5: is still out there and the consumers are still spent.
Speaker 5: But I think we're getting to a point where they're
Speaker 5: reaching the end of their rope. And until we get
Speaker 5: to that point, we're not going to see the pullback
Speaker 5: and spending that you know that people are talking about.
Speaker 5: You know when that happens. Timing is everything, but I
Speaker 5: wouldn't dare to try to call it necessarily and say
Speaker 5: at the end of this year or early next year
Speaker 5: or whatever. But it does come eventually. It does come.
Speaker 5: You run out of you just run out of places
Speaker 5: where you have income to spend.
Speaker 1: Jen both T tj X and Target called out, as
Speaker 1: have other other retailers recently, that the rise in shrink.
Speaker 1: What is shrink and how problematic is it for the retailers.
Speaker 3: Yeah, so shrink is is really loss of goods either
Speaker 3: due to cesser damage, and it's really as simple as that.
Speaker 3: And it's it's an issue that has always been around retail,
Speaker 3: but has been amplified significantly in the last year or so.
Speaker 3: And we've actually even heard retailers like Kroger talk about
Speaker 3: retail shrink and theft of you know, of actual retail
Speaker 3: gangs coming in and stealing products. It's something that is
Speaker 3: always there because you know, people you know, pocket things
Speaker 3: as they're in the stores. But when people are under
Speaker 3: economic stress, it sort of leads an opening, leads an
Speaker 3: opening to an increase in theft. And that's what we're
Speaker 3: seeing across the industry when we.
Speaker 4: Talk about the theft story, though, Jen, I mean, what,
Speaker 4: what is what's driving that exactly? Because has that target
Speaker 4: always kind of had this issue to some extent.
Speaker 3: Well, all retailers have this issue to some extent. It's
Speaker 3: it's it's a matter of how well it's being managed.
Speaker 3: And and when you think about, you know, where the
Speaker 3: consumer sits, especially consumers who shop in the lower to
Speaker 3: mid tier stores, they've seen their discretionary income start to
Speaker 3: be under more pressure, and it lends itself to more
Speaker 3: of that that type of theft than we see when
Speaker 3: people have free or spending capabilities. And it is something
Speaker 3: that is it goes in cycles, and we've seen it
Speaker 3: in the past with retail when we were in other
Speaker 3: recessionary type environments, and so it's nothing new, but it
Speaker 3: is a new issue, and it's remarkable in targets respect
Speaker 3: and that they're calling out a five hundred million dollars
Speaker 3: potential impact of profits this year.
Speaker 1: Yeah, that's that's the number that kind of trumps out
Speaker 1: at me. Hey, Vince, what are the next data points
Speaker 1: that you'll be looking for that the market's really focusing
Speaker 1: on you, abilieity.
Speaker 5: You know, not a lot this week, unfortunately, for us
Speaker 5: to really get our hands on where we get the
Speaker 5: usual jobless claims weekly number Philly FED is probably going
Speaker 5: to be interesting following what we saw in New York
Speaker 5: home sales. I don't think anyone's expecting any any major surprises.
Speaker 5: I think until we get to the f MC minutes
Speaker 5: on the twenty fourth, there's there's nothing amazingly substantial I
Speaker 5: think to really shift market sentiment. It's all going to
Speaker 5: be given taken. When I'm watching markets now, which you know,
Speaker 5: we're just we're in a bit of a seesaw trend
Speaker 5: that it simply feels like the day traders are ruling
Speaker 5: the roost and just just moving things back and forth
Speaker 5: and just taking taking advantage of enter day trends. But
Speaker 5: we're not seeing a really good feel I think for
Speaker 5: a market trend. I think it's that's going to come,
Speaker 5: hopefully with the statement that follows the f O MC
Speaker 5: or maybe they'll give us that word that everyone's looking for,
Speaker 5: which is pause, right.
Speaker 1: The P word, the pause were okay?
Speaker 6: All right?
Speaker 1: Jen Bartash is a senior industry anasal with Bloomberg Intelligence
Speaker 1: and Vince Cignerella, Bloomberg macro strategist. Thanks you guys for
Speaker 1: stepping in here talking about these big retailer starting reportant earnings.
Speaker 1: We've got Walmart tomorrow, so I'm sure we'll be talking
Speaker 1: to Jen again about that. We had TJ Max and
Speaker 1: Target reporting today. You know, cautious that that's the word there.
Speaker 7: You're listening to the team.
Speaker 8: Ken's a line program Bloomberg Markets weekdays at ten am Eastern.
Speaker 7: On Bloomberg dot com.
Speaker 8: The iHeartRadio app and the Bloomberg Business app, or listen
Speaker 8: on demand wherever you get your podcast.
Speaker 1: Pretty it seems like we kind of joke about this
Speaker 1: that every company in every industry, what did they all
Speaker 1: talk about on their conference? Cause AI? I mean your
Speaker 1: dog make dog food maker. You're talking AI and how
Speaker 1: that's going to drive your business. I think it's a
Speaker 1: scam approaching scam like levels. But how does it imply
Speaker 1: to investing? Our next guests can help us out there,
Speaker 1: Hugh Roberts, head of analytics at quant Insight. The name
Speaker 1: says it all, Hugh, I got to ask you AI.
Speaker 1: It's all over the place. How does it apply, if
Speaker 1: at all, to investing. You're the guy to have an answer.
Speaker 9: I think, yeah, Well, we think it massively does. The
Speaker 9: key difference to what we do is we don't have
Speaker 9: a kind of a large language model. It's obviously making
Speaker 9: all the hype around chat, gbt Bard and all the others,
Speaker 9: so we've not gone down the natural language processing route. Instead,
Speaker 9: we used the smart machine and just basically trained it
Speaker 9: on a range of financial securities single stocks, equity indices, yields,
Speaker 9: FX crosses and the like, and the macro environment, because
Speaker 9: the problem with macro more often than not, is not
Speaker 9: that we're we don't know what the mysterious X factor
Speaker 9: is it's driving ten new yields or dollar yen or spoos.
Speaker 9: It's that we don't know what the right pattern and
Speaker 9: the right jigsaw is. You know, our FX trading off
Speaker 9: interest rate differentials, are spoos trading off the strength or
Speaker 9: weakness of the dollars. You know, it's putting the different
Speaker 9: moving parts of growth, inflation, financial conditions, risk, appetite together
Speaker 9: in the right order. And that's exactly what AI can
Speaker 9: help with. So AI can help, but not necessarily the
Speaker 9: natural language processing the LLM models, more just using to
Speaker 9: train it on smart data, on understanding the patterns of
Speaker 9: association between financial markets and the broader macro environment.
Speaker 4: Does that apply to every asset class though, I mean,
Speaker 4: or is this just a stock market kind of thing?
Speaker 9: Well, we train that on everything, but it's a really
Speaker 9: fair question because obviously you do see discrepancies within that.
Speaker 9: So sometimes you know, commodities get driven exclusively by a
Speaker 9: supply squeeze, in which case, you know, you've got to
Speaker 9: get into the weeds in terms of you know, is
Speaker 9: it a weather event that's impacting crop production levels, for example,
Speaker 9: or within the equity space. You know, there are certain
Speaker 9: sectors and I think even the most bottom up company
Speaker 9: fundamental guy would acknowledge a macro place. They're typically the
Speaker 9: interest rates sensitive sectors like finance like housing, et cetera,
Speaker 9: or even growth versus value thinking about the level that
Speaker 9: bond yields play in that kind of style allocation. But
Speaker 9: then we'd be the first to admit, you know, if
Speaker 9: you're talking about a new biotech stock where it come
Speaker 9: up with a new prescriptive drug of some kind, and
Speaker 9: it's about their R and D capabilities, it's about their
Speaker 9: ability to patent it so they can monetize it properly.
Speaker 9: But that's always be more radiosyncratic. So there are variances
Speaker 9: across the entire kind of capital market structure. If you
Speaker 9: think about it, what financial asset is completely impervious to inflation?
Speaker 9: The fed financial conditions, risk appetites, these are just truisms
Speaker 9: in our life.
Speaker 1: So Hugh, right now, what are some of the data points,
Speaker 1: data sets that you guys at quant Insights are really
Speaker 1: focusing on now?
Speaker 9: Yeah, So what we're lediting is is a little bit
Speaker 9: of a regime change for US equity markets. I mean,
Speaker 9: it is a little bit self evident, because obviously the
Speaker 9: narrative has been out there for some time, but we're
Speaker 9: seeing that while everyone's talking. Obviously all these amazing stats
Speaker 9: about Apple being the size of the russel. Two thousand
Speaker 9: or half dozen stocks explain the entire performance for twenty
Speaker 9: twenty three, and you can ascribe that to AI, you
Speaker 9: can ascribe it to a little bit of safety status,
Speaker 9: and also maybe the moving yields as the bond market
Speaker 9: starts for discount and easier fed. You've got to be
Speaker 9: more nuanced than that, we would argue if you're actually
Speaker 9: trading this stuff. So it's not actually the level of
Speaker 9: bond yields and that is driving US tech stocks on
Speaker 9: our models. It's actually a the shape of the yield
Speaker 9: curve and b bond revolve interstrate volatility that is more important.
Speaker 9: And what we're finding at the moment is that the
Speaker 9: move lower. We actually use Swatch involve rather than the
Speaker 9: move index, but the move index tends to be more
Speaker 9: well known. The fall in the move index over the
Speaker 9: last month or so has been a huge tailwind. That's
Speaker 9: been a positive, and that's raising model value for spoos,
Speaker 9: NAVVAC XLK.
Speaker 5: All this stuff.
Speaker 9: A steeper yield curve is also a big tail wind,
Speaker 9: and that's helping move model value higher against that given
Speaker 9: that we finally feels it's most eagerly anticipated recession in
Speaker 9: a long time, and it feels like everyone's been waiting
Speaker 9: for it. For the data in the last month or so,
Speaker 9: it's felt like it is starting to roll over, but
Speaker 9: at the margin, both in the States and Europe and China,
Speaker 9: and that's been a headwind to macro warranted serve value
Speaker 9: for all this stuff. So what we do is obviously
Speaker 9: balance up the tailwinds and the headwinds. And at the moment,
Speaker 9: the moves in the bond market are more than offsetting
Speaker 9: the negative drag from gross the negative drag from inflation expectations.
Speaker 9: But the trouble is is that markets have moved equity
Speaker 9: markets have leaved ahead of that. So we've got the nowsack,
Speaker 9: for example, about five percent rich.
Speaker 5: To where it should.
Speaker 9: Be at the moment. So the good moves is macro warranted,
Speaker 9: macro momentum is moving higher, but the health warning is
Speaker 9: the market's ahead of itself.
Speaker 4: Well, it's interesting that we say the market's ahead of
Speaker 4: itself when it's kind of been stuck range bound for
Speaker 4: two months now, how much of the kind of carnage
Speaker 4: of last year is almost a tailwind as well to
Speaker 4: the stock market this year around, even as we're staring
Speaker 4: at a recession.
Speaker 1: Does it? Is it just up from here?
Speaker 9: Yeah? I think that's really fair comment, at least for
Speaker 9: justifying price action in January. And it did feel like
Speaker 9: a lot of last year's losers, the ones that got
Speaker 9: beaten up the most, did see a reallocation towards them
Speaker 9: at the beginning of the year. And I think that's
Speaker 9: a really fair comment, and there is flow evidence to
Speaker 9: back that up as well. But it has to be
Speaker 9: more than that when you look at the price action,
Speaker 9: and I think what started off was a twenty twenty
Speaker 9: two losers reallocating into twenty twenty three winners morphed into
Speaker 9: a bit of a bond yeel trade and more in
Speaker 9: the last whatever it is six to eight weeks, is
Speaker 9: morphed into a generative AI trade. But our point would be,
Speaker 9: is it interestingly if we look at the nasdak so
Speaker 9: we have we compute and our squared steps, that's just
Speaker 9: goodness of fit how good a job are our macro
Speaker 9: factors doing of explaining price action from whatever we're looking at.
Speaker 9: If we looked at the Nasdak from January up until
Speaker 9: about ten days ago, our our squared was below our
Speaker 9: threshold for macro regime, So that would speak to the
Speaker 9: fact in January now that was driving off flow and
Speaker 9: in February and March it was trading off the generative
Speaker 9: AI hype. Now it's back above our threshold. We explained
Speaker 9: seventy percent of price action in the Nasdak and we
Speaker 9: have a five percent rich So our message to people
Speaker 9: at the moment is the generative AI hypeer taking us
Speaker 9: this far. But it's not the only game in town anymore.
Speaker 9: There's also macro factors at work, and that's the headwind
Speaker 9: that you're seeing from growth and the reflation dynamic and
Speaker 9: lower commodity markets. But the tail when they're getting from
Speaker 9: moves in boon vol and the yield curve, and you've
Speaker 9: got to try and weigh all those up. And that's
Speaker 9: what that's where back to the original conversation where AI
Speaker 9: can help Q.
Speaker 1: I know you guys are are macro focused. Do you
Speaker 1: care at all about the micro like do you care
Speaker 1: the fact that you know we're finishing up earning the
Speaker 1: season here, and do you even look at that kind
Speaker 1: of stuff.
Speaker 9: Well, our clients do. I mean, we don't have any
Speaker 9: kind of bottom up variable so that we model. And
Speaker 9: that's simply a commercial division, to be completely honest, it's
Speaker 9: because that area of the research world is incredibly well covered.
Speaker 9: If there are so many people looking at company fundamental,
Speaker 9: there's just no edge there as far as we can tell.
Speaker 9: But the way our equity clients would use us is
Speaker 9: they would still do their bottom up analysis. They'd look
Speaker 9: at the target earnings, the home depot yesterday and they'll
Speaker 9: do their kind.
Speaker 5: Of bottom up analysis.
Speaker 9: But then they'd say, well, we know we're in macro
Speaker 9: markets as well, so we need to put a macro
Speaker 9: overlay on top of this as well. And then you
Speaker 9: get the holistic picture. It's where bottom up meets top down.
Speaker 9: But we only provide one half of that equation.
Speaker 5: To be honest, h.
Speaker 4: You about thirty seconds here in your analysis, where does
Speaker 4: the currency picture fall of How much of a ripple
Speaker 4: effect is the dollars well stagnation for now going to
Speaker 4: have on the rest of the markets?
Speaker 9: YEA, the most interesting thing on the FX models at
Speaker 9: the moment is actually that you're a dollar, and factually
Speaker 9: this speaks to equities as well European assets, both European
Speaker 9: equities relative to the S and euro dollar. Europe is
Speaker 9: the highbe to growth play. It is most sensitive to
Speaker 9: global GDP improving to commodity market rallying, and euro dollar
Speaker 9: screens is very slightly rich and eased you. The Eurozone
Speaker 9: ETF screens is very slightly rich relative to spy. So
Speaker 9: if you think we are about to get the recession
Speaker 9: we've all been waiting for and global growth is going
Speaker 9: to turn aggressively lower YEP, then all those trades that
Speaker 9: have over what Europe might need to be reconsidered.
Speaker 1: You always good to chat with you a different perspective,
Speaker 1: refreshing perspective from the macro side of the equation. Hugh Roberts,
Speaker 1: head of analytics at Quat Insights. They are based in
Speaker 1: the UK in London.
Speaker 8: You're listening to the tape can Tour live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 7: Bloomberg Business app.
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Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: The next guest I really want to talk to because
Speaker 1: I'm really interested in this fund. Here Savina Risova, global
Speaker 1: head of Research for Dimensional Fund Advisors. Now I'm a
Speaker 1: little I'm a little nervous here because she has her
Speaker 1: MBA and PhD from the University of Chicago, which means
Speaker 1: they really like numbers. And I was told that there
Speaker 1: would not be math on this show. But we'll see
Speaker 1: what we can do here, Savina. I see Dimensional. Why
Speaker 1: I pull up the stockholders list. I see Dimensional as
Speaker 1: top top, top shareholder and a number of big companies
Speaker 1: tell us about Dimensional First, what do you guys do?
Speaker 1: What's your strategy? Sure?
Speaker 10: Yeah. They Mentional as combining the best of kind of
Speaker 10: two words or two ways of investing, the best of indexing,
Speaker 10: low costs, broad diversification, transparency with the best of her
Speaker 10: active systematic active investing, which is pursuit of premiums and
Speaker 10: a daily, flexible implementation process. And we offer kind of
Speaker 10: that type of approach both in equities and fixed income.
Speaker 10: One investment philosophy, many investment solutions, and.
Speaker 11: It sounds like though you favor kind of the indexing overactive.
Speaker 11: Is that right? Based on your.
Speaker 10: Note, it's a combination essentially of the benefits of both.
Speaker 10: Indexing has a lot of nice features with it, as
Speaker 10: they mentioned, broad diversification and low costs are the first
Speaker 10: that come to mind, but also it has costs, and
Speaker 10: I think in the last few years we've seen the
Speaker 10: pandulum swing a lot away from traditional active to indexing,
Speaker 10: which journey has been a great trend, but people have
Speaker 10: also started to perceive indexing as a free lunch out there.
Speaker 10: It has its own costs. There are regiditis associated with
Speaker 10: indexing and also lack of pursuit of premiums in general
Speaker 10: when it comes to playing market index solutions. So we
Speaker 10: try to basically deliver the benefits of indexing, but also
Speaker 10: go beyond indexing by focusing on pursuit of premium systematically,
Speaker 10: day and daily in our investment solutions.
Speaker 1: So, Sabine, I know you at Dimensional to really take
Speaker 1: a look at the retirement business, and you've got to
Speaker 1: paper out entitled A Little Goes a Long Way. What
Speaker 1: do you mean by that?
Speaker 10: What do you mean by that is that if people
Speaker 10: in their retirement accounts, which are, by the way, the
Speaker 10: largest share of household well according to the twenty twenty
Speaker 10: US Census. Instead of focusing on a plane market index,
Speaker 10: Solutions goes for a little bit of a pursuit of
Speaker 10: premiums with inequities. That is, go for a portfolio that systematically,
Speaker 10: but in a controlled manner, emphasizes smaller, deeper value, more
Speaker 10: profitable stocks. Then they can actually improve significantly their outcomes
Speaker 10: for retirement, namely more asseted retirement, better chance of not
Speaker 10: running out of money in retirement, and the potential to
Speaker 10: live larger bequests. That's kind of what the study focuses on.
Speaker 10: What can you how can you improve your retirement outcomes
Speaker 10: if you move away from plane market index in your
Speaker 10: equity allocation for retirement to a portfolio that, in a
Speaker 10: broadly diversified manner pursues the long term drivers of returns
Speaker 10: with inequities.
Speaker 11: So what's the best way for folks listening to try
Speaker 11: and accomplish that.
Speaker 5: Yeah.
Speaker 10: So, usually when you have a research paper, even if
Speaker 10: it has a compelling message, it's hard to act on
Speaker 10: it under your word, Yeah, not the case with this paper. Actually,
Speaker 10: anybody who listens today to the show can take action
Speaker 10: on that because you can switch from a plane index
Speaker 10: for equity portfolio to a systematic active solution in your
Speaker 10: for one K and your ERA, in your other taxable
Speaker 10: accounts you use for retirement, even in HSA health savings accounts,
Speaker 10: which are essentially longs, can be used as long term
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Speaker 10: of accounts used for saving for retirement, investing for retirement,
Speaker 10: or you can have options practical real world solutions like
Speaker 10: the dimensional investment solutions in equities that offer that type
Speaker 10: of approach focus balance, integrated, focus on size, value and profitability,
Speaker 10: which can improve retirement outcomes. And the other great kind
Speaker 10: of message from the paper is the findings of the
Speaker 10: paper applied not only to someone who is very far
Speaker 10: away from retirement like age twenty five, let's say, lots
Speaker 10: of time to save for retirement. They actually can improve
Speaker 10: retirement outcomes even for people who are about to enter
Speaker 10: retirement or who are already in retirement. It's not too
Speaker 10: late to read some of those benefits.
Speaker 1: All right, Savina, thank you so much. We appreciate it.
Speaker 1: Savina Reserve, a global head of research and Dimensional Fund Advisors.
Speaker 8: You're listening to the Team Cancer online program Bloomberg Markets
Speaker 8: weekdays at ten am Eastern on Bloomberg dot com, the
Speaker 8: iHeartRadio app and the Bloomberg Business app, or listen on
Speaker 8: demand wherever you get your podcasts.
Speaker 1: All right, let's switch gears. Let's talk energy here. You know,
Speaker 1: we're talking a lot. We just had the CEO of
Speaker 1: Bentley on Bentley Automotive and they're talking about, you know,
Speaker 1: transitioning to electric vehicles, and there's obviously huge energy components
Speaker 1: to all of this. We're welcome to bring in Robert Picconi.
Speaker 1: He's the CEO and co founder of Energy Vault. Energy
Speaker 1: Vault is a New York Stock Exchange listed public company
Speaker 1: and our GV is the ticker to put into your
Speaker 1: Bloomberg terminal. Rob thanks so much for joining us here.
Speaker 1: You join us here in our studio. We know you're
Speaker 1: based out in California, so we appreciate you coming into
Speaker 1: our studio here in New York. What do you guys do?
Speaker 1: What Energy volt Just give us a quick, you know,
Speaker 1: kind of elevator pitch for energy Vault here.
Speaker 12: Sure, we're focused on energy storage, and energy storage is
Speaker 12: going to be fundamental for the deployment of renewables to
Speaker 12: be deployed in more volume for us to wean our
Speaker 12: way off of fossil fuels. Our storage is broad We
Speaker 12: use a software platform where we can handle short duration
Speaker 12: storage and integrate that long duration. We do that with
Speaker 12: our proprietary gravity solution, and we also is just announced
Speaker 12: last year to do ultralong duration with green hydrogen. So
Speaker 12: we broadly play in energy solutions for utilities, independent power
Speaker 12: players and also large consumers of energy, large industrial players.
Speaker 11: And the gravity based storage feels like a big deal
Speaker 11: for you guys, Can you explain what that is?
Speaker 12: It's a big deal and it's also big as a building. Yes,
Speaker 12: we innovated with gravity as a solution for energy storage
Speaker 12: that would be sustainable, low cost, something that could be
Speaker 12: deployed quickly, and that you could essentially build anywhere you
Speaker 12: can build a building. So ninety percent of all energy
Speaker 12: storage today are actually pumped hydro electric dams that use gravity.
Speaker 12: In that case, it's water that traverses down and turns
Speaker 12: a motor and discharges electricity, and then that water is
Speaker 12: pumped back up into the reservoir into the dam. We
Speaker 12: came up with a way to use that same gravity
Speaker 12: and build a structure in a building that you could
Speaker 12: build basically anywhere, not have the reliance on building dams
Speaker 12: damming up rivers for example, or the large cost, and
Speaker 12: to do that very economically. We have a very low
Speaker 12: levelized cost to do that, which is a big issue
Speaker 12: with energy storage's cost.
Speaker 1: What are you storing?
Speaker 12: Actually, we're storing electrons, so we're essentially taking ideally excess
Speaker 12: wind and solar when it's not needed. So solar typically
Speaker 12: overproduces during the day because the demand isn't there, and
Speaker 12: that excess wind and solar actually powers the motors and
Speaker 12: moves these large composite blocks. We don't use concrete in
Speaker 12: those blocks. They are twenty five metric tons each, so
Speaker 12: that powers these blocks to a height, and then at
Speaker 12: height it's all potential energy. So this goes back to
Speaker 12: your physics classes and it can sit there and last
Speaker 12: literally days, weeks, months. However, it's designed to cycle every day,
Speaker 12: so when the energy is needed by the grid, for example,
Speaker 12: in the morning when we get up and we're using energy,
Speaker 12: or in the evening when people come home, we lower
Speaker 12: those blocks, all automated with software, and that turns the
Speaker 12: motor and discharges that electricity back to the grid.
Speaker 11: Wow, you got to be really smart to figure this
Speaker 11: stuff out. That's amazing. That's pretty cool.
Speaker 7: All right.
Speaker 1: I had to ask one question because I know you
Speaker 1: made an investment. You've got something in rudin China. So
Speaker 1: you're nearing completion of the world's first commercial long duration
Speaker 1: gravity energy Storm says, I've been dying to meet somebody
Speaker 1: who's investing in China. What are you doing investing in China?
Speaker 12: Yeah, by the way, great question, and it's really fundamental.
Speaker 12: So first of all, China produces more greenhouse gases than
Speaker 12: the next seven countries combined, twelve billion tons. The US,
Speaker 12: by the way, second at about five billion, so number one.
Speaker 12: With our mission of decarbonization, China was going to be important.
Speaker 12: It's a very large market that's good for investors unique
Speaker 12: to disrupt with new technology to introduce there. We had
Speaker 12: a very good leadership partnership with a company called China
Speaker 12: Taianying that partnered up with the Book Family Foundation in
Speaker 12: Texas to support us with a license to go ahead
Speaker 12: and build that technology in China and start right away.
Speaker 12: So they broke around last year in March and moved
Speaker 12: very very quickly, and we signed a large license deal
Speaker 12: that will have a royalty component so for all the
Speaker 12: volume that gets built there. So, given the size of
Speaker 12: the market, given it's going to be the largest energy
Speaker 12: storage market in the next few years, and given just
Speaker 12: the need for the world to decarbonize, it became a
Speaker 12: very strategic point for US.
Speaker 11: It's strategic, but it's still China. Are you concerned at all?
Speaker 12: Not the way we structured the deal. So we structured
Speaker 12: in a way where they invested fifty million dollars in
Speaker 12: our company in the IPO as well, they prepaid fifty
Speaker 12: million dollars up front to have the license to deploy it.
Speaker 12: So we structured something in a way that financially would
Speaker 12: I think help investors get that coverage upfront. And I
Speaker 12: really believe with a partnership, they're a publicly company in China,
Speaker 12: they want to deploy very quickly and protect the technology.
Speaker 12: It's the investments they made in.
Speaker 1: So are you licensing your technology to this Chinese partner?
Speaker 6: Correct?
Speaker 1: Okay, okay, I understand, okay, So what are you doing
Speaker 1: here in the States? What are the growth drivers for
Speaker 1: you here or just rest of world? I would guess
Speaker 1: I'm not.
Speaker 6: Sure, We're sure.
Speaker 12: Well, the US is the largest market, so why don't
Speaker 12: we start there. We're doing a lot in the US.
Speaker 12: We had our first year of recognized revenue last year
Speaker 12: where we did one hundred and forty six million, but
Speaker 12: we announced one point seven gigawat hour of projects that
Speaker 12: included short duration lithiumayan projects as well as a large
Speaker 12: green hydrogen project with Pacific Gas and Electric, which is
Speaker 12: the largest California utility. So we are addressing the short
Speaker 12: duration market because that is the market in the United
Speaker 12: States today and we'll continue to be for the next
Speaker 12: few years. And in the rest of the world. We're
Speaker 12: doing things internationally in India and Australia, and we'll be
Speaker 12: announcing some other things in other parts of the world
Speaker 12: as well. We announced some recent license deals as well,
Speaker 12: in Greece and Cyprus and Egypt, for example.
Speaker 1: So is that your primary business model, licensing your time technology.
Speaker 12: Yeah, that's one of the business models we use for
Speaker 12: our gravity system in particular. Why because that's basically a building,
Speaker 12: So it's a structure you build that's lifting and learn
Speaker 12: in those weights. So that is a very easy license model.
Speaker 12: We also build commission transfer will also own projects and
Speaker 12: own them in under long term tolling agreements or power
Speaker 12: purchase agreements.
Speaker 11: Does something like the Inflation Reduction Act in the US
Speaker 11: make deals more attractive here?
Speaker 7: Absolutely?
Speaker 12: In fact, I'm here in New York this week because
Speaker 12: I met with the World Economic Forum and there's a
Speaker 12: leaders focused on energy innovation. So I'm one of about
Speaker 12: thirty CEOs that participate in that, and the IRA it
Speaker 12: has the world looking at the US. In fact, other
Speaker 12: projects in other countries very interestingly are getting canceled to
Speaker 12: come here, for example in green hydrogen. So the IRA
Speaker 12: for US is a tremendous impetus because it's domestic content.
Speaker 12: Our gravity is domestic for projects. The benefits are anywhere
Speaker 12: from thirty to fifty percent, and it's going to be
Speaker 12: great for jobs, and it's going to be great to
Speaker 12: make the United States the leader in renewables. So it's
Speaker 12: having its intended effect.
Speaker 1: So how would you size up this industry here? I
Speaker 1: guess is energy storage industry? I'm not sure, but how
Speaker 1: would you kind of size up this market and kind
Speaker 1: of where's your place in that market?
Speaker 12: Sure, it's by twenty thirty and by many accounts, somewhere
Speaker 12: between three hundred billion to four hundred billion is going
Speaker 12: to be spent. There's estimates that go up to a
Speaker 12: trillion when you get out to twenty forty and twenty fifty,
Speaker 12: and so it's a massive market. It's required for renewables
Speaker 12: to actually replace what is base load power from fossil fuels.
Speaker 12: The issue with renewables, of course, is they're intermittent, So
Speaker 12: if you're going to shut down predictable baseline energy, you
Speaker 12: need to have storage to make up for that intermittency
Speaker 12: when you can't predict when the sun shines or when
Speaker 12: the wind blows. So it's a massive market. Unfortunately, there
Speaker 12: are not a lot of solutions in the market. You
Speaker 12: have lithium ion batteries. They're not ideal, but they're good
Speaker 12: for short duration that's fine. They compete with electric vehicles,
Speaker 12: so you have massive demand. The components come from only
Speaker 12: a few countries, hence this IRAAC to try to get
Speaker 12: us more energy independent. What's happening in Russian and Ukraine,
Speaker 12: So it's a difficult problem to solve. With electrons, we
Speaker 12: can make wind and solar today for one to two
Speaker 12: cents of killawot hour just versus fossil fuels. That five
Speaker 12: cents fully amortized, already built. The problem is to store
Speaker 12: those same electrons, which you have to do if you're
Speaker 12: going to replace fossil fuel. It costs five to ten
Speaker 12: times that in some cases. So it's a difficult problem
Speaker 12: to solve. It's a difficult problem to solve sustainably. And
Speaker 12: I would say as an industry, and this may surprise
Speaker 12: you to hear me say this, we are behind because
Speaker 12: things got started late. I think the world, I think
Speaker 12: has woken up that we do.
Speaker 6: Have a problem.
Speaker 12: It needs to be solved. A lot of money now
Speaker 12: is being invested in a lot of new technologies that
Speaker 12: can help us, and we're going to be leading away
Speaker 12: for sure with the big.
Speaker 1: I'm sorry, would the big energy companies have an incentive
Speaker 1: to do this? Like you're a small company recently came public.
Speaker 1: Who are the big players here? If somebody want to
Speaker 1: play this in addition to your company.
Speaker 12: Sure, well there are large players that are playing in here.
Speaker 12: So Tesla is one of them that not only for
Speaker 12: their cars, but they're using those same litinum batteries to
Speaker 12: provide utility short duration storage technology. In addition, you have
Speaker 12: you mentioned oil and gas with the big players, they
Speaker 12: have to make their own clean energy transition. So for example,
Speaker 12: as investors, we have Saudi Ramco that invested in the
Speaker 12: company the largest energy company in the world, PHP, the
Speaker 12: largest mining company in the world for the transition they
Speaker 12: need to make and Creating is another one, large non
Speaker 12: farest metals producer. They made these investments because they're going
Speaker 12: to need longer duration technology, long duration storage and saw
Speaker 12: us as an innovator. So it's happening and the largest
Speaker 12: companies are looking at investments to help them make that transition.
Speaker 11: And do you anticipate in our kind of final thirty
Speaker 11: seconds with you, how worried are you about the macro
Speaker 11: environment impacting that investment plan.
Speaker 12: You know it's going to continue to be volatile as
Speaker 12: we see in the stock market. Absolutely, but he continue
Speaker 12: to see investment and demand coming. In other words, I'm
Speaker 12: not seeing and he drops in demand. In fact, in
Speaker 12: our last quarter we announced a forty percent growth in
Speaker 12: our sales funnel, which already is about twelve billion dollars.
Speaker 12: So and we announced also about a billion dollars in
Speaker 12: new project awards just last quarter. So we are not
Speaker 12: seeing a slowdown in demand from where we sit and
Speaker 12: the IRA is going to just accelerate that at least
Speaker 12: for sure for demand and also profitability in the United States.
Speaker 1: Robert, thanks so much for joining us. Really appreciate you
Speaker 1: coming in here. Robert Picconi, he's the CEO and co
Speaker 1: founder of energy Vault again the ticker on the Bloomberg
Speaker 1: terminal nur GV. Very interesting story. I think I learned
Speaker 1: a lot there about how this whole stuff works. You
Speaker 1: got to store It's not just creating the alternative energy,
Speaker 1: so you got to store it. So I think I
Speaker 1: got a better understanding of that, and that's what energy
Speaker 1: Vall is trying to solve for.
Speaker 7: You're listening to the tape.
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Speaker 1: All right, let's bring in our next guest. We'll have
Speaker 1: chatting with Neil Grossman. He's a former CIO a t
Speaker 1: k NNG Capital Neil million. Ways to go here. I'm
Speaker 1: just going to start with because we had President Biden
Speaker 1: speaking a little bit earlier, is now shaking hands getting
Speaker 1: ready to head over to Japan. But he and his
Speaker 1: friends in Congress, I got to get a debt deal done.
Speaker 1: And my question is what are we going to get
Speaker 1: if they do agree? Is it just to raise the
Speaker 1: debt limit and kick this can down the road another
Speaker 1: period of time.
Speaker 6: You're very, very intelligent. Yeah, I think that's most likely
Speaker 6: because I don't think the Democrats are going to be
Speaker 6: willing to go as far as the Republicans want, and
Speaker 6: you know, so they're going to have to find some
Speaker 6: way to get this done. I'll tell you, just as
Speaker 6: an aside, what I find very interesting, you know, you
Speaker 6: really want to scratch your They put through a one
Speaker 6: point seven trillion dollar package at the end of last
Speaker 6: year with a lot of spending. They had to know
Speaker 6: that they were going to create a problem for themselves
Speaker 6: if they didn't resolve this Number one. Number two. There's
Speaker 6: been a lot of interesting discussion if you've been paying
Speaker 6: attention about constitutional issues, which I'd love to sit down
Speaker 6: with Lawrence Tribe and discuss. But what I find very
Speaker 6: interesting is they could have started to do things like
Speaker 6: cut expenses about three or four months ago to give
Speaker 6: themselves more running.
Speaker 11: I mean decades ago, right, decades decades another run DC right, Like,
Speaker 11: there's not a lot of long term planning necessarily.
Speaker 6: Well, you know, the entire process. This is an interesting thing,
Speaker 6: the entire process for how debt and spending and all
Speaker 6: these programs are done based on the Congressional Budget Office
Speaker 6: projections are only ten year projections. So what the Congress
Speaker 6: tends to be very good at is dumping a lot
Speaker 6: of additional expenses into back years so they don't get measured.
Speaker 6: In fact, by the way, I wrote a book about
Speaker 6: this about ten years ago called Generation WTF. I'm very
Speaker 6: much on the side of young people.
Speaker 1: And thanks Neil.
Speaker 6: But the actuarial problems of this country are roughly speaking,
Speaker 6: two hundred trillion plus. You have to understand the government
Speaker 6: GDP is about twenty five trillion now, so we've already
Speaker 6: committed functionally almost eight to ten years of GDP already.
Speaker 6: The government spends let's say about five or six years
Speaker 6: trillion dollars a year, so in theory we've spent close
Speaker 6: to forty years of GDP already. So I mean, the
Speaker 6: hands are tied significantly. And you know, look, nobody has
Speaker 6: the willingness to do anything. Even this. McCarthy and Biden,
Speaker 6: to start with, both said we're not going to touch
Speaker 6: in titlements. Well that's ninety percent of the problems basically,
Speaker 6: and it's not what they do, which is just keep
Speaker 6: pushing into the back years. It's a problem.
Speaker 7: Now.
Speaker 6: My guess is, roughly speaking, the actuarial change in liabilities
Speaker 6: tied to those to the entitlement problems primarily, it's probably
Speaker 6: four to five trillionion dollars a year. And so whatever
Speaker 6: you see being measured understates the accumulation of these problems enormously.
Speaker 1: Yeah, that's just, yeah, that's just Those are discussions at
Speaker 1: the market. I don't think the market remotely can deal.
Speaker 6: With Well, they're going to have to at some point
Speaker 6: social Security the trust fund runs out someplace around twenty
Speaker 6: thirty three. I mean, that was a two year cut
Speaker 6: from what they are fired for thirty three ten years.
Speaker 1: That's scary y.
Speaker 7: Yes.
Speaker 6: So, by the way, I've been talking to a lot
Speaker 6: of young people about getting you may make the problem
Speaker 6: is the young. So my suggestion is young people should
Speaker 6: call their congressman and say, listen, you need a second
Speaker 6: trust fund. Every penny we put in cannot go into
Speaker 6: that trust fund. That's not our problem. You tell them
Speaker 6: to pay for it. Let's set up a fund for
Speaker 6: ourselves and we'll be we'll be accumulating money for our retirements.
Speaker 6: But you know that leaves the other other fund out
Speaker 6: of money in a number of years. By the way, Medicare,
Speaker 6: Medicaid ran out of money in twenty fifteen, so those
Speaker 6: are now on budget as well. So these are big
Speaker 6: problems too. Out of every three dollars give or take,
Speaker 6: that the US government now spends is for entitlements.
Speaker 11: What is the one thing then that you would want
Speaker 11: Congress to do specifically to protect my social security?
Speaker 6: Well, me, I am having to be quite extremely I
Speaker 6: think they should shut it down right now. And what
Speaker 6: they should do is that you can't do things. But
Speaker 6: they ought to go back and say, look, this is
Speaker 6: the amount of money we have to spend, and let's
Speaker 6: get this right. Because, to be honest with you, if
Speaker 6: they work with a cap this way, forget the deficit
Speaker 6: cap and say they're going to get a lot more.
Speaker 6: There's so much waste in this system, right, I mean,
Speaker 6: I think this is roughly estimated one hundred and fifty
Speaker 6: to two hundred and fifty billion dollars a year of
Speaker 6: medicare medical fraud that by itself is almost as you know,
Speaker 6: would provide enormous additional coverage. But you've got to sit
Speaker 6: there and be willing to say, Look, we cannot simply
Speaker 6: continue to have I call it ostrich economics and stick
Speaker 6: our heads in the ground, because all we're doing is
Speaker 6: providing a staggering problem to the future and that's.
Speaker 7: Not really fair.
Speaker 1: All right, back down to earth a little bit. Sure,
Speaker 1: what else do you think about? What are you doing
Speaker 1: in the markets? How are you viewing these markets? We just
Speaker 1: got through the bulk of earnings. We heard some from
Speaker 1: some retailers today and they're reasonably cautious and the outlook
Speaker 1: and on the consumer. But what are you looking at?
Speaker 6: Well, First of all, it's been and we've talked about
Speaker 6: this for a lot while. I've been doing reasonably well
Speaker 6: because I've been ranged, trading and trying to take advantage
Speaker 6: of volatility. I think we also discussed the fact that
Speaker 6: there was likely to be some upward migration and prices,
Speaker 6: which we're having right now. So you know, in the
Speaker 6: shorter run, I mean, this death issue is a concern
Speaker 6: because I'm very very flat basically beause I don't know
Speaker 6: how this is going to come out. I guess is
Speaker 6: they're going to You're gonna You're gonna basically push it
Speaker 6: to the limit. There'll be some real ugly days, they'll
Speaker 6: get it done, and you'll be relatively okay. Inflation has
Speaker 6: been coming down. The interesting thing to me is a
Speaker 6: little lesson. I would have expected you have a couple
Speaker 6: of more good mone of relative comps, and so I
Speaker 6: think that as a concept concept gives you because the
Speaker 6: market likes lower inflation because it thinks it takes the
Speaker 6: fed out of the picture. I think the problem is
Speaker 6: going to be that when we begin to move into
Speaker 6: the fall, the year on year comps with inflation get
Speaker 6: very ugly. And so because if you go back I
Speaker 6: think last year, like five or six months, they were
Speaker 6: averaging point one a month. We're averaging point three a
Speaker 6: point four months. So any additional improvement is likely to
Speaker 6: go away, and then you're going to have issues which
Speaker 6: I suspect we have not seen the full full impact
Speaker 6: on the economic side, So you're going to probably continue
Speaker 6: to see economic slowing. You're going to probably see some
Speaker 6: upward pressure on unemployment. By the way, anyone thinks you're
Speaker 6: going to have a significant rise and unemployed by the
Speaker 6: end of the year, the only way that's going to
Speaker 6: happen is if we start losing. You know, one hundred
Speaker 6: thousand jobs a month will not change the unemployment rate.
Speaker 6: You've got to go way below that to really get
Speaker 6: a significant rise. So I think you're going to find
Speaker 6: less progress us on that side, economic slowing, upward pressure
Speaker 6: on prices, and the FED is going to have its
Speaker 6: hands tied unless something extreme happens. So that's sort of
Speaker 6: my basic mindset for how I'm going to be approaching
Speaker 6: the markets for the next six to eight months unless
Speaker 6: something changes.
Speaker 11: So with the year on year comms for inflation like
Speaker 11: you mentioned, and the tight labor market and strong consumer spending,
Speaker 11: how do we possibly predict that the Fed is going
Speaker 11: to have this massive string of rate cuts.
Speaker 6: I think they're out of their mind. I don't think that.
Speaker 6: I don't think. First of all, let's be clear about
Speaker 6: one thing. The Fed's mandate, and we've talked about this
Speaker 6: is zero. They've self defined it to be two percent,
Speaker 6: which is fine. They're not going to do anything unless
Speaker 6: they want to try and change it, and if they
Speaker 6: change it, watch out for the bond market until you
Speaker 6: get near two percent, but you have if you have
Speaker 6: three and three quarter percent unemployment, which is historically low.
Speaker 6: Even with modest growth. Remember the growth they report real
Speaker 6: growth is nominal less inflation. Nominal growth right now is
Speaker 6: still quite healthy, and that's one of the reasons I
Speaker 6: think we've seen less slowing than people think. It's not
Speaker 6: like we're growing at two percent nominal with one percent
Speaker 6: inflation to get to one percent. You're growing at like
Speaker 6: five and a half six percent with four percent or
Speaker 6: four and a half percent inflation to get to that level.
Speaker 6: So I just think the bottom line in the back
Speaker 6: we may not have to see any more hike. Personally,
Speaker 6: I would have stopped hiking a little while ago. But
Speaker 6: I think the FED should be selling assets off their
Speaker 6: balance sheet, which they're not doing, not just simply letting
Speaker 6: them run off. I think I call it quantitative dribble basically.
Speaker 6: But the bottom line is that until something extreme happens
Speaker 6: that will force their hand. As long as the economic
Speaker 6: data is reasonable enough and in prices are still high,
Speaker 6: you're not going to see them cut rates at least
Speaker 6: that's my perspective.
Speaker 1: Interesting, all right, Neil, thanks so much for joining us.
Speaker 1: Neil Grossman, co founder and former CIO of tk NNG Capital.
Speaker 8: You're listening to the tape cats are live program Bloomberg
Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 1: I want to get right to our next guest in
Speaker 1: our c suite conversation today, Anna Bryson. She's a chief
Speaker 1: financial officer for the company's Doximity New York Stock Exchange
Speaker 1: symbol DOSDCS. It is in New York Stock Exchange listed
Speaker 1: stock and thanks so much for joining us here. Let's
Speaker 1: start off just real quick. Give me the twenty or
Speaker 1: thirty second pitch on what you guys do at Doximity.
Speaker 1: Then we'll get into your earnings and kind of the outlook.
Speaker 13: Sure, well, thanks so much for having me. You know,
Speaker 13: at dot Simity, we are building the leading digital platform
Speaker 13: for US medical professionals, so we serve over two million
Speaker 13: members including over eighty percent of USA positions across all
Speaker 13: specialties and practice areas. So what we're building here is
Speaker 13: really the physician Cloud. We provide our members with digital
Speaker 13: tools that are built for medicine, which is enabling them
Speaker 13: to collaborate with colleagues. They can stay up to date
Speaker 13: with the latest medical news and research, manage their careers,
Speaker 13: and conduct virtual patient visits. So we are really focused
Speaker 13: on making physicians more productive to provide better care for
Speaker 13: their patients.
Speaker 11: All right, So just to get it out of the way,
Speaker 11: a tough morning, dropping as much as eleven percent in
Speaker 11: pre market trading. Analysts are looking for a lot of
Speaker 11: growth in the second half of the year after some
Speaker 11: product delays. What's the plan to turn those delays into progress?
Speaker 13: Sure, So we're really proud of the new products that
Speaker 13: we've launched for our customers. We think they will be
Speaker 13: critical to our success over time and contribute to our
Speaker 13: top line growth. We are in a regulated industry, so
Speaker 13: we are facing a few delays and getting the new
Speaker 13: products live. But if you look at our quarterly revenue curve,
Speaker 13: the cadence of our quarterly revenue curve that we're guiding
Speaker 13: to for this year actually looks very similar to last year,
Speaker 13: so it really isn't that different versus what we've seen
Speaker 13: in the past. And we're really proud of the fact
Speaker 13: that we're guiding to another year as a rule of
Speaker 13: sixty plus company with twenty percent top line growth and
Speaker 13: forty four percent adjustedy bits don margins, which is something
Speaker 13: top macro environment. I think we're really proud of being
Speaker 13: able to maintain our long term target of a rule
Speaker 13: of sixty plus company.
Speaker 1: I'm a big fan of subscription revenue businesses, and I
Speaker 1: see that's a big, big part of your business. Talk
Speaker 1: about kind of what drives your revenue, what are the
Speaker 1: key metrics that I need to get right and looking
Speaker 1: at your revenue sure, I.
Speaker 13: Think one of the key pieces there is our net
Speaker 13: revenue retention rate. We've been able to post very high
Speaker 13: net revenue retention over the last several years. So this
Speaker 13: last quarter we reported one hundred and seventeen percent net
Speaker 13: revenue retention rate, and that was even hire amongst our
Speaker 13: top twenty customers. So our top twenty customers had a
Speaker 13: net revenue retention rate of one hundred and twenty four percent,
Speaker 13: which implies that we're actually able to scale the quickest
Speaker 13: with our largest customers, which we think is a really
Speaker 13: good indication of what's to COG over the next five
Speaker 13: to ten years as we continue to get more and
Speaker 13: more large customers.
Speaker 11: What are some of the biggest headwinds that you're concerned
Speaker 11: about in that same time period, the next five to
Speaker 11: ten years, and how do you plan to kind of
Speaker 11: hedge against them.
Speaker 13: Sure, I think from our perspective, while we may remain
Speaker 13: focused on building out tools for our physicians, that is
Speaker 13: our key focus area, we're less concerned about headwinds. I
Speaker 13: think you know we've achieved a record number of qaus
Speaker 13: across our entire platform this last quarter. I think if
Speaker 13: you had asked me this question maybe a year ago,
Speaker 13: as we were coming out of the pandemic, the concern
Speaker 13: would have been can we maintain the engagement levels on
Speaker 13: our platform that we saw during the pandemic. And today
Speaker 13: we're not only seeing that we're able to maintain the
Speaker 13: engagement levels, we're actually seeing higher engagement than we saw
Speaker 13: during the pandemic, which is something that we're incredibly proud
Speaker 13: of and I think just speaks volumes to our ability
Speaker 13: to continue to make our platform very sticky and we're
Speaker 13: continuing to build new tools, Like we're really excited about
Speaker 13: the docs GPT tools we're building for our physicians to
Speaker 13: help them. You know, we like to call it cut
Speaker 13: the scut, so get rid of a lot of that
Speaker 13: day to day work that really takes them away from patients.
Speaker 13: So yeah, I would say our engagement is a really
Speaker 13: strong indicator of what's to come.
Speaker 1: And telehealth that is something that not a lot of
Speaker 1: people were adept at before the pandemic. But boy, that
Speaker 1: that change. I mean, I'm not even going to a
Speaker 1: doctor's office like unless a limb is hanging off, you know.
Speaker 1: I mean, so and you talk to us about telehealth,
Speaker 1: how you guys incorporate that into your system.
Speaker 13: Yeah, So we have a telehealth tool that is both
Speaker 13: voice and video. We've built it by physicians for physicians,
Speaker 13: meaning it has a lot of unique features that really
Speaker 13: help the physician communicate with the patient in a more
Speaker 13: clinical way. And our telehealth tools alone were used by
Speaker 13: our record three hundred and eighty thousand unique providers last quarter.
Speaker 13: So to put that in perspectives, there's just over a
Speaker 13: million doctors in the United States, So we have very
Speaker 13: high engagement on our telehealth platform, and we continue to
Speaker 13: build out more than just telehealth, other workflow tools that
Speaker 13: our doctors are using daily to be more efficient in
Speaker 13: the office.
Speaker 11: You guys have two of the big buzzwords that everyone
Speaker 11: loves in your description here, cloud and AI. Talk to
Speaker 11: me about how you're gonna become the go to when
Speaker 11: it comes to the healthcare provider that really is nailing
Speaker 11: the AI space.
Speaker 13: Yeah, you know, we're learning a lot about how generative
Speaker 13: AI can serve doctors. So the one thing we've arted
Speaker 13: out with here is docs GPT. I think you can
Speaker 13: think of it as a chat GPT integration with a
Speaker 13: healthcare twist. So we've developed a library of healthcare specific
Speaker 13: prompts and we've trained the AI on common healthcare specific documents,
Speaker 13: so physicians can use it to appeal an insurance denial
Speaker 13: for a patient with a chronic condition, for example. And
Speaker 13: that's an area that we're continuing to focus in on
Speaker 13: and or we're you know, we're really encouraged by the
Speaker 13: early adoption and I think at the end of the day,
Speaker 13: you know, as we think about a generative AI is
Speaker 13: very promising, but you know, it's not without errors, and
Speaker 13: it should be approached judiciously. So we're enabling the position
Speaker 13: to test and use this technology and provide the appropriate
Speaker 13: feedback for us to help ensure the best best applications
Speaker 13: in healthcare context.
Speaker 1: And in your subscription model, who pays the subscription? Is
Speaker 1: it the doctor individually is at the hospital? How does
Speaker 1: that work?
Speaker 10: Yeah?
Speaker 13: Sure, good question. We are free for physicians, that is
Speaker 13: very important for us. We are all free for physicians,
Speaker 13: but we are monetized by health systems and pharmaceutical manufacturers.
Speaker 13: So those are two key customers where pharmaceutical manufacturers can
Speaker 13: get information to physicians about clinical trials for example, and
Speaker 13: health systems can get information to physicians about, you know,
Speaker 13: a new innovative treatment that they might have.
Speaker 1: So thirty seconds, how's your recession model?
Speaker 7: Look?
Speaker 1: How susceptible do you guys think? Are you to a
Speaker 1: slow economy?
Speaker 2: Yeah?
Speaker 13: So, pharma is a very recession resilient industry. And so
Speaker 13: while you know, if we look at the pharma ETF,
Speaker 13: I think it's only down about five percent this year.
Speaker 13: It's an industry that's proven to be very recession resilient.
Speaker 13: Healthcare in general is recession resilient because the need for
Speaker 13: life saving treatments doesn't change just because we're in a
Speaker 13: tough economic time, so we think we have a strong
Speaker 13: ability to weather a recession. I mean you and see
Speaker 13: that as we're continuing to post north of twenty percent
Speaker 13: revenue groups and north of forty percent margins.
Speaker 1: All right, and great stuff. Thank you very much for
Speaker 1: taking the time and chatting with us. Anna Bryson, CFO
Speaker 1: of Proximity DCS is the ticker.
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews on Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
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