ADOBE Q3 EARNINGS, NVIDIA STOCK SURGE, KROGER, Stock Market Coverage & Analysis

just open we have Adobe earnings we have Kroger earnings in a few minutes we have retail and wholesale data and interest rates are going to get cut pretty soon so the economy should be turning around right yeah we have SOI stock here we have as space mobile and $27 I remember when as space mobile was at what like $2 now it's at $27 that's crazy yeah let's see Nvidia it looks pretty stagnant pre-market hours all the test all the stocks look like they're not doing anything crazy but yeah they're pretty stale right now the stocks are pretty stale yeah good morning good morning how's everyone how's everyone we we have Adobe earnings so I thought what better way to start um the Adobe earnings call with this where is it people hate Adobe now Adobe is like uh people people hate Adobe now Adobe is like uh it's like on the unity level right or like everybody just hates it but there's no real alternative for a lot of adobe uh software that's like really been developed for a long period of time so so people are kind of stuck with Adobe Adobe is the world's leader in Creative software their software Powers everything from Hollywood Blockbusters to your favorite YouTube videos but beneath the surface there's a darker Story the company's practices are so controversial that even the US government has through Adobe this is why Adobe is one of the most evil companies on the planet this video is brought to you by my startup Silo's 7.39% yielding Bond accounts Adobe subscription help what does Adobe do in short Adobe makes creative software Photoshop illustrator After Effects and about a dozen more iconic staple programs all come from Adobe despite their current drama things used to be very different many years back you could actually buy Photoshop along with all of their other products you could this is a really good example of what I was talking about about how I don't think this should be a when you buy something I think that you're entitled to certain rights for what you are purchasing that transcend terms of service and I don't like how a lot of programs and products have been transitioned into becoming uh licenses and services rather than products and I think that if you're selling something the person needs to actually get something out of that you can't just take it away from them at some arbitrary period of time because you've decided this is a rule because at the end of the day the reason why the company does this is because the government lets them do that like somebody could just steal all the stuff from Adobe and give it out for free if there were no rules right so there are rules to protect companies like this but are the rules to protect people from companies that take advantage of the rules and I think that we've gone so far in the direction of these subscriptions being predatory and just completely all-encompassing that I really think that we need some consumer protections for this I think it's been the case for probably I mean this should have happened 15 years ago but you know obviously like a lot of the government's not really as techsavvy so they don't understand it I think that if you buy Photoshop you should be able to use Photoshop for whatever you want to the idea that you need a professional license is outrageous unless you're getting extra tools and the idea that they can take it away from you or make it stop functioning after a period of time is insane you gave them the money and I understand that there's a terms of service but who's to say that that's acceptable or or ethical or fair to the consumer pick up a physical disc in Store install it and were good to go they were expensive at around $700 but once you bought it you owned that copy of Photoshop also you could upgrade to the newest version for only $200 people loved adobe's products they were the best the company had an amazing reputation but all of this was about to change at some point Adobes Executives realize something they could make much more money if they overhaul their business model have you noticed how almost every digital product or service is now a subscription this is called soft as a service this is so [ __ ] annoying like it really is and the the thing about it that's so frustrating to me is that a lot of the software is service doesn't have to be like that like I there's no reason how many of you have used cracked versions of Adobe Photoshop I have works just [ __ ] fine and you pay regularly to use a software instead of buying it outright and Adobe was one of the first to adopt it someone might spend more at once on buying their creative Streed for $2,000 that's insane this method has a massive downside getting a customer to make such a massive purchase is extremely difficult all right guys the market just opened let's see oh Nvidia stock is crashing Tesla stock crashing ooh wow vertical crash planker losing how much that's a that's half instantly wow green wow 100% the subscription for the same product at a fraction of that price is much easier to digest people rarely factor in the distant future and end up paying more than they would have if they just bought the expensive package to start well we saw this with the Chase bank glitch right I mean this is the same exact thing is that people can't I keep people can't so it's like it's $70 a month and is that better than $500 well it's only 70 a months so yeah and you get it for a whole year so it's like wait a minute and then you get people to spend $700 instead of 500 no they're they're I'm telling you guys people's math abilities however bad you think they are they're worse and they are getting worse every single day Adobe soon completely stopped selling products that you could own you could no longer buy Photoshop instead they began licensing products you could lease their revenue began to sore as they added hundreds of millions every quarter wow but they also gained something else with the subscription you're paying Adobe to use their software they own the license which means they have all the power that's right they can change anything they want whenever they feel like it this is the problem and this is why you need consumer protection laws I'm so glad this guy is making this video and I'm so glad that this is finally going to get addressed because it is so long overdue and I think this issue is something that is overreaching for like tons of services they can revoke it for any reason exactly yeah it's outrageous this is where all the problems started Adobe soon began sending strange letters to customers using previous versions of their software is dating we have recently discontinued certain older versions of Creative Cloud applications and as a result under the terms of our agreement you are no longer licensed to use them yeah I'm sorry but I don't think this should be legal I don't I don't think it should be legal that's it right and and like I'm not like I'm not like mad at Adobe the same as like I'm not mad at like a raccoon for breaking into the to like my you know my attic because it's like well that's just what raccoons do I mean they're animals this is just what they're this is what they do like this is a company it's designed to make money I'm not mad at Adobe I'm mad at the that at the government for letting this happen to be honest with you this is incredible that this is this is this has been allowed Please be aware that should you continue to use the discontinued versions you may be at risk of potential claims of infringement by Third parties these were Creative Cloud subscribers who hadn't updated their software in a while Adobe never explained the four reasoning Behind These threats but naturally this upset a lot of people yet this isn't why Adobe is being sued by the US government thank [ __ ] god finally the reason behind that is much worse Adobe offers Creative Cloud through an annual or monthly subscription and they even offer a 7-Day trial but things aren't as they seem if you sign up for this trial it says paid monthly except it's not a monthly subscription it's a yearly subscription that's built monthly Adobe does offer a monthly subscription at $90 a month subtly encouraging users to take the cheaper monthly option but this is a trap if you sign up up and continue past 14 days they locked in and Adobe will do everything in their power to keep you there how with their dreaded cancellation fee hidden in their fine print if you want to cancel your subscription that's ridiculous that's so bad but yeah let's look at Nvidia stock Nvidia stock [Music] it's Nidia stock is at $116.25 Microsoft down 2% in the 2% in the in the red AMD 6 in the red Amazon 6 in the red okay Apple 0.1 in the red wow so a lot of people say under Amazon is undervalued under that Amazon is like it looks like the only one in the Magnificent 7 that the stock is surging guys Amazon seems to be the only company in the mag 7 that seems to be surging wow we have so we have Kroger earnings in a few minutes we have Adobe earnings today so Adobe earnings it's kind of a software that you know it's kind of messed up right now the software is a little messed up like it's overpriced it had a controversy rate but I'll play the video you will need to pay 50% of your remaining subscription up front which is often times hundreds of dollars and it's crazy how people let this happen Adobe learning their ABCs they did it it's just it's it's just a scam right that's it it's just just a scam why the heck is this allowed because the government makes it possible like Adobe can't steal the money out of your bank account if you owe this money to Adobe the government can make can make you give Adobe the money that's the problem it's not like Adobe is going to send people to your house it's the government that's going to do it for them why is there no competitor it doesn't matter whether there's a competitor or not uh an unethical business practice shouldn't exist exist regardless of whether they exist inside of Monopoly or not because it's something that's bad for consumers and it hurts them so like government can make can make you give Adobe the money that's the problem it's not like Adobe is going to send people to your house it's the government that's going to do it for them why is there no competitor it doesn't matter whether there's a competitor or not uh an unethical business practice shouldn't exist regardless of whether they exist inside of Monopoly or not because it's something that's bad for consumers and it hurts them so like yeah no you're right that there should be more competitors and there are things like [ __ ] and things like that but in a in a general sense no I I don't think that definitely it it doesn't just like the idea that the free market solves all problems is not really true because all free markets are immediately controlled and made not free Adobe isn't very transparent about this users who unsubscribe are surprised to see Adobe charge them hundreds of dollars seemingly out of nowhere people have been experiencing adobe's Greed for years Adobe ripped me off for $60 after I signed up for a free trial proceeded to cancel the trial and then got charged for the product anyway Adobe tried to charge me $162 to cancel my Creative Cloud subscription one user was charged over $300 to cancel their plan and another even had Adobe attempt to build them after they PID the cancellation fee but it gets even worse many subscriptions allow you to turn off auto renew so your plan will automatically no [Music] no the end Adobe doesn't you can't okay you can check in anytime but you can never leave currently you cannot stop your plan from ruing automatically oh my [ __ ] God this is amazing they went all in this is what can't just disable auto renewing it this is insan only way cancel is to cancel the entire plan which causes the massive cancellation fee and none of this is new either Adobe has been doing this for many years except now it's finally catching up with them the US Federal Trade Commission has taken action at against so it's been happening since 2005 and finally the FTC is like hey uh you hear about this thing with a Photoshop it would be but this isn't just any lawsuit usually a limited liability company protects the individuals but the US government is bypassing that given that this is a special case of greed and Malice absolutely we are deliberately going after individual executives to it in particular the president that is thank [ __ ] God that's awesome [ __ ] yes yeah like and and this is what remember what I said before is that you know if you want it if you want bad practices to stop you hold people directly accountable who are doing them you don't hold the company accountable you look at names and faces and you punish those individ ual people and you put them up in front of everybody else and you say if you [ __ ] around you're going to find out just like he did that's what it is and vice president of adobe's digital media business they argued that adobe fails to adequately disclose to Consumers that by signing up for the annual paid monthly subscription plan they're agreeing to a year-long commitment and a hefty early termination fee that can amount to hundreds of dollars Adobe clearly discloses the termination fee only whenn subscribers attempt to cancel turning the termination fee into a powerful retention tool that generates significant revenues by trapping consumers into subscriptions they no longer want man that's just about it isn't it I got to say [ __ ] Adobe yeah it's unbelievable that this is even happening yeah it it it's nuts I mean that's almost indefensible on their side the way they do it intentionally since they know how it works of course they do well it it's done maliciously with a with an intention to take advantage of the person it's an unfair business practice well it it's bad for consumers and I think that if you have something like this that's basically a scam like effectively this is the way that I look at the government is the government should be there to make things fair and to keep people from you know exploiting each other basically right that's one of the things the government is there for so if you have a situation where a company is using a tool that's made by the government to exploit people this is an abuse of game mechanics you you should not have this happen like it it's not good for anybody not to colle taxes no yeah but what do you do with the tax money right this happened to me too on I'm outside the US well because here's the thing right is if you didn't have the government if there was no government you know what would happen people would go to the Adobe headquarters and burn the building down that's what would happen so so the reason why that doesn't happen is because of the government so the only reason why the company can exist is because they they are being protected and they are allowed to exist that's it Anarchy lunch marks that's right and any place that has no laws and no government to protect this stuff that's exactly what happens Adobe it naturally disagrees with the decision they stated that cancellation fees make up less than 1% of the revenue though that raises even more questions namely why are they so insistent on using something which has given them so much backlash which amounts to less than 1% of their revenue if it's truly less than 1% and it's given them so many issues why not just remove it simple the process to unsubscribe is horrible with all kinds of obstacles and the massive cancellation fee people often stay subscribed even if they don't want to long term this gives Adobe more money and allows them to boast about their low cancellation rates to shareholders that's why okay I really like this argument that he's using so he's saying basically that the reason why it only accounts for 1% is because it's obstructive in a way that makes people not do it so the actual amount of people that are taking advantage of is higher because of the nature of the way that it's obstructive that's a very good point why it only accounts for 1% is because it's obstructive in a way that makes people not do it so the actual amount of people that are taking advantage of is higher because of the nature of the way that it's obstructive their low cancellation rates to shers that's so okay I really like it is horrible with all kinds of obstacles and the massive cancellation fee people often stay subscribed even if they don't want to long term this gives Adobe more money and allows them to boast about their low cancellation rates to shareholders that's why yeah so okay I really like this argument that he's using so he's saying basically that the reason why it only accounts for 1% is because it's obstructive in a way that makes people not do it so the actual amount of people that are taking advantage of is higher because of the nature of the way that it's obstructive that's a very good point yeah so okay I really like this argument issues why not just remove it simple the process to unsubscribe is horrible with all kinds of obstacles and the massive cancellation fee people often stay subscribed even if they don't want to long term this gives Adobe more money and allows them to boast about their low cancellation rates to shareholders that's why so okay I really like this argument that he's using so he's saying basically that the reason why it only accounts for 1% is because it's obstructive in a way that makes people not do it so the actual amount of people that are taken advantage of is higher because of the nature of the way that it's obstructive that's a very good point FDC is doing Adobe customers couldn't be happier as it seems like justice is finally being served yeah I think this is a problem in general it's not something that's an issue with like Photoshop specifically it's just that adobe is like one of the biggest examples of it and I think the problem is that these companies do this and you don't even own the things that you buy anymore and I think right now we're in like a really weird transitionary period we're in like effectively middle school for what digital owners ship is supposed to be right now because nobody can understand I think or conceptualize what digital ownership is supposed to be and you have like some like ideas like nfts and different types of like blockchain technology and I think that the truth is that a lot of people the I would say vast majority of people think digital ownership is the same type of digital ownership that we had in the 90s and the ' 80s right where it's like you buy the product you get that product you can use that product with no restrictions that's your product that's it I think that's what people want ownership to be and I see no reason why we should compromise with greedy companies about letting that be exactly what it is and I think that there are examples of of things that have online components but there should be an offline version of it that you can purchase as well steam is probably the best example of digital ownership I'm not sure if that's true or not I have to really think about it what about updates well I don't know I think it really depends right uh I I think that you know some companies can provide updates for free other ones don't it really depends GG yeah I hear a lot more good things about Gog you don't own Steam games yeah basically what I think is that I think that if you purchase a video game they should not be able to revoke your access to that video game they they can revoke your access to using the servers to play online in that video game absolutely that's totally fair but they should not be able to take the game away from you because you paid money for it and I think that whenever a person pays money for something they have certain rights and privileges that they're entitled to and I think that's one of them the idea that DET terms of service means that you sign all of your customer protections away is outrageous even with this lawsuit there's actually an entirely different Scandal surrounding Adobe at the exact same time believe it or not they're in hot water for something much worse in the past several years big Tech first into the AI and Adobe is no different AI images into their own stock portfolio but most importantly training their own generative AI Firefly one very similar to Mid Journey or Dolly but also integrates into Photoshop and other programs the only issue is that guys need data for machine learning lots of yeah I think that you have to consent to having your data be used for their machine learning algorithm uh but by using program Adobe wiled in Hidden terms into the Creative Cloud with horrible implications Adobe had very subtly changed their terms that granted them full access to users local content and most bafflingly of all they included that they had a non-exclusive worldwide royalty-free sub licensable license to use reproduce publicly display and much more Adobe that is crazy Perpetual this is nuts this basically says we own everything oh my God and a much more Adobe basically decided that taking your money wasn't good enough they wanted to own your assets your Creations everything Adobe could view your local files and do what they wished but users caught on very quickly our access to your content we may access view or listen to your content through both automated and manual methods and then down here it says our automated systems May analyze your content and Creative Cloud customer fonts uh which are defined over there using techniques such as machine learning in order to improve our services and software and the user experience Not only was this unethical training for their AI but it also came with all kinds of implications this is especially concerning for users and companies who use NDA yeah if you're using NDA or you're using somebody else's work as well like if you have a license for something that you're working on you couldn't use it on Photoshop as far as I know and this is again I was going to go to law school but I didn't so I could be wrong on this but if you have a license to use an IP and then you're using that IP you legally are not allowed to just kind of like sublet out this license to somebody else like you can't do that so like it it's insane how how overreaching this is Adobe basically shot themselves in the leg by adding this piracy better hey I I get it right didn't they change the C to only be stuff on their Cloud I don't know protect their work like those working on Films or commercial space Adobe worked for civil engineering firms they won't use Adobe anymore because of this really that's interesting so you pay them to be an employee that they make money from yeah it's called buying Early Access for a video game oh wait no that's another conversation [ __ ] sorry never mind yeah but with this with Photoshop too to override everything and the backlash was huge a worldwide boycott of adobe began with many major news outlets weighing in on the story the problem is that the Adobe boycott will never stick and I think all consumer boycotts are effectively worthless I do I mean like I I know that sometimes they're effective but like I don't like relying on them because they're they're just they're I I I just here's my best way that I can say it right and I've said this before is that in 1965 America got rid of slavery companies still use slavery today the truth is that companies are not accountable to the public in the same way that the government can make them account and whenever consumers get together and they complain it doesn't really matter enough did I say 1965 I meant I meant I mean I meant 1765 sorry artists began uploading Nightshade art to Creative Cloud a way of intentionally misleading and poisoning machine learning Adobe insisted that Fire Fly was ethically trained but the evidence was clear and following the enormous backlash Adobe change their terms they outline they right I mean CU again and this is another problem is that adobe right now the reason why Adobe is able to do this is that they exist inside of a market that they have a defacto monopoly on as far as I know there are not a lot of other tools like I don't know like what a pie chart for this would look like but um I assume that a pie chart would look like Adobe is pretty much the entire pizza right like where they have a defacto monopoly on on all of the like you know Photoshop like tools like some people use [ __ ] some people use other things but like for the most part yeah it's basically all Adobe so they have a deao uh what do you call it uh they have a deao monopoly and I think that the reason why a really good comparison for this I think that is if you look back at what happened with unity last year with uh John ratell which was the CEO who stepped down after this whole the bacle happened the reason reason why Unity was held accountable and had to walk everything back as much as they did is because there were other players inside of the market that could take advantage of their weakness and that's the one good thing about a free market and I'll give another parallel to this from about 10 years ago which is when um XBox the Xbox one said that you had to always be connected to the internet and you had to have a webcam on your game or sorry on your console and you also couldn't own your game and resell them and then Sony with the PlayStation 4 said we're not going to do any of this and because of how consumer unfriendly Xbox was uh and and then like how how how much well like how much better Sony looked because of that Xbox had to pull all of that back and and I think that now it's the the reverse right where I think Microsoft is actually more uh more consumer friendly but that's like a whole different conversation the point is that inside of free markets that have genuine competition you can expect to have consumer boycotts work better but the problem there are two issues number one is that some people still do get taken advantage of and if people are being taken advantage of by a company that's being enabled by a law then that's an unjust law it shouldn't exist and the second problem is that that only works when the other companies don't work together and all have the same unfair disadvantages like I'll give you an example with a lot of subscription Services now so have you guys ever gotten like Netflix crunchy roll Hulu uh you know peacock any of that you guys all subscribe to one of these probably one or you know somebody who has so do you remember back whenever the the the product would originally come out and you would just purchase the product and then uh that was it and you could just watch movies well now they've added a separate tier that now has ads in it and it seems to be very interesting to me that all of these companies are doing this now right it's not just one company it's all of them so George Carin once said there doesn't need to be a form conspiracy when interests converge so I don't think that they're necessarily conspiring to do this I think that one of them sees the other one do it and they effectively test the waters and then guess what happens everybody else does the same thing and I think that's how microtransactions in video games have happened as well so I still think it needs to be regulated but the reason why Adobe is more problematic and it's more evident that it's bad is because of the deao Monopoly that they have on a lot of the graphic design space and it's a lot different than things like Unity for example or the Xbox One for example and and things like that right fuing H start yeah yeah so it's a bit of a tangent but like I I actually have very strong feelings about this new terms we don't scan or review content that is to locally on your device we also don't train generative AI models on your or your customer's content unless you've submitted the content to the Adobe stock Marketplace a good change but they've only done so because they were caught doing just that but but they're not out of the clear just yet you might have caught the last part of that statement about the Adobe stock Marketplace this was once a prestigious wild I'm not I I'm you know I've taken a few CL I've taken I think two classes and graphic design I'm not really familiar with how this works to be honest flooded with AI with its own consequences Brian kessinger a lead artist at Disney sham on Adobe for selling AI imagery on their Adobe stock page scrapped my art without my permission using my name on it that did not create AI copies of his work in the marketplace with this name fly attached to it while this has increased the bread of a Doby stock or catalog of stock photos it's hard to say that this is a good thing Deviant Art also started doing this too where they have people that are pushing a lot of like uh AI art on Deviant Art and it it's become like a huge issue yeah I know it's it's massive they yeah they even sell artwork many of which have incorrect spelling or weird unnatural details it wasn't bad enough that what's supposed to be a database full of real professional photographs has been completely diluted with unusable garbage if I did want to license any of these photos it would cost $80 $80 for a photo someone generated by typing and this is the problem licing I think and like we're beginning to like come I think AI is to be a very good like manifestation of the problem with licensing is that like there's so many it's like an onion right where you have like all these different layers of Licensing there's like the licensing of the ownership of it there's the licensing of the IP there's the licensing of the use and everything and it becomes so complex and convoluted that it's effectively impenetrable for an average person Adobe is hurting their own reputation as well as their own catalog but it doesn't it doesn't matter it doesn't matter because there's still a monopoly and until somebody brings out a Photoshop equivalent that's as good as it that's as good as Photoshop or at least close to it people will have to keep using it because it's the best tool and also they have a massive first mover Advantage because Photoshop has been the de facto thing like I mean my my dad used Photoshop 1.0 right like back in like the ' 80s or the '90s so like they've been around so long it's kind of like twitch where like twitch has been around so long they have such a strong first mover advantage that you don't have people building uh communities in other markets like for example mixer or uh with kick or something like that all of this has placed Adobe in a very bad light all of which is their own fault they're greedy malicious and their business model is predatory the people who hate them the most right now are their own customers all of this exposes a bigger problem that created that doesn't sound good seriously considering the creative industry has been ruled by a they got so exactly yeah they have such a this is like I mean at what point is a monopoly not subject to some degree of Regulation because you know that guys I don't know like I mean there's a lot of people not not in America right but like in the US here we do have monopolies here but like the monopolies are ulated by the government like I I think this is true for a number of like utility services in different places depending on where you're at that's full because they made great products but over time they slowly also became a monopoly in a healthy Market with a lot of competition if a company provides bad Services customers can simply switch to a competitive so the whole Market faces pressure to provide the best service or a unique experience but for many years now Adobe has ruled their industry I also by the way do not think a free market is a solution to this problem I don't think so because in a free market the the the best thing for the companies to do would be for everybody to do what Adobe does and then make more money collectively that's the issue yeah you need to have regulation last time I don't think so because in a free market the the the best thing for the companies to do would be for everybody to do what Adobe does and then make more money collectively that's the issue yeah you need to have regulation as time has gone on and they've made things worse for the consumer but things might be changing yeah it's like yeah free market solves many problems but it creates new problems that need to be solved yeah like I I I I am a believer in the free market but I am a believer in free market remaining free through regulation because I think that in any sort of like I I learned this in MMOs right in any sort of a genuine free market the first thing you do is is make it not free right you start price fixing you start you know like scamming and doing stuff like that like changing deals Etc right that's the first thing you do so you need to have some rules so it's fair to everybody years people have been advocating others to switch from a looking for alternatives to this evil monolith their products have become notably unstable their services become more predatory and now with the changes to their terms I'm not sure about the quality of Adobe Photoshop I really don't know about that yeah but who makes the rules well the government would make the rules right that's the same as as the month progresses they are more cautious with their spending in response we are supporting our customers by keeping prices low through promotions including loyalty discounts person personized offers and fuel rewards we are also expanding our multi-tiered portfolio of our Brand's products which provides customers exceptional alternatives to National Brands competing on quality while at a noticeable lower price point our long-term model demonstrates that by consistently keeping prices low we increase customer loyalty and grow share of wallet while the food at home industry remains competitive our model drives efficiencies that allow us to sustainably invest in value and maintain competitive price spreads with key competitors in addition to lowering prices we executed our goto Market strategy through our pillars of fresh Our Brands personalization and seamless we are proud of our Associates for bringing this strategy to life with another quarter of excellent store execution this led to another quarter of strong customer Trends including total and loyal household growth and an increase in customer visits mainstream households are largest customer segment LED our sales growth through more households and increased visits by delivering a more consistent customer experience we are moving customers up the Loyalty ladder and positioning ourselves for long-term sales growth grow I'd now like to cover how we are enhancing our go to market strategy starting by Leading with fresh our fresh for everyone promise reflects our commitment that customers can trust the quality and freshness of every item they purchase This Promise is only possible through our strong relationships with farmers and suppliers which enables Kroger to Source the freshest products field and Vine one of the new Our Brands lines offers regionally grown berries picked to Peak freshness we are very pleased with the initial customer response to this line Our Brands is an important differentiator for our business enabling us to offer Innovative products at a great value this combination of quality and value led to our Brand's sales growth outpacing National brand sales growth this quarter more than 90% of our c customer households purchased Our Brands products during that time across the portfolio of Our Brands we are expanding into new categories and launching new products with almost 600 already introduced this year each of these new products is Thoroughly tested and validated to earn its spot on our shelves competing aggressively with national brands with no compromise on quality SmartWay one of our opening price point Brands is delivering exceptional value to customers on a budget these are ultr low priced Essentials and Pantry Staples that we know our customers need the most we continued expanding the SmartWay lineup in the second quarter to meet our customer needs for more value we are also making progress on our Brand's refreshment roll out with more of our Brand's portfolio to be refreshed later this year we are excited to see our customers respond to these new designs as we innovate within the portfolio and expand to meet customer needs we are improving our mix and driving better profitability for example our manufacturing plants allow us to make many of our own products keeping costs lower as we pass those savings on to customers while preserving in our ability to grow margins next is an update on personalization our loyalty program and personalized promotions enabled us to deliver value beyond the Shelf price we collect data and insights which enable us to enhance our personalization capabilities delivering better product recommendations and more effective promotions as a result we are generating greater unit lift on promotions compared to the industry boost our paid membership program supports our personalization capabilities this quarter we held a boost bonus days event which provided boost customers even more savings during the two-e special event this event went well above and beyond the incredible value the memberships already offers with daily savings free delivery on orders of $35 or more and two times fuel points now turning to seamless digital sales grew 11% driven by an increase in both households and traffic one of the many ways we move customers up the Loyalty ladder is to convert digitally engaged households into e-commerce households this means we are moving customers from Simply using our app or website to making purchases through one of these digital channels this work resulted in our team's growing Ecom Commerce households 14% this quarter households who shop with us digitally and in our stores are important because they are our most loyal and increased retail media monetization opportunities Delivery Solutions LED our sales growth once again this quarter with pickup also showing very strong demand demand across our Kroger delivery Network which provides customers a premium shopping experience continues to grow customers tell us they love the convenience of on time and refrigerated delivery right to their homes profitability remains a key Focus as we drive volume growth through our customer fulfillment centers our teams are working hard to improve the shape of weekly and daily demand as well as refining trade areas to improve customer delivery density by executing our go to market strategy we are building loyalty and creating more growth opportunities first with alternative profit businesses which had a strong quarter led by growth in Kroger position marketing their results were in line with internal expectations and keep us on track to deliver more than 20% media growth this year next is health and wellness we continue to be optimistic about this area of our business we know that grocery customers who are also Pharmacy customers are more loyal to Kroger and spend more with us while the pharmacy industry is going through a period of transformation and disruption we have a unique opportunity to help our customers live healthier lives and grow share over the long term we remain confident and our teams are working hard to navigate industry challenges and position the company for future growth during the quarter sales outpaced internal expectations profitability was similar to last year but behind internal expectations due to product mix pressures specifically as a result of strong glp1 cells we expect gp1s to have a similar impact on our results for the remainder of the Year our vaccine efforts are ramping up now and should help offset some of the glp1 impact in the second half of the Year turning to Associates our full fresh and friendly commitment is our roadmap to achieving a best-in-class customer experience and we appreciate our Associates for delivering again this quarter we are facilitating this improved customer experience through our commitment to be an employer of choice we are achieving this by investing in associate wages and by continuing to create an outstanding supportive work environment it is great to see these efforts recognized with a perfect score on the 2024 disability inclusion equality index making Kroger a best place to work for disability inclusion for the fifth consecutive year with that I'll now turn it over to Todd to take you through our second quarter Financial results Todd thanks Rodney and good morning everyone C second quarter results reflect the resilience of our model as Investments made to diversify our business are enabling us to navigate an environment of economic uncertainty our results through the first half of the year are in line with our expectations and with our improving sales momentum we are able to reaffirm our full year guidance I'll now take you through our second quarter Financial results we achieved identical sales without fuel growth of 1.2% as Rodney mentioned earlier our identical sales were supported by several positive customer metric Trends including increases in total and loyal households and increased customer visits we are encouraged by favorable unit Trends as we continue to make progress toward achieving positive unit growth as we saw in the first quarter vendor support for promotions has been strong and we will continue to deliver on our long-term commitment of providing customers with exceptional value digital sales had a strong quarter led by 177% growth in Delivery Solutions pickup is an important part of our seamless ecosystem and demand continues to be strong with pickup sales growing 10% this reflects our digital team's Relentless focus on delivering a great customer experience resulting in increased fill rates a reduction in weight times and a 33% Improvement in perfect orders which are orders with both a 100% fill rate and that are completed within an appropriate wait time with the help of AI enabled advancements in Dynamic batching and routing we are able to offer two-hour lead times in pickup in all stores these improvements and customer experience are being accompanied by productivity enhancements resulting in an improvement in our cost to serve turning to margins I would like to spend a little more time today talking about our second quarter Trends in gross margin and ogna rates as you know our long-term model is designed to deliver consistent year-over-year gross margin rate and ogna rates in a way that we deliver slightly expanding operating margins over time though there can be puts and takes in these measures from quarter to quarter over the long term our business model gives us the flexibility to balance investments in lower prices and higher associate wages with growth in margins through our power Brands and alternative profit businesses as well as cost-saving initiatives and productivity all to ensure that we are consistently returning value to shareholders this expectation is true for fiscal 2024 as well for the full year we now expect fifo gross margin rate excluding fuel to be slightly positive balanced by the ogna rate without fuel which will be slightly negative this quarter fifo gross margin rate excluding fuel was 42 basis points favorable to last year and was slightly ahead of our expectations for the quarter conversely the ogna rate excluding Fuel and adjustment items was 65 basis points unfavorable to last year as well as unfavorable to our expectations primarily due to several non-recurring charges during the quarter looking in more detail at our quarterly results gross margin was 22.6% of sales the increase in fifo gross margin rate excluding fuel was primarily attributable to favorable product mix in our grocery business including Our Brands lower shrink and sourcing benefits partially offset by lower Pharmacy margins the result reflected Kroger's ability to improve margin while being competitive on price and helping customers manage their budgets the Improvement in shrink reflects the significant ongoing work from our operations team as they address this challenging issue while we are pleased with the result this quarter shrink related to theft remains high on a historical basis and we still have work to do to further mitigate the financial impact the increase in ogna rate excluding Fuel and adjustment items was driven by investments in associate wages increased incentive plan costs and non-recurring costs including hurricane expenses and an increase in cost due to the severity of general liability claims part partially offset by continued execution of cost savings initiatives during the second quarter we recorded a lifo charge of $21 million compared to a charge of $4 million for the same quarter last year adjusted fifo operating profit was $984 Million our adjusted EPS was 93 cents per diluted share a decline of 3% compared to last year fuel is an important part of our total value proposition it builds loyalty through our Kroger Plus program by offering customers another way to save and led to gallon sales outpacing the industry this quarter fuel profitability was stronger in the second quarter compared to last year on a cents per gallon basis in the second half we will Rec cycling stronger fuel results but expect margins to be relatively flat compared to last year I wanted to provide a brief update on inflation a topic I am asked about frequently inflation increased slightly in the second quarter from the first quarter but is trending around 1% which is consistent with our expectations since the start of the year I'd now like to provide a brief update on Associates and Labor Relations during the second quarter we ratified new labor agreements for our food for less warehouse stores in Southern California Columbus Valley stores Mid-Atlantic division stores Anderson Bakery Michigan West Michigan and new Market clerks Central peia clerks and Shelbyville Warehouse covering more than 13,000 Associates Kroger is working to reach an agreement with the UFCW for Meat and Grocery Associates at 29 Fred Meyer stores in Portland we respect our Associates right to collectively bargain Associates at these stores chose to strike for six days before returning to work last week negotiations continue this week and we remain open to constructive dialogue with the UFCW we are also communicating to local unions that coming to the table with proposals that do not balance investing in Associates with keeping groceries affordable for our customers and supporting a growing and profitable business model are untenable it undermines our goal of growing the company in a way that helps to ensure job security and create more jobs and advancement opportunities for more Associates turning to cash flow Ker continues to generate strong adjusted free cash flow through consistent operating results consistent generation of free cash flow is an important part of our model and is enabling us to deleverage in anticipation of our merger with Alberton at the end of the second quarter Ker's net total debt to adjust at the ebit ratio was 1.24 compared to our target range of 2.3 to 2.5 our strength and balance sheet provides us flexibility to pursue growth and enhanced shareholder value we continue to take a disciplined approach to deploying Capital prioritizing the highest growth opportunities that strengthen our business and deliver solid returns for shareholders we're committed to maintaining our investment grade at rating increasing our dividend over time subject to board approval and returning excess Capital to shareholders when we are able to do so the strength of our free cash flow gives us the ability to invest in the growth of our business we are allocating more Capital to our major and minor store projects this year our teams have done an excellent job completing projects ahead of schedule and year-to date we have completed almost double the amount of store projects as we had completed last year at this time which will position us to grow in the second half of 2024 and 2025 it also creates capacity later this year to work towards opening 2025 projects earlier in the year as well to reflect this we are raising our guidance for full year Capital expenditures from a range of 3.4 billion to 3.6 billion to a range of 3.6 billion to 3.8 billion based on the strength of our free cash flow the change to our capex guidance does not affect our adjusted free cash flow guidance in the second quarter we raised our quarterly dividend by 10% reflecting confidence in our ability to generate strong cash flow our quarterly dividend has grown at a 13.5% compounded annual growth rate since being reinstated in 2006 and this marked the 18th consecutive year of dividend increases I'd now like to provide some additional color on our outlook for the rest of the year we are encouraged by our performance through the first half of the year which led to results that were in line with expectation our solid sales results through the first two quarters of the Year give us confidence to raise the low end of our full year identical sales without fuel guidance we now expect identical sales without fuel to be in the range of 75% to 1.75% we are cautiously optimistic about our sales outlook for the second half of the year and expect customers to continue prioritizing food and Essentials we have developed merchandising plans that are designed to enhance customer engagement Drive spending and improve unit volumes the strength of our model enables us to navigate an environment where customer spending is constrained by current economic pressures and we expect the various components of our model including grocery health and wellness Fuel and alternative profit businesses to provide us with flexibility in how we create shareholder value as a result we are reaffirming the rest of our full year guidance I'll now turn the call back to Rodney thanks Todd before I open it up for Q&A I'd like to speak briefly about our pending merger with Albertson's first I would like to express my appreciation for our Associates and their incredible commitment it has been a long journey and our Associates have done an excellent job serving customers and running the day-to-day operations of our business while also preparing for the merger integration work continues to progress and our teams are laser focused on ensuring a seamless transition for our customers and Associates from day one it is exciting to see the complimentary strengths of both Kroger and Albertson's organiz ations and we look forward to combining these strengths to provide customers an even better experience as part of our merger preparation Kroger recently launched an exchange offering for Albertson's notes contingent upon the closing of the merger as well as a successful new offering for 10.5 billion of senior unsecured notes with the net proceeds expected to fund a portion of the cash consideration for the proposed merger a portion of the proceeds of this offering is subject to a special mandatory Redemption if the merger does not close as the preliminary injunction trial with the FTC nears its conclusion we are confident in the facts and the strengths of our position the retail industry continues to be more competitive and we know how our customers shop every day they are making decisions on where to eat and where to buy their groceries they shop at a wide range of competitors from Costco to Amazon to Dollar stores and they eat at restaurants they shop digitally and brick and mortar as I have said before we remain committed to closing the merger because it will provide meaningful and measurable benefits for customers Associates and communities across the country and we look forward to Bringing these commitments to life regardless of the out come of the trials Kroger is operating from a position of strength and we are optimistic about our future our business is more diverse than ever and our value creation model provides us with multiple ways to drive sustainable growth we are delivering strong free cash flow that allows us to invest in our business and drive attractive returns for our shareholders with that Todd and I look forward to taking your questions because we are are in litigation we will not be taking questions on the merger this morning thank you as a reminder if You' like to ask a question you may press star fl1 on your telephone keypad our first question for today comes from Ed Kelly of Wales Fargo the Line is now open please go ahead hi good morning everyone been you know increased concern around the competitive backdrop um morning there's been increased concern about the competitive backdrop um you know Rising promotions across the industry can you just talk about what you are seeing uh from a promotional competitive standpoint and then what are your plans as you think about you know the back half of the year um you know I mean you did raise the gross margin guidance a bit today so you know it certainly seems like you believe you can manage it but um you Just Thoughts around what's going on out there and your promotional plans if you look uh I would say the promotions are getting uh back to pretty much normal and obviously during co uh there was less promotions because Supply chains were under tremendous pressure uh the other thing that we would say on the promotions we are doing uh we view uh the ones that we're doing are more effective and uh the cpg partners are incre increasing uh their support uh from for some of those as well as they're trying to grow tonnage uh if you look at uh you know as as Todd outlined uh the uh overall we feel good about the balance of the year and balancing cost reductions and uh mixed changes that are helping gross and our continued investment in pricing which we've been doing for I think close to 20 years now thank you our next question comes from a Kelly ABIA from [ __ ] L open please go ahead hi good morning thanks for um taking our question just just wanted to to dive in a little bit more on gross margin it was um really quite strong and you called out some of the factors um there but can you help us just understand how digital is impacting grow margin is that included in your kind of mix category and just just a general update on digital profitability um as you look forward really into the back half in next couple of years here yeah glad to Kelly um yeah you're right as we went into the year we we talked about the expectations for our margins to be relatively flat and included in that expectation was a little bit of a a an increase in the second quarter year-over-year so uh but even on top of that uh some of the strength that we saw in Our Brands like we called out uh had a tremendous quarter in Our Brands actually uh the the the sales growth there outpace National Brands uh quite meaningfully that helped drive it above our expectations uh and also we had a great shrink quarter it's been been a while since we've looked you every year on shrink and seen positive results so that was really exciting to see because we called out um still a lot of work to do there on a go forward basis but so it was a a little bit better than our expectations which were which were to be up some and therefore for the balance of the year we do expect uh for the full year margins to now be slightly favorable on a year-over-year basis so from a digital profitability standpoint already if you want to add anything in that space yeah I'll just a couple of comments uh we continue to make uh progress uh if you look at uh over the next two or three years uh we see the opportunity to uh signif to make significant progress and uh we would hold ourselves accountable for doing that uh the thing that's uh pretty special about the overall ecosystem that we're building is when you look at a customer that engages with us uh seamless uh they actually still physically go into stores uh sometimes they do delivery sometimes they do pickup they also become more loyal in other aspects becoming boost members uh engaging in Pharmacy so as you look at it over the next two or three years uh we're very excited about the uh potential of that and the uh continued progress obviously uh you know it's uh the media business uh helps gross margin uh and the margins in that is significantly different than uh anything that we've ever sold in a supermarket store thanks Kelly thank you our next question comes from John Hein Buckle of googan Heim partners your line is now open please go ahead morning this is Andrew ner on for John um between the practive cost reductions the media growth and the moderating digital losses should we expect a greater amount of p&l benefits and there have been in recent years and uh if so how much of this incremental benefit flows through to the bottom line versus reinvestment into other areas of the business thank you yeah great question uh you know the things that you call out are are great examples of some of the uh margin enhancement programs that we've talked about in the past as well as some of the productivity improvements and cost improvements that uh that we've uh realized o over time that's an important part of our overall business model uh being able to use that value that we create through the things that you called out to invest it back in the business you know Rodney alluded to it we have a long history of taking that value and reinvesting it back in the business in a way that over time our operating profit rate grows slightly over time so as we grow the top line as we're able to balance uh uh the the Investments um with the benefits that we get from those uh that that that drives the bottom line every time yeah I think it's always a good uh reminder that our long-term TSR model is 8 to 11% a year that long-term uh TSR model assumes uh that we continue to move and grow alternative profit businesses continue to invest in wages continue to invest in lower prices for our customers uh as you know uh fortunately we generate a tremendous amount of free cash flow uh we would expect over time for more of that growth to come from the business as opposed to buying back stock and then uh once the merger uh happens obviously there's uh incremental accretion that will happen because of the merger for a for a period of time that once the merger happens we'll give more insights into thank you thank you our next question comes from Leia Jordan of golden Sachs your lines now open please go ahead good morning thank you for taking my question um see if you could comment on your market share Trends in the quarter and especially interested in any color on what you're seeing in fresh specifically as I know that that's been a big area of investment for you yeah if you look at our fresh uh Trends uh overall they would be uh stronger than the center store uh overall I would say that we're uh we feel okay about where we are but if you look going forward we continue to see Improvement and we would expect uh to see Improvement throughout the balance of the year so it's one of those areas where we're not uh satisfied uh we are uh gaining strong household growth and strong loyal hous household growth as well which Al also also uh in the past always leads to Future progress uh as well so I would say that um we feel okay where we are uh we're more excited about what we see where the trends are and where we see for the balance of the year and next year because we're also incrementally adding storing as well which helps on market share as well thanks Leah thank you our next question comes from Simon Gman of Morgan Stanley the lines now open please go ahead good morning everyone um two-parter first if you look at the second quarter and the second half the difference in comp uh that you're Pro that you're guiding to how is it changing between units and inflation I I heard the inflation piece but curious how the guidance reflects this it looks like a slightly better than consensus the second part is if this environment stays and I I know you're not you know you're trying to in improve share and grow comps but if we stay in this low very low single digit environment do you spend the same way uh in the business next year and you think you can keep the core ebit dollar roughly flat or margin flat in this in this backdrop thank you yeah uh good question Sim let me start with the with the the differences uh in comp um you know we did update our sales guidance for the year uh T taken up the the bottom end of that range as you saw from 25 basis points to 75 basis points but kept the top end of the range at uh at 1.75 basis points and I think that was our thought process around that was really to take the low end off the table you think about where we came into the year and there was quite a bit of disinflation last year that was still kind of uh hitting us early in the year and and wanted to make sure that we were navigating through that uncertainty our view at the time was that that q1 would be the low point of the year and we would we would consistently grow our sales as we went through the year on a backdrop of inflation that was 1 percenti um as we go throughout the year and U that's really certainly through the first half it's played out as we expected in the first half of the year here and our expectations for the back half uh are very similar to the way that we thought about it back then so so I would say both our expectations on the sales and the inflation environment uh backdrop against which um it hasn't really changed a whole lot and and we expect that that growth to flow from a unit standpoint you know we've talked about that a little bit Ron Rodney alluded to the fact we we continue to be encouraged by um the trends there we're still a little negative the unit side but we continue to be encouraged by the progress that we're making in that space and think that will be part of the contribution to to the sales Trend that we see for the back half of the year yeah yeah we are seeing uh progress on units we would expect to continue to see uh progress on units uh you didn't really ask but if the the thing that's um right now what we're seeing is and I mentioned it earlier in the first of the month uh our business is really strong holidays are strong and then when you get to the end of the month they're weaker because of the uh people being constrained on a budget uh so far uh in the third quarter we're tracking a little bit better than where we were in this uh second quarter so we you know fundamentally we believe all the programs we're doing and that uh is making improved connection your question relative to 2025 I would say it's still early for us to start sharing guidance on 2025 and I would just you know the the comments I made earlier about our long-term business model uh really would apply uh to 2025 obviously uh we would expect uh to be in a position of where we've just uh completed a merger and we would also need to update where we are relative to merger and the integration of the merger and those factors as well so uh thanks San for the question thank you our next question comes from mik montani of everle isi your line now open please go ahead great thank you for taking the question it seems that the guide is implying a stable or even slightly up ebit Margin in the back half of the year and I just wanted to understand a little bit if he could parse out the drivers behind that um in particular you know with relation to shrink if there's uh favorable Compares coming up that give you confidence um Andor if there's certain onetime costs you know that you could quantify for us on ogna that wouldn't come up again yeah uh we'll do Michael uh you're right um uh great call outs and as we we look at at the at the back half of the year you know we talked about uh given the trends that we saw in the second quarter our view for the year on uh gross margin would be that we'll be slightly favorable year-over-year and on ogna uh the the annual Trend will be be slightly unfavorable um year-over-year uh but we do expect those to to to to reasonably balance uh as they'll come out we talked a little bit about shrink earlier um and again we're really excited about the result that we saw in shrink but but I mention the caution that we have there there is a lot of work to do that issue is still out there um and our shrink costs are um High relative to history on on where we' been there our team continues to work in that space and continues to drive it you can't have a trend so you have a data point and so we're excited to see where we're at but um you know we're kind of cautiously optimistic about the opportunities and Shrink uh for the balance of the Year relative to some of the other costs before you move on one one addition shrink Michael that you might that everyone might find helpful is if you look at the our Fresh side of our business uh We've made a meaningful progress on improving shrink over several quarters now when you look at uh the center Store with uh organized retail crime and other things you couldn't see it uh but there's been tremendous changes by using technology AI processes and our teams have done a nice job of improving the uh the Fresh side on shrink uh that's not uh subject to as much theft but it's really process oriented so now Todd I'll let you go and talk about some of the great call appreciate that um talking a little bit on that on the on the cost side U you know there are you know we did see in the second order and part of uh why it was a little bit worse than our expectations some some non-recurring type of items the main one was um you know some cost related to Hurricane barrel uh that came through obviously that was that was bet driven uh relative to that the second and we've talked a little bit about this we've talked about incentive being a little bit higher than our expectations we do think for the second half of the Year that'll have less of an impact on our year over year ogna uh than than what we've seen in the past as well so I I think those are a couple of the examples uh of things that we don't expect to continue in the second half thanks Michael thank you our next question comes from Kenneth Goldman of JP Morgan the line's now open please go ahead hi uh thank you and good morning um I wanted to dig in a little bit deeper into inflation um just in light of the CPI and and uh PPI numbers that came out this morning you know usually the two rates have changed uh they're not perfectly correlated but they're somewhat correlated and right now you know PPI food is is increasing at a you know faster clip than CPI so I just wanted to get a sense for you know how you think about balancing the need to pass on inflation and I know that ppi is not a perfect proxy for that but it's somewhat of a proxy balance that with a desire to you know continue to appeal to budget conscious consumers um and then how do we reconcile all of that with the fact that you know your GM growth was so good when ppi is growing so much faster than CPI yeah you know as you mentioned I mean you're always trying to balance all the pieces uh part of the uh ppi is it's uh some certain parts of it are commodity driven commodity and we will if we think something's a permanent cost increase then we try to pass that along as fast as we can if it's a shortterm then we'll manage that based on what's going on in the market and it's it's as difficult now estimating where inflation's going to be as probably any period of time we are seeing it uh being reasonably stable if you look out in terms of uh price increases that uh cpgs have already shared with us because obviously uh we'll see that in advance of it happening um it would certainly still uh in the range of where we said we think overall inflation will be around 1% and we don't see anything that's causing us to see that be much different than that over time we do find the two kind of line up pretty close uh the other thing that we are seeing is inflation on food away from home is meaningfully higher than food at home and we are beginning to see customers uh move back from uh restaurants to uh food at home because you know you can f you can prepare a meal at home for about a fourth of the cost of going out and getting a meal so that is something that we are beginning to see a little bit of as well I don't know Todd anything else you want to add on inflation thank you our next question comes from rupesh parak from Oppenheimer your line is now open please go ahead good morning good morning morning good morning thanks for taking my questions so F first on CC so you know higher range for this year so just want to get a sens of if we should think about that think about this level spend as more of a normal going forward and then secondly you know not sure if you if you're giving any Clarity in terms of how to think about the EPS growth Cadence between Q3 and Q4 as I know you're lapping the 53rd week later this year yeah no great great call repes on the cack yeah I think we talked about it's we been working really hard to take the opportunity to get these storing projects open as quickly as we can uh to be able to serve customers and so so shifting spend from late in 24 to early in 24 you saw our cap X year8 be a little bit higher that's going to create some capacity to help us pull um early what what might have been early 25 Construction in process into late 24 so we can open next year's projects early too so I think uh given the strong cash flow in the business if we're able to continue to execute that that I think what we'll see should be um a lift in our spend in our in our Capital plan over time and we're the money that we're investing we're seeing good performance to budget uh as well and uh operationally it's a lot easier to open up exp you know a remodel or new store expansion earlier in the year ver versus later in the year as well and then talking to your EPS comment rupes um yeah for the balance they given where we landed uh in in the first quarter in our actual results for the or for first half of the Year sorry our first half kind of landed where we expected it to uh quarters played out a little bit differently than we thought but the first first half landed where we expected and reaffirming the the rest of the year uh the back half we we think is right on par with with where we've been guiding as well within that we do think that the third quarter will be probably slightly ahead of where we were year-over year and the fourth quarter proba be slightly behind on a 52 we basis when you compare it 52 to 52 but um that's probably how the trend will play out for the balance of the Year Neo is Neo car company our next question comes from Michael Lassa of UBS the line's now open please go ahead morning it's Mark Cardon for Michael Lasser this morning thanks so much for taking the question so you talked about some of the trade down that's accelerated in 2q to additional income cohorts and also highlight some of the pressures that budget customers are facing what kinds of behavior changes are you seeing in your your middle income and above cohorts and when did you see these become more pronounced yeah it it's uh throughout the year and it's as I mentioned before it's uh we're seeing it more at the end of the month than the beginning of the month and people continue to be uh uh aggressive or whatever the right term is on celebrating holidays now I think one of the things that's always important to remember is those change es aren't uh uh many of those changes are beneficial to us so if you think about people moving from eating at a restaurant to cooking at home that's beneficial from us if we look at uh customers changing segments ladies gentlemen that's good for us because they typically uh will buy more uh our Our Brands products and they'll buy uh smaller packages and some of those things as well wow so when we look uh it's been really throughout but I would say over the last few months it's been more pronounced as you get toward the end of the month uh but you know all of those things are things that uh you know obviously you're changing your uh promotional approach uh your connection with the customers what offers you make at different times of the month and all those things so you know overall the customer as we've said all along uh are under uh stra uh tremendous strain especially customers on a bud budet uh that was the reason why I want to say it was probably a year and a half ago or two years ago we sawed SmartWay product uh to uh be much more uh aggressive on having an entry price point item because that was a trend that we saw coming and trying to be proactive on addressing that and we continue to add product in that but for us you know we're going to do everything we can to help a customer be able to have a great meal without compromising and eating as a family and so far uh the changes the customer is experiencing uh we're making changes to trying to support the customer and the customer is connecting well with that so you know you you feel for people uh in terms of where they are and then we're going to do everything we can to try to help support them on what their particular situation is thank you our next question comes from Robert SS of Bank of America the line's now open please go ahead oh thanks for uh taking my question maybe um Todd for you can we get uh even you gave some color already on the OG Anda line for the backa maybe a little more uh you know how where where is Kroger on the wage pressure in the back half of the Year say versus the front half and also you you guys called out general liability claims you're not the only retailer to call that out this quarter if we could get some uh you know what how much pressure was at in the second quarter and is that uh is that an issue or a pressure in the back half thanks yeah no great great call uh relative to um second H again given what we saw in the second quarter our guidance on the year is now will be slightly um uh unfavorable to where we were a year ago and so but but beyond that I think our our Trends will be you know expected in the second half of the year you talk about wage pressure one thing to keep in mind on on our wage pressures because so many so many of our wages come through collective bargaining agreements um you know we've got 300 or so of those but but at any point in time probably 75% uh of our wages are locked in in collective bargaining agreement you know we have maybe a third or a quarter of those that are that are you know up each year that that we constantly negotiate so so the guidance that we have out there reflects uh those expectations and and where we're at from a wage perspective because because most of those are are are known to us going into the year your comment on uh G GL claims um it's there's really two pieces to to general liability the the incident rate piece is actually our results are phenomenal you look at it through the lens of Osha incident rates uh we're very much below where the industry averages are at and even as a company where're we're at you know we're in that kind of record record low territory there at least in in in modern history uh and so we're extremely excited about the work that the teams do to manage the incidents from from that standpoint the number of claims what we saw as we were going through our analysis uh this time was around the average cost of the claim and and what we were seeing relative to the cost to settle some of these claims being being much higher given the environment that's out there um we're seeing more and more pressure on the average cost to settle those claims and so as we evaluate what we had outstanding for for reserves in that space given that Trend we thought it was it was wise to update it um we have done a a nice job in the past trying to mitigating those claims and have a variety of strategies to put into place and and we continue to be able to put more of those types of items in place to be more effective in keeping that average cost down um but I think the analysis that we did I I think has us comfortable with where we need to be now and uh and don't expect that to uh recur in the back half of the year one other uh comment I would add to Robbie to the ogna comment that Todd was talking about uh is we feel like we've developed a good skill on being able to identify cost reductions over time and we would expect that's a skill that we'll have also as you look at in the second half and forward in next year as well the other thing that our teams have done a nice job on is continuing to find process C changes to be able to operate a store with uh less labor and simplify the store to run and it's one of those where uh we we've made good progress but we still think we have plenty of uh opportunity to get better going forward so really appreciate the question thank you our next question comes from Chuck sanosi from North Coast research your line is now open please go ahead good morning everyone uh morning Rony when you look at the sales growth challenges you mentioned the you mentioned the uh economic factors putting pressure on consumers and it seems to be a wide ranged consumers but you also have non-traditional uh competitors put pressure on the supermarket channel can you sort of compare where the what the strength of those difficult or head are as you're trying to accelerate sales in Kroger the the uh increase in non-traditional competitors obviously has been a 20-year Trend and you know when you look at Amazon and Costco and Walmart and you know I could go on and on for the litany uh those your con those in terms of how do you be successful against them uh really is uh how do you continue to change your basic offering to the customer and supporting the customers changes and we've felt good about those changes that we've made but we still need to continue to make them uh and you know it's one of those things where uh if you ever think you've figured it out it's it I would say that it's not good you need to uh change uh so we feel good about our ability to compete we'll have to continually change it's the reason why we've invested so much in staying connected with the customer on a seamless perspective continuing invest in wages continuing to invest in promotion but making up some of those uh things with alternative profit growth and mix and uh over time we would hope food away you know being a more stronger competitor on food away from home because half of the money that's spent on food is food away from home and we see no reason why we shouldn't be able to get a share of that if you look at the economic pressure so far um we feel uh confident in our ability to uh deal with it or manage it or whatever uh because uh you know there's fortunately we we have a a large business and there's uh a lot of moving parts and Our Brands uh obviously had a strong quarter uh we think the opportunities even stronger in Our Brands and things like that uh which helps support the customer that's under that economic pressure uh as well so on those so far I mean if you had a depression I wouldn't these I would give a different answer but so far on the things that we're seeing uh we feel uh uh comfortable or confident in our ability to deal with those changes thanks Chuck thank you our next question comes from Joe Feldman from telsey Advisory Group your line is now open please go ahead he good morning guys thanks for taking the question um morning you know why don't ask about inventory level which you know was down a little bit and uh down I think almost 3% which was really good shape I'm wondering how you guys are thinking about inventory going forward and and what drove that was it you guys is it fewer units is it because the prices have just come down a bit year-over-year so you've been able to be lower inventory levels because of that maybe you could just share a little more color around that going forward yeah great great question Joe and I think you hit on on some of the keys I think it's it's a variety of things you know inventory it's it's um part of it is we're seeing less cost inflation so the average cost of an item on the Shelf uh is a little bit less but uh we have also been very laser focused relative to working capital and working Capital Management you know we talk about our our our strong cash flow generation that's an important part of that uh is balancing our working capital and it's uh you know both of those go together it's always having the right tension between making sure we're in stock for our customers and having what our customers need but but making sure we don't have too much there so that we're being a good Steward of working capital and so I think what you're seeing uh on the balance sheet is the combination of lower lower cost per item relative inflation year-over-year uh and and the right level of working Capital Management to make sure we're in stock for our customers thank you at this time we'll take no further question say so hand back to Rodney for any further remarks thanks Alex and thank you to all for all your questions and as you know before we uh conclude our call we always like to uh we have many of our Associates listening in we always like to uh share a couple of comments with them and I'd like to take a moment to acknowledge our 2024 Kroger Scholars uh since uh the Kroger Scholars Program was launched in 2008 we've awarded more than 3,300 scholarships uh totaling almost $5 million to Children of our Associates uh these recipients were selected based on a broad range of criteria including their volunteering activities Civic Service uh extracurricular activities academic performance and work experience and it's always fun to uh be able to help a little on their education and congratulations to our 120 winners this year and thanks to everyone for joining us today and I know it's early but uh it will be December before we talk to everyone I hope everyone has a beginning great holiday season as well and thank you very much thank you all for joining today's cool you may now disconnect your lines W so that was Kroger earnings uh they mentioned a couple interesting things in Kroger we also let's listen to some EV EV earnings by for Neo Incorporated second quarter 2024 earnings conference call at this time all participants are in listen only mode today's conference call is being recorded I'll now turn the call over to your host Mr Ru Chen head of invest relations of the company please go ahead Rie thank you good morning and good evening everyone welcome to Neil second quarter 2024 earnings conference call the company's financial and operating results were published in the press release earlier today and posted that's wild on today's call we have Mr William Lee founder chairman of the board and chief executive officer and Miss Danny IMF spokesperson kak says appropriate for usfed to begin mon loosening ccle next week forward looking statement made under the state Hopper provisions of the US private Securities litigation Reform Act of 1995 forward looking statements involve inherent risks and uncertainties as such the company's actual results may be materially different from the view expressed today further information regarding risks and uncertainties is included in certain filings of the company with the US Securities Exchange Commission the stock exchange of Hong Kong Limited and the Singapore exchange Securities trading limited the company does not assume any obligation to update any forward-looking statements except as required under applicable law please also note that new's earnings press release and this conference call include discussions of un audited Gap financial information as well as un audited nonap Financial measures please refer to News Press release which contains a reconsideration of the UN audited non-ap measures to comparable Gap measures with that I will now turn the call over to our CEO Mr William Lee William please go ahead hello everyone thank you for joining new 2024 Q2 earning score the first half of this year the new brand complete the 2024 mod year face L further enhancing the competitiveness of his N2 product in the meantime as new technologies products services and the use Community were recognized by more people it's all the intake and the delivery continued to grow near delivery in Q2 reached our cly record of 57,7 3 units of 43.9% in China new models have over 40% market share among all Bs with a transaction price higher than 300,000 RB since Q3 new product mix has been continuously optimized in July and August the delivery was 20,4 98 and the 2,176 respectively with that near monthly delivery has been more than 200,000 for four cons consecutive months the total delivery in Q3 is is backed to between 61,000 and 63,000 units in terms of new financial performance with continued cost optim optimization of core components and supply chain the V margin K to increase to 12.2% as the youth Community became larger and more vibrant the second quarter also witnessed rapid growth in revenues from up sales and po Services the growth marging of otheres continued to improve now I would like to share with you the recent highlights of our product and the an operation on July 27 NE hosted near in 2024 as the event at the event we introduce the four domain operating syston Sky OS and the smart system Bion screen moreover they also announced the successful tape out of s NS 1931 our in-house devel chap for smart driving as for NAD new continue to inate It season capabilities in July the industry's first a function based on endtoend architecture was released with the scenario coverage 6.7 times better than traditional a it makes driving sa at a new y they also introduced a new world model MVM the brand new architecture for smart driving n AR 2 were also released this is the most advanced and to end architecture based on nbm nwm new fatures and expenses of n AR 2 will be released in the second half of this year on September 19th our fa our family Centric Mass Market brand anvo is going to celebrate launch of his first model L6 and the use of delivery will start in late September with strong confidence in this all around product we will spend no effort in ramping up production and foring the market demand for sales and services as of now the new brand has 161 new houses and 48 new spaces as well as 351 service centers and 63 delivery centers the Ang brand has already opened 105 stores in 55 cities and we have over 200 stores by end of the year by the year end about charging the swwa network so far new has over 2,561 P SW station worldwide and has provided over 52 million swaps besides new has installed over 23,000 power chargers and destination charges quick and H free recharging is critical for convincing IC owners to drive EV on August 20th they hosted the new power up event where we announce the plan of power up count in the first half of 2025 new charge network will become available in every County in Chinese Mainland by the end of 2025 the swaping network will become available in more than 20 2,300 counties in China to better support this initiative we also announced the PowerUp partner plan and signed the agreement with the first partner The Continuous deployment of the charging and swapping network will have expand the market rate of near and unv and further Drive sales grows as for Market development we are accelerating the international expansion on August 20 new UA website went live and in Q4 the product will be launched and delivered in UA while ensuring controllable investment and efficient operations we will also actively evaluate opportunities worldwide introducing product to more markets in NV quality study released by JD Power in early June new model rank highest in their respective segment NE is also the only n company winning top ranking for six consecutive years ever since establishment new has been committed to making itself a global Benchmark of quality and providing great us experience through life cycle quality management as Neil has been funded for almost 10 years with the multibrand strategy and the international business Road out as well as the external change the upgraded the company's value system in July in the quest of Blue Sky coming NE aspires to shape a sustainable and bright future and the inations itself as a US Enterprise where Innovative technology me experience exdents with new brands and the product being launched step by step the fundamental Tech capability and the long-term strategical planning that NE has been developing they have a great e effect greater effect near cumulative and investment sophisticated Community operations and the efficient infrastructure deployment will lead to bad sales and margin we look forward to near performance in the second half thank you for your support with that I will now tend to call over to standy for q2's financial details over to you stany uh thank you Willam uh now let me go over our Financial results for the second quarter of 2024 I will refer to R&B only in my discussion today onless otherwise stated our total revenue were 17.4 billion R&B up 98.9% year-over-year and up 76.1% quarter over quarter revenues from vehicle sales were 15.7 billion R&B representing an increase of 11 18.2% % year-over-year and an increase of 87.1% quarter over quarter the increase year-over-year was mainly attributed to higher deliveries casually offset by a lower average selling price due to changes in product mix and user rights adjustments since June 2023 the increase quarter over quarter was mainly attributed to higher deliveries other sales were 1.8 billion R&B representing an increase of 11.3% year-over-year and an increase of 15.6% quarter over quarter the year-over-year increase was mainly due to the increase in sales of parts accessories and after sales vehicle services and provision of Power Solutions which both grow with our user base and partially offset by lower sales of used cars the increase quter over quarter was mainly attributed to the increase in sales of parts accessories and after sales vehicle services provision of Power Solutions and other products and the increased revenues from technical R&D Services vehicle margin was 12.2% in this quarter compared with 6.2% for the S period of 2023 at 99.2% for the last quarter the year over increase was mainly due to the decreased material costs and was partially offset by a lower average selling price the quarter over quarter increase was mainly due to decrease material costs overall gross margin was 9.7% compared with 1% in the same period of last year and 4.9% in the last quarter R&D expenses were 3.2 billion R&B decrease 3.8% year-over-year and increased 12.4% quarter over quarter the quarter over quarter increase was mainly due to the incremental design at the development costs and the increased Personnel costs in R&D functions sgna expenses were 3.8 billion R&B increased 31.5% year-over-year and increased 25.4% quote over quote which was mainly driven by higher Personnel costs related to sales functions and increased sales and marketing activities loss from operations was 5.2 billion R&B representing a decrease of 14.2% year-over-year and a decrease of 3.4% quarter over quarter net loss was five billion R&B representing a decrease of 16.7% year-over-year and a decrease of 2.7% quarter over quarter as of June 30 2024 our company had cash and cash equivalent restricted cash short-term Investments and long-term time deposits in total of 41.6 billion RMB for more information and the details of our are audited second quarter 2024 Financial results please refer to our earnings press release now this concludes our prepared remarks I will turn the call over to the operator to facilitate our q& session thank you thank you if you wish to ask a question please press star one on your telephone and wait for your name to be announced if you wish to cancel your request please press star to if you're on a speaker phone please pick up the handset to ask your question your first question comes from Tim hial from Morgan Stanley please go ahead hi M team thanks for taking my question um I have two questions uh the first question is about our new model l60 um because some L l60 started pre-sale in mid May and since since then I think the model has received tens of thousands of pre-orders uh which is very robust the comp to the new launches L um but how could NE also ensure a high conversion rate this time after the offal launch on September 19 uh with the company consider getting more aggressive with the official pricing given the competition and in the meantime what kind of supply chain preparation uh the team has done to avoid any potential Supply disruption after the dele Dos uh that's my first question thank you thank you [Music] team forla Mot for [Music] um thank you for the question on August 15th we have witnessed the offline of the very first mass produced l60 and the head of sales of the AL br is actually driving this very first must produced car having a road trip in China and he has been driving the car for almost 20 days while doing the broadcast on the social media it has received a lot of attention from the public uh every day there are several millions of views of the broadcast by the uh by the members in terms of the pre-order intake it actually is pretty good and has surpassed our expectation so we are quite confident with the overall competitiveness of this project regarding the pricing strategy well we launched the project in miday we have announced a pre-sale price which is 29,900 RB that is around 30,000 RB cheaper than model Y and before the official launch of the product on September 19th we still have some time and room for the uh final price adjustments and decision but overall speaking we will try to strike a balance between the vehicle margin and the price point of the product to find the switch spot in general we will not be very aggressive as we needed to realize a reasonable margin for the product regarding the supply chain security uh our Target is that by the end of this year which is in September we hope that we can realize a supply capacity of 10,000 units and sometime next year we will be able to realize a supply capacity of 20,000 units per month next question sure thank you R for sh all details my second question is about the nein uh vles on the nein uh because we noticed the monly cells of models on the nein have stabilized at the 20,000 levels in second quarter um so looking for would there be any further upside uh to the vco cells and the gross profit margin based on our current product portfolio uh if yes um could you share with us that where would be the upside to the volum and the margin of NE brand V coming from that's my second question thank you uh hi Tim this is stny uh your question [Music] about for um thank you for your question regarding the vehicle margin of the new brand u in the second quarter we have achieved the vehicle margin of 12.2% that is mainly because of the efficiency improvements on the supply side and also in the production as in the past four months we have realized the monthly delery volume of 20,000 units for of more than 20,000 units uh we also see the opportunities for further improvements uh including the cost optimization of the product as well as to improve the pro uh improve the high margin products uh in the product mix from the marketing side with that we will keep improving the vehicle margin in the following two quarters of this year and expect to realize a vehicle margin of around 15% by the end of the year and also a a comment to add here is that uh we also see opportunities to improve our delivery volumes month over month yet uh we will also need to strike a balance between the vehicle delivery volume and the vehicle margin uh both will increase but will not be in a very drastic manner uh for either margin or the vehicle volume as we uh ultimately we pursue a very good grow profit with our product so we need to find the S spot in between and for the much longer time as New Brand targets a premium segment uh priced over 300,000 R&B as we are going to launch new products and also do fa lift and upgrades on the product we believe that in the battery electric vehicle segment realizing a monly volume of around 30 to 40,000 units is a reasonable Target and the volume so I'll sum up for the new brand our long-term operational Target is to realize a monthly volume of 40,000 units at a vehicle margin of 25% [Music] bu as for the Amo brand it faces a much larger uh Market with a total Car Park of more than 8 million um in that case leveraging our batter as a service as well as our well established charging and swapping Network we believe that on both products will be competitive even against the competition with pive rev and other bath models so uh for our product it they do have a higher potential or bigger potential for a higher sales volume month over month and for the longer term our operational Target for onal products will be 15% for more than 15% for the vehicle margin and we believe that it's also a reasonable Target thank good keep thank you very much uh with sty thanks for the a the insight and looking forward to the l60 launch thank you thank you thank you your next question comes from Benin Wang from Deutsche Bank please go go ahead okay thank you so much my first question is also about on at 60 you you pleas previously you mention that this year your volume Target is about 20,000 units given the strong order do you still maintain such a volum Target and if you can break down by month because we are not in the end of this month so what's the progress for say uh October November December so that is my first questions and second questions about expense SG expense is since that expense has keep increasing what's your um target for is quity um expense do you have guidance for the each quarter in the upcoming um second half thank you I so [Music] [Music] [Music] um I will take the first question this is William um regarding the omo l60 uh we will start the delivery of the product from late September but it will take some time for us to ramp up the production and supply of a new product so most of our deliveries this year will happen in Q4 we will start delivery from September but not in a very significant volume and towards the end of the year we hope that our monthly delivery will be around 10,000 units for the month of December in terms of the supply side as the car is equipped with many new technologies it will also take some time for the supply sites to ramp up their production thank you uh [Music] L6 um this Stanley I will take the second question uh regarding expenses there are two categories the first is R&D expenses we will still keep the similar R&D investment taste and intensity in the on a quarterly basis so roughly on the non-gaap basis it will be around the 3 billion R&B every quarter but there will also be fluctuations where slight differences from quarter to quarter uh as they are relevant to our actual R&D activities conducted and regarding the second category uh sgna expenses as we have mentioned that in late Q3 we will start to the degree of LC 60 with that there will be increase in our sgna expenses but as we ramp up the delivery volume of the product we also think that we will keep optimizing the percentage of the sgna expenses against the overall sales revenue from l60 thank you thank go thank you thank you your next question comes from Tina how from Goldman Sachs please go ahead thanks for taking my question uh so my first question is Also regarding envo l60 um so uh just wondering at uh let's say 10K volume in December this year and 20K volume next year what kind of gross margin uh should be reasonable for this model uh also as we are ramping up to higher and higher volume what is our capacity um expansion plan and also capex plan uh for 2025 and maybe 2026 should we expect capex to become higher versus 2024 so that's the first question the second question is Also regarding the sales marketing expense and so we had over 30% sgna uh expense uh growth in the second quarter wondering uh Could you um give more details on the sub items which is the one that's growing the fastest and also is any of the sales policy recorded in the uh sgna expense um yeah so that's my second question thanks thank you tin for marke for efficiency for [Music] f um thank you for your question this is William I will take your first question regarding l60 when its overall production volume reaches a reasonable and expected targets uh we believe that it will naturally realize a 15% vehicle margin um of course against the fierce competition we have also reserved some room for the variable marketing of the product so that we will be more flexible in the competition yet overall speaking as the product itself is designed for efficiency and the cost uh 15% vehicle margin is a reasonable Target for this model um as we actually managed to realize a good balance between the technology advancement and the cost competitiveness regarding the capacity preparation we are having the mid and long-term planning for our production capacity in 2025 and 26 as of now we already have two factories in operation F2 has already started to upgrade to double shifts to support the production of l60 in late September or early October the upgrade to two shifts will be completed in F2 and in the meantime we are also planning our third Factory and around Q3 next year the third Factory will be ready to produce the products which means that by Q3 next year we will have three factories in operations and it will be sufficient to support our production over speaking we don't think production capacity will be a bottleneck for us especially it will not be a long-term bottleneck for us um here in China the production capacity and capabilities of vehicles and PS are quite competent maybe some companies will face short-term disturbance in their capacity and the supply yet for long term it will not be a bottleneck especially last year we have optained a dependent manufacturing qualification uh this uh has also laid a foundation for our long-term stable than um this is Stanley I will take your second question regarding the capx according to the stal of the company we are making prudent control and management of the pace of of our investment and expenses uh especially starting last year we have already started sear management by postponing certain project or even canceling some projects so overall speaking the R&D or the capx in the year of 2024 will be significantly lower than that in 2023 as for 2025 as we haven't started budgeting for the next year we don't have a clear picture over that but we believe that the overall expans intensity will be similar to this year thank you uh uh [Music] [Music] as for the increase in the sgna expenses in Q2 it mainly contributed to two reasons the first is that in q1 we delivered around 30,000 units and in Q2 we delivered a total of more than 57,000 units the increase of our Sal volume naturally Drive drove up the staff cost mainly because the um the team site has grown and also the incentives for the sou sport has uh increased as well and the second reason is that um in 202 in the first half of this year we have launched our model year phics and many of this new products were launched in around April around May and around March and April in that case we have also uh started a series of Communications on marketing campaigns relevant to our model year products that has also increased the relevant expenses from q1 thank you thank you so much can I have a very quick followup so in terms of store uh do you have the average store rental cost versus a Neo store and also how many employees do you plan to deploy in an enville store versus that of a Neo store thank you C um regarding the opening of alal stores we actually uh require the team to open up the stores in a quick and efficient manner so in terms of the cap haacks as well as the rent of a single enval store it is significantly lower than that of a new store um but we don't have the specific numbers for comparison as the actual expenses may be quite different depending on the locations and the type of the store but overall the expense is lower significantly lower than that of Neil sorry um and in terms of the renovations for each of the elal store we actually have a very strict requirement um for the almost for the existing 100 Aro stores we have just opened for each store the renovation fee was no more than 1 million R&B and for the following 100 stores we are going to open by the end of the year we will have a even more strict requirement on renovation with that we will be able to make full use of the existing resources and to renovate the store in a more efficient manner in terms of the team sides for each of the store it depends on the actual number of orders and the deliveries we plan for each store in each City but in general we will make sure that the team is also set up in the most efficient and compact way Stanley thank you thank you your next question comes from Muk anding from HS BC please go ahead uh thank you team uh you can here I I've got two question uh first is about a t driving progress and second is about market and competition Dynamics um first question could you share the the Neo U progress especially could you break down uh in terms of the consumer takech rate um our disengagement rate um scenario coverage uh the original expansion um these aspects fact and the second question is to ask against the backdrop of in the premium EV segment there's a couple of new models coming especially in the um in the coming months to the end of the year um and also we notice um um the the high tier City uh versus the low tier City the con consumer consumption is um slightly in general and more so than a lower city um so could you help us to get comfortable and a conviction on near and Anvil's portfolio product technology and service expansion could counter these micro um head wings and still book growth uh quote unquote perspective maybe um in a aspect of Channel order momentum and latest consumer feedback thank you uh smart d [Music] [Music] um thank you for your question we also noticed the fierce competition in the area of smart driving yet we are also confident that Neil is among the top players uh in this area regarding uh NOP plus uh it is now being used by more than 300,000 users as it is now offered as a standard feature on our N2 projects um in the meantime the cumulative knowledge driven with NP and NOP plus has riched uh or has surpassed 1.1 billion kilometers so in terms of the user base as well as the total knowledge driven with the functionality we are also a top player in China [Music] for World model fore impressive [Music] [Music] um regarding the technology road map right now in side of the industry many players are conver are converging their Technology Solutions and the road map into endtoend model uh beat Tesla where other players in China uh for new we are also working on our endtoend model and we have already released our first endtoend based uh feature that is end to endend a uh its performance has been um significantly improved than the traditional a functionality as its scenar coverage is 6.7 times better than the traditional um a and in the meantime at the new in we have also released our endtoend architecture based on the new word model because end to end is an architecture but its Foundation Technology is also very important and we are the first company to uh develop and announce a such word model and the Anto end architecture based on the model uh we have also released the NAD Arc 2.0 uh so the end to endend model will be based on the new the end to end architecture will be based on the new world model where you can see that the new world model is developed uh with the endtoend architecture solution overall speaking we believe that we're still leading the Block in terms of the smart driving Technologies uh we have already tested the latest functionality onad Arc 2 at the small scale and its performance is pretty impressive overall speaking with uh world model and endtoend architecture we will be able to realize quicker functionality iteration better experience at a lower cost in terms of the enal brand its prodject will come with a single oring with pure vision technology solution but even with that it has realized a very good performance in the urban driving scenario the other days I have tested the functionality in Shanghai and it's also pretty good uh so overall speaking We Believe that and we also saw facts that uh the smart driving functionalities will help users improve the safety of driving in terms of the actual usability of the functionality we will also keep working on that yeah 5T es6 ec6 et7 ec7 es8 [Music] E6 for service community [Music] um regarding your second question we also understand the intensity of the market competition and this is not the first time for us to face such Fierce competition yet new has the new brand has been um realizing a pretty stable market share in the premium segments for years this is mainly because we have a diversified and Rich product portfolio to offer for the premium segment we have et5 5T es6 E6 E7 E7 yes7 plus es8 so it's a pretty wide range of a product offering that will be enough to cover many product segments and many of these products are also leading the sales volume in their respective B product segment not to mention that for some Niche products like e5t ec7 or ec6 in their respective segments their volume is even higher than some of the IC competitors so overall speaking we have made a quite successful product portfolio and offering strategy plus we also have other advantages such as charging and swapping Network leading Technologies good product experience service and the user Community this has further enhanced and solidified our foothold in the premium segment of course in the meantime we also hope that more players can also come into this segment so that we can work with them together to enlarge the sze of this premium segment premium BB segment for for um in the meantime for the entire new company we actually have a pretty clear and straightforward strategy for the continuous business growth the first is via wider price range um from next year we are going to have three brands uh in the market uh with battery our price range come or the price range that can be covered by this Tri brand will be as wide uh will be pretty wide ranging from 140,000 all the way to 00,000 R&B and with batter service the price range will be from 100,000 to 700,000 uh which will be a very strong competition to the I cost in the respective segments with three brands with wide price range we will be able to reach a broader Market than many of our other competitors the second approach is via our product wide product range we have three brands we also have a very Diversified product portfolio of each brand in that case we will be able to cover a pretty comprehensive product segments with clear differentiation between each brand and the third approach is through uh the market and the regional coverage uh right now we are expanding our Point of Sales into the lower tier cities especially for new at the moment most of our Sals are in the first and second tier cities so such coverage expansion is also very important we have also announced other plans like the power uh County Power Up Plan where we will expand our charging and swapping Network to uh the counties at all levels with that it will help us to further enhance the r of aler brand plus we also have the business development plan for the overseas market so overall speaking for the long-term growth and the development we have a clear road map that is bya wide price range wide product range and also broader regional coverage thank you awesome thank you thank you thank you your next question comes from Paul gong from UBS please go ahead uh hi William uh thanks for taking my questions uh two question here uh the first one is regarding the uh Flagship sedan E9 uh I think it was a to uh schedule for uh lunch uh in q1 next year is it still on schedule and uh can give some uh updates uh regarding this model uh in terms of the positioning new technology adoption as well as they say the uh Target uh volume Outlook um yeah the second question is regarding the overseas expansion uh you are going to open the store in UAE and start delivery there um is it is it a signal of the change of the direction as a result of the uh EU tariff uh that you are switching the direction uh from Europe into Middle East uh also uh one of your peers has uh nowadays uh been delivering uh over 10% of their volume into the overseas Market uh do you think this serves as a benchmark for your overseas expansion over the next one or two years thank you f for [Music] [Music] us five um thank you for the question regarding the first question on the et9 we're still proceeding the et9 launch preparation according to the plan and we hav't we haven't change we haven't made any changes on the uh Su of this product but in the meantime as you know that the etmi is equipped with many new technologies including de by wire fully active suspension in-house developed chip as well as Sky OS so we will need to spare no efforts in making sure and preparing for the successful launch of this product next year regarding your second question on our International expansion we hasn't we haven't changed our Direction uh yes because of the Tariff uh in Europe now selling or exporting cost from China to Europe becomes more expensive so we will focus on the existing five European markets that we have already started we also know that to establish Neo such a premium brand in the European market will also take a longer time and we are very patient with that but in the meantime it doesn't mean that we have stopped our activities there earlier this year we have just opened our new house in Amsterdam and we are still installing and deploying our power swap stations in Europe so we will still keep the same plan in terms of the uh Market entry into UAE uh as you may know that last year we have received a three billion US dollar Strategic investment from the ABAB government and then the market entry into UAE is part of the plan with that we will work with our strategic Partners in UAE to offer our products and services to the local market starting next year a big difference is that we not only have new brand and products but also products from Amo and the Firefly which are more suitable for the global market with that we will be actually more active with our International expansion but in the meantime we will also need to keep a good balance between our investment skill and the efficiency to make sure that we enter into the global market in a smarter and more efficient way thank you thank you that's quite thank you thank you your next question comes from mingen Lee from Bank of America please go ahead uh hello William Stanley I also have two question so my first questions is more related to the overall uh macro so uh in your view what is the uh potential growth rate for the China EV uh Market in the next few years because uh I think recently some uh investors expect that the EV penetration will slow down because right now the EV penetration is already very uh so yeah just your view what is the uh the EV penetration uh in the next three years uh yeah this my first question uh and my second question is regarding uh the uh the Firefly uh pipeline uh so right now will you launch one or two uh models in 2025 for uh five5 yeah thank you that's my two question passeng [Music] V for [Music] [Music] [Music] um thank you for the question if you look at the overall passenger vehicle Market in the first half of this year it has increased by around 3.6% um for the longer term if you actually if you look at the total PV population in China it's as big as 20 to 30 million units so it's already a very significant amount definitely it will keep growing but probably not a very not at a very significant growth rate and it's even normal for the PV segment or PV Market to suffer slight decrease but even with that the Chinese market will still be the largest passenger vehicle Market in the world in terms of the penetration rate of the new energy vehicle it has already surpassed the 50% and I think that it will continue to increase and at a even faster manner uh because for the replacement of the ICU cost Beats by PVS or PIV it will be much faster once it has surpassed its 50% keeping point we can take Norway as a a reference or example um it actually grew at 50% penetration rate at first and then it has quickly increased to 80 and 90% so similarly for China I believe believe that in two to three years the penetration rate of new energy Vehicles among new vehicle cells will surpass 80% [Music] yeah Market massive Market for for [Music] um if we look at the i e c in China actually they have entered into a unsustainable cycle or a vicious cycle because many I brands have to cut their prices to keep their Market sh uh be it's premium brands or mass Market Brands be it's brands from China were from uh other countries many of this IC costs are having a price slushed for the sake of a market share but as they cut prices it also hurt the profit and interest of their dealers hurt the image of the brand as well as the residual value of their products with that um it is even more difficult for them to keep a very uh strong market share in their segment so their uh the decline of their market share is even FAS than it should be for the recent years we have already witnessed the significant decline of the market shares of a Korean brand like hunda Kia including Ford and the General Motors and for the recent years uh Japanese brands like uh Toyota Honda and Nissan are also entering the same phase so in general we believe that the IC cost from this Jo Venture Brands will face quite difficulties uh in the future competition and when they lose the market shares they normally lose market shares to other new energy vehicle Brands including brands from China and Europe so in that regard I believe that the penetration rate of the new energy vehicle will grow will grow at a pretty quick Pace even faster than we expected and regarding your second question yes we are going to deliver the product from Firefly from 2025 we are in smooth progress with our product preparation thank you me thank you your next question comes from changing from cicc please go ahead okay thank you for taking my questions I have two question the first is uh regard to our new operating system Sky OS uh which has been released in July so it has shown uh very uh comprehensive and indeep uh our software self-development ability so can you just introduce ask more details so what are the technical challenges we have faced and what advantages and also the Improvement of our product can be brought by the new system uh so this is the first question uh the second is uh regard to the other other income gross profit margin we have seen the second in in the second quarter uh the gross profit margin has improved so how to understand these major uh drivers and also was our uh Focus for the trend and continuity of the uh margin Improvement in the future uh so also uh with our growth uh of our sales volume can be uh can we see that our charging especially charging and uh battery swap business can turn to profit f [Music] [Music] h for [Music] lat Foundation [Music] [Music] [Music] um thank you for the question regarding Sky OS it's the world's first Food domain vehicle operating system that is the special thing with the uh with Sky OS which is also the difficulty or the challenge we have faced When developing the sky because when it comes to the era of the smart electric vehicles we cannot use the fragmented operating systems to manage the electric architecture of the car anymore with that we have developed the sky OS it comes at three levels at the bottom we have the sky H that is the hypervisor and in the middle we have four kernels uh for the Skywest and on the top we have a Skywest middle w so it's a very comprehensive solution we have developed uh we've used four years with 20 uh 20,000 person month with this great work in terms of its benefits the sky is definitely making the car safer and more secure it also makes the system Stabler and it also help us to realize more efficient R&D process and iteration process it also help us solve the problems faced by the smart electric vehicles like huge data thut domain F cross doain fusion and also the latency along the communications because we uh we know that it's impossible to realize such benefits by simply working on application layer adaptation we need to do something at the foundational level and we are very happy that we have made it happen the skyw will be applied to our uh auor Brands including NE ano and Firefly uh we can say that Skywest is a software Cornerstone for our future products and development [Music] for for [Music] um regarding the um regarding the revenues where the loss on other cells in Q2 we have significantly narrowed the losses on other cells in Q2 it's m because of the two reasons um I think Q2 we have we have improved or increased our uh user deliveries uh with that well actually there are two reasons the first is that we have improved the profitability and the efficiency of our up Market Source um earlier this year in February on February 20th we have released the 2024 Warr service policy with the new policy our after sales Services become more efficient and also more profitable and secondly we have also decoupled the lifetime rear Power Swap from the sales of the vehicles with that one and more users especially new users have to pay for the power swoft services this has also helped us improve the revenues and the margin on the power swap related services with that we have significantly narrowed the losses on the other cells and we believe that in the future as we continue to grow the total user base and the sales volume especially with the launch and delivery of the en products the profitability of the other sales will also become stronger and we look forward to the break even where even the profit from this part for for okay there's this is different language guys I'm sorry greetings welcome to the Dollar Tree second quarter 2024 earnings call at this time all participants are in a list and only mode a question and answer session will follow the formal presentation if anyone should require operator assistance during the conference please press star zero on your telephone keypad please note this conference is being recorded I will now turn the conference over to Robert lefor senior Vice president in investor relations thank you you may begin good morning and thank you for joining us today to discuss Dollar Tree's second quarter fisal 2024 results before we begin I'd like to let everyone know that our CEO and executive chairman Rick has been under the weather for the past few days and his voice has not yet fully recovered he's here listening to the call today and send his regards but has asked our chief operating officer Mike ceden to step in for him today at the end of our prepared marks Mike will join our CFO Jeff Davis for the Q&A session we wish Rick a speedy recovery and I know he looks forward to chatting with you all again next quarter so with that I would like to remind everyone that some of the remarks that we will make today about the company's expectations plans and future prospects are considered forward-looking statements under the Safe Harbor provision of the private Securities litigation Reform Act of 1995 these statements are subject to risks and uncertainties which could cause actual results to differ materially from those contemplated by our forward-looking statements for information on the risks and uncertainties that could affect our actual results please see the risk factors business and Management's discussion and Analysis of financial condition and results of operations sections in our annual report on form 10K filed on March 20th 2024 our most recent press release and Form 8K and other filings with the SEC we caution against Reliance on any forward-looking statements made today and we disclaim any obligation to update any forward-looking statements except as required by law also during this call we will discuss certain non-gaap Financial measures reconciliations of these non-gaap items to the most directly comparable Gap Financial measures are provided in today's earnings release available on the IR section of our website these non-gaap measures are not intended to be a substitute for Gap results unless otherwise stated we will refer to our financial results on a gap basis additionally unless otherwise stated all comparisons discussed today for the second quarter of fiscal 2024 are against the same period a year ago please note that a supplemental slide deck outlining selected operating metrics is available on the IR section of our website following our prepared remarks Jeff and Mike will take your questions given the number of callers who would like to participate in today's session we ask that you limit yourself to one question I'd now like to turn the call over to Mike thanks Bob good morning everyone this is Mike cre I'm Dollar Tree's Chief Operating Officer and I'm happy to pinch hit for Rick this morning when Rick first joined dollar Tre as executive chairman and again last year when he became CEO he told you that he came here to lead a transformation with the primary goal of helping this company realize its full potential he's also said that Transformations are rarely easy or linear and that is especially true for a company as large as ours that is navigating through one of the most challenging macro environments we've ever seen that said Rick and all of us on the senior leadership team believe very deeply in this transformation and the positive impact we're having in the areas we control we also believe very deeply in the importance of providing the highquality lowcost products that individuals and families need in a convenient and comfortable shopping environment we are also committed to serving the communities where we operate and most importantly we are aware of the awesome responsibility we have each and every day to serve our customers Associates and shareholders clearly we are not pleased with our second quarter results or having to revise our full year outlook but this updated Outlook reflects how the challenging macro environment continues to pressure our customers it also reflects some revised Financial estimates that we will discuss shortly that said we will also talk about several areas where we are performing well and where our transformation initiatives are taking hold and I will share where we are heading as a company and why we are still so excited about our future so let's get started sales came in towards the low end of our Outlook range Family Dollars comp was in line but Dollar Tree's comp while positive was lower than we expected as we have seen for several quarters now demand from Family Dollars core lower income customer remains weak Dollar Tree has a broader customer base that includes more middle and upper income households and beginning this quarter we started to see inflation interest rates and other macro pressures have a more pronounced impact on the buying behavior of these customers this impacted our second quarter comp performance and is the primary driver of our revised full year outlook despite these near-term pressures we are confident in the Dollar Tree segment's ability to compete and win our offerings provide customers with exceptional values that are well matched to the current environment we are strong Believers in the inherent strength of dollar tre's differentiated business model and its long-term strategy of multi- price expansion and store growth acceleration today we need to be sensitive and responsive to the needs of our customers and meet them where they are and how they are living in this environment retailers who can offer products to provide value and convenience to pressure consumers are the ones who will take market share and grow sales we believe we are and will continue to be one of those winning retailers before getting into the rest of the details on the second quarter let us acknowledge that Dollar Tree's comp store performance was just part of the lower than expected Q2 earnings the most significant component 30 cents of EPF that wasn't in our June Outlook was related to general liability claims predicting these claims is complex and we again increased our acral for general liability this quar after observing higher than expected costs to resolve certain claims Jeff will give you the full details on this in a few minutes again this evolving economic backdrop our team remains focused on factors that are within our control including the rollout of key transformation initiatives Dollar Tree's multi- price expansion continues to resonate with our customers and the, 1600 stores that have been converted into our newest inline format are seeing an outsized sales lift as we talked about last quarter we are building new muscle memory with multi price this roll out is a process and we are constantly making adjustments based on our learnings from earlier rounds of conversions for example we are now prioritizing ready to convert stores and moving them to the front of the line ahead of that may need some additional prep work before they can realize the full range of conversion benefits as we've taken the time to incorporate these learnings we're a few hundred stores behind our original schedule but we've learned it's better to get the conversions done right than to rush the process the most important thing is that the customer response is validating our Strat it looks like Kroger Kroger it looks like Kroger stock is surging after their earnings calls it it seems like more customers are visiting Kroger I guess because they don't price scouch as bad as other grocery stores or other corporations yeah comment below guys what do you guys think of Kroger's earning calls it looks like they're doing well and they are providing for the consumer they are not price scouching they they have slowed down to C prices and are making it affordable for the customer to shop at Kroger comment below do you guys have this experience do have you noticed Kroger price gouging or do you guys actually enjoy shopping there comment below multi- price offerings will help us overcome some of the macro driven weakness we're seeing elsewhere in the portfolio we believe the expansion of inline multi price across the Dollar Tree portfolio will be a major growth driver for many years to come today less than 15% of our SKS are multi pric in addition to driving comp the higher gross profit dollars per item generated by this assortment should provide a meaningful lift to store economics over time as excited as we are about these initial results we believe we're still in the very early Innings with many years of Runway ahead of us St searches after we're also happy to announce that as of today we've reopened approximately 85 former 99 Cent Only locations as Dollar Trees in fact another 20 stores are reopening tomorrow and the remaining 56 should reopen by the end of the year getting this done from scratch in less than a 100 days required a massive effort across multiple teams that's a real accomplishment I would like to thank everyone involved for all their hard work these 99 Cent Only locations are proven highquality stores in strong markets with great growth potential we're very excited about expanding our footprint across California and the southwest and we couldn't be more pleased with the reception we've received from the C communities who've welcomed us this transaction was a rare opportunity to acquire a portfolio of assets under very favorable lease terms we expect these stores will provide compelling unit level economics and positive synergies across our networ while we have to absorb some unanticipated upfront costs that Jeff will talk about in a minute this is still a great deal in supply chain our DC in West Memphis Arkansas has reopened and is now making deliveries recall that after we lost our DC in Marietta Oklahoma we decided to temporarily repurpose West Memphis to support the Dollar Tree ban we're also making good progress on rocart s West Memphis is servicing over $600 tree and combo stores with Roc carts and by next year it will be able to handle an additional 150 stores elsewhere our DC in Matthews North Carolina is delivering to Family Dollar stars with rotor carts and we're serving approximately $300 Dollar Tree stores with Roto carts out of our DC here in Chesapeake many investors are very bullish after interest rates get cut in 2025 we might see a repeat of 2021 stock market where like stocks are like two to three times their value and so this has a lot of Nvidia investors hyped they think that in 2025 Nvidia is going to reach like a $6 trillion market cap which would be pretty insane but if stocks are expected to double and triple that's not that shocking that's not that shocking and we're also going to have the first trillionaire like they they are expected to make the first trillionaire in the history in like two years so it's either going to be Elon Musk and Jeff basos so yeah this either means the dollar of the value is going to decrease or the economy is going to like be doing very well comment below guys what do you guys think of like the stock market in 2025 to hit our 70 uh% yearend Target year to date we've added 75 new skews across food HBA and household products and private Brands now represent 9% of Family Dollar skes among categories we're seeing strong growth in food and we see great potential in HBA where we remain under index shrink remains a major topic across retail while shrink remains unacceptably High it appears to be stabilizing while it is too hurly to declare Victory I am pleased that our targeted actions and interventions helped our second quarter shrink rate we are running ahead of shrink expectations at Family Dollar and still have some additional work to do at Dollar Tree as we adjust to the new shrink challenges that arise when we introduce more high value multi- price products into the assortment now let's move to the financial highlights from the water on a Consolidated basis net sales increased 0.7% to 7.4 billion Enterprise comp increased 0.7% on a 1.1% traffic increase partially offset by a 0.5% average ticket decline looking at performance by Banner Dollar Tree comps increased 1.3% on a 1.4% traffic increase modestly offset by a0 .1% average ticket decline while cops were positive in each month they softened sequentially throughout the Big Bear AI is a competitor to palanker they have defense contracts they use AI to solve their like their customer Solutions so do you guys think this stock is undervalued it's currently like a150 it's basically a bag of chips their stock price and so do you guys think Big Bear AI is going to experience exponential growth when interest rates get cut like the AI Boom the AI bubble is just starting like AI is expected to grow like crazy in the next decade so do you guys think Big Bear AI is an undervalued stock comment below guys what do you guys think of the AI stocks discre it particularly in seasonal finally arrive in our stores Dollar Tree consumable comp was 4.7% against a very challenging 13.2% comp last year while discretionary comp was down 1.9% on the unfavorable mix this was a sequential improvement from the Easter related challenges we faced in q1 consumable categories like candy apparel snacks and beverages were our best performing areas in Q2 while higher margin discretionary categories like crafts floral and Home Decor underperformed after several quarters of strong growth Dollar Tree's unit and dollar market share gains moderated in the second quarter Dollar Tree attracted 2.8 million net new Shoppers over the past 12 months in the Family Dollar segment customer traffic and average ticket largely offset as comps declined 0.1% comps were positive in the middle month of the quarter and negative in the first and last months customer traffic increased 0.7% while average decreased traffic 0.8% our consumables comp increased 0.3% on top of a strong 99.5% comp in Q2 last year discretionary comp declined 1.7% a 300 basis point sequential improvement over q1 the improving Trend in discretionary comp reflects recent efforts to improve our assortment by emphasizing more relevant items with higher purchase frequency it's gone standouts for performing categories were evenly splited today's challenge is to play without the middle of your B meanwhile bottom performing categories Like Home Decor seasonal and Beauty skewed towards discretionary Family Dollar's unit and market share was essentially flat in the corner in the quarter Family Dollar attracted 1.8 million net new Shoppers over the past 12 months now I see the let's also update you on SNAP benefits as you may know over 40% of Family Dollar customers are eligible for some form of government assistance including snap and those benefits are a meaningful part of their household resources we have cycled most of last year's benefit reductions and we believe the worst is now behind us in the second quarter reduced SNAP benefits were a 60 basis point comp headwind for Family Dollar significantly better than the 280 basis point impact we saw in q1 and the 500 basis point impact in Q4 of last year and and one last point to share on Snap Family Dollar customers can now buy snap eligible products online through instacart delivery this collaboration reduces Transportation dependency by giving customers access to same day delivery of Family Dollar products this is a logical extension of our mission to help individuals and families do more with less by making essential Goods more affordable and accessible now let us share some thoughts on a few other topof mind issues we know that tariffs have been a big topic re recently uh in the event of any meaningful change to the current tariff regime we have long-standing contingency plans to diversify our supply chain in a timely and costeffective manner we also have the flexibility to adjust product specs and price points to address any changes in the market regarding ocean Freight our exposure to spot rates remains limited as the vast majority of our capacity is covered by annual or long-term contracts with limited near-term exposure to container rate volatility our outlook for ocean and domestic Freight remains positive regarding changes to overtime thresholds for salary workers under the fair labor standards act we fully absorbed the first phase of this in early July the next proposed phase which raises the July salary threshold by an additional 34% is scheduled to go into effect on January 1st of next year however there is significant uncertainty over when and if this change will be implemented we are evaluating multiple mitigation strategies to address the proposed rules and finally we wanted to provide an update and let you know what we are making good progress on our strategic review at Family Dollar which includes evaluating a full range of Pathways to maximize shareholder value as we discussed in June our transformation includes operational and business improvements such as multi- pric idolatry as well as this more holistic evaluation of the best structure and pathway for our Family Dollar business we understand that there are many questions on this topic and we reiterate our commitment to update you when we reach the conclusion of the review the actions we took earlier this year at Family Dollar to close underperforming stores are having the intended impact and our remaining Family Dollar stores are focused on providing service and value to our customers across the country each and every day before wrapping up we'd like to share a few thoughts about our revised Outlook we've adjusted our sales Outlook to better reflect where the consumer is today as they continue to adapt to the evolving macro landscape regarding the 99 Cents Only portfolio our revised Outlook reflects a better estimate of the one-time pre-opening costs associated with these stores and better than what we had when the transaction first closed finally it is also the adjustment to our general liability exposure and our latest DNA forecast which de Jeff will discuss in a moment we are comfortable with this reset given where the customer and the business are today and we are confident in our ability to execute against our objectives with that I'll turn the call over to Jeff thank you Mike and good morning I'll start off by discussing our second quarter results after which I'll provide some comments on our third quarter and fiscal 2024 Outlook where applicable I will focus on our adjusted results a Reconciliation of our non-gaap adjusted results is provided in our earnings Rel release second quarter results obviously fell short of our expectations our adjusted EPS of 67 cents was 38 cents below the midpoint of our June Outlook of that 38 cents 30 cents was attributable to the general liability adjustment while the remaining 8 cents was attributable to the flow through from the sales shortfall mostly in the Dollar Tree segment as Mike indicated Dollar Tree's comp softness was primarily on the discretionary side of the business and reflected the increasing effect of macro pressures on the purchasing behavior of the Dollar Tree's middle and higher income customers our original second quarter Outlook did not anticipate those pressures migrating to Dollar Tree's customer base to the degree that they did turning to the business results on a Consolidated basis adjust operating income was $218 million a 24% decrease from last year adjusted operating margin decreased by approximately 90 basis points to 3% reflecting an 80 basis point increase in gross margin offset by 180 basis point increase in adjusted sgna rate gross margin Improvement came primarily from lower freight costs partially offset by a fa unfavorable sales mix and higher occupancy costs adjusted sgna increased primarily from the general liability adjustment higher depreciation temporary labor for Dollar Trees multi- price rollout higher utility costs and sales D leverage partially offset by lower incentive comp cost our adjusted effective tax rate was 24.2% compared to 24% adjusted net income was 143 million and adjusted diluted EPS was 67 let me take a step back and offer additional details around the general liability adjustment we made in the quarter as we stated before predicting the outcome of both existing and unreported claims is inherently complex particular particularly as general liability claims have become more volatile in recent years due to the increase in estimated liabilities for these claims we took an incremental $84 million charge or 30 cents of eps against our prior Outlook with about 21 cents of that pertaining to Dollar Tree and the balance to Family Dollar so what's going on here and why are we talking about this again given the size and scale of our footprint we manage thousands of general liability claims stemming from customer accidents and other incidents at our stores and surrounding areas while some claims are current many relate to Prior years over time the ultimate outcome of claims particularly older claims during the pandemic and post-pandemic time frame has become increasingly challenged to predict given the higher settlement and litigation costs that have resulted from a more volatile Insurance environment for these reasons twice a year we rely on thirdparty Actuarial assessments and assumptions to evaluate acrs for open claims as well as incurred but not yet reported claims the claims have continued to develop unfavorably due to the rising cost to reimburse settle and litigate these claims which impacted our actuar determined liabilities while exposure to general liability claims remain difficult to forecast We Believe The Adjustment we took in Q2 captures the current range of potential outcomes based on what we have experienced in recent years now let's move on to our business segment results at Dollar adjusted operating income decreased 133% to $344 million 34 adjusted operating margin decreased 190 basis points driven by a 80 basis point increase in gross margin offset by a 270 basis point increase in adjusted sgna rate gross margin improved primarily from lower freight cost this was partially offset by unfavorable sales mix and occupancy cost adjusted sgna expenses increased primarily due to the general liability adjustment higher depreciation temporary labor for the multi- price rollout higher utility costs and sales The Leverage at Family Dollar adjusted operating loss was $3.6 Million compared to adjusted operating income of $1.8 Million last year adjusted operating margin decrease 40 basis points on a 50 basis point increase in gross margin offset by a 100 basis point increase in adjusted sgna rate gross margin increased primarily from lower Freight and occupancy costs partially offset by unfavorable sales mix higher distribution costs and markdowns adjusted sgna rate increased primarily from higher depreciation and amortization the general liability charge and sales D leverage moving on to the balance sheet and cash flow inventory decrease by 4% or $228 million average inventory per store decreased 3.6% On a related note to dat we have received $7.8 million of insurance proceeds related to the inventory loss and property damage at our marota Oklahoma DC value and that power is only as6 million that you connect them into right if you can't action on an Insight or an output generated by one of these optimization models what is the point right it's just more insight it's not actionable so the way they've literally deploying these models is within Foundry using the paler ecosystem and specifically compute modules as well so this is a new feature that allows you to actually deploy containerized Docker images on the platform that scale up and down depending on demand dynamically it's a bit of a technical topic but honestly for a developer that's deploying especially these models it's super powerful it means a ton of cost savings and also the ability to scale as your usership grows so for cell and DEA timeold like this is a new way in which they're engaging their customers and users of their products and the fact that pent is allowing them to like rethink what was actually possible in terms of a goto Market that's just awesome so uh Dr KP put out a video a couple days ago around getting into the S&P 500 and in that video he said the products that Panter is are building are becoming legitimate platforms for a company so piggybacking off what you said are you seeing companies use Foundry AIP to build the rest of their Enterprise applications on 100% I think one of the interesting things and we'll get into it of course but with the Keynotes you're going to see and the story we're going to hear told here at Aon today is how a lot of customers will think about how can they serve their customers better how can they build products for like their follow on customers Etc standing losses will be fully recovered under our existing insurance policies in due course w so Dollar Tree stock and Dollar General stock have both crashed over 30% does that sound right no it doesn't Dollar Tree stock and Dollar General stock have both crashed over 30% damn that is wild really this is the US economy telling us that customers are maxed out they can't even afford a shop at Dollar Tree or Dollar General a lot a lot of consumers do not have money stored and this could lead to something tragic happening in the economy down the road so yeah price gouging is a real epidemic here in America right now whether it's car loans housing loans Gro grocery prices it seems the American suer is maxed down and we need Solutions guys anyways comment below do you guys think these dollar stores are going to be around within a decade and do you guys think that investors should buy the dip or are we going to see foreclosures with cash and cash equivalents of $570 million and long-term debt of $3.4 billion our balance sheet remains strong our bank defined leverage at quarter end stood at approximately 2.5 times which continues to underpin our investment grade credit worthiness on the cash flow statement we generated $37 million from operating activities compared to 172 Million last year Capital expenditures were $51 million in the quarter versus $425 Million last year reflecting The Accelerated new store openings and ongoing investments in growth and other initiatives our free cash flow in the quarter improved $60 million over last year consistent with our discipline approach to Capital allocation after investing in the growth of our business this quarter we returned 91 million to our shareholders by repurchasing 750,000 shares at an average price of $120 per share at quarter end we had approximately 9 $52 million remaining under our existing share repurchase program now let me provide some perspective on our third quarter and full year expectations our current revised Outlook reflects the following we are taking a more conservative view towards comp sales in the back half of the Year particularly in the Dollar Tree segment as macro factors continue to weigh on customer sentiment and adversely affect discretionary demand and buying Behavior it also reflects one-time integration cost related to the 99 Cents Only lease Acquisitions because time was of the essence in acquiring these leases in a competitive bidding process the time between when we took physical possession of these properties and when we and when they opened was longer than expected as a result we are incurring upfront occupancy costs like rent insurance and security for an extended period before the stores open this transaction a week before or prior to our major cities are falling apart businesses cannot afford their rent at time Beverly Hills Santa Monica downtown LA there's so many closed down businesses up bordered up because the owners cannot afford rent they are the prices are too high and so we have a lot of vacancies vacant buildings here in Los Angeles the initial sales performance of theed and so when interest rates get lowered we are going to see wealthy Real Estate Investors just buy up all this property and then we're going to see greater wealth disparity where like the people at the top own everything and everyone at the bottom doesn't we also EXP DNA anyways comment below what do you guys think of the current real estate market in Los Angeles reflect anticipated cost for projects such as new stores Renovations and our it transformation as well as the timing of receipt for vendor invoices this is expected to be an incremental EPS headwind of approximately 12 cents split evenly between Q3 and Q4 on the positive side of The Ledger we saw some green shoots and discretionary mix at Family Dollar in Q2 which is so far carried into Q3 we are assuming this trend continues for the balance of the year and are now expecting a modest mix headwind for Family Dollar in the back half the better initial performance at the converted 99 Cents Only stores is also reflected in our revised sales out Outlook from a modeling perspective it also worth reminding everyone that sales from these and all new stores won't show up in our comp store net sales until after they've been open for 15 months and finally payroll should come in lower than previously forecast as we align incentive comp and hours with our revised business Outlook with that background for the third quarter we expect net sales will be in the range of 7.4 to 7.6 billion based on low singled digigit comp net sales growth for the Enterprise and both Dollar Tree and Family Dollar segments adjusting for the stores that were closed as part of the portfolio optimization we expect third quarter net sales for the Family Dollar segment to decline by 1 to 3% on a year-over-year basis we expect adjusted UPS will be in the range of a doll five to a doll 15 which reflect more conservative sales out 3523 [Music] what pank tier stock just reached its alltime high High Ever $35.23 the stock has been getting a lot of hype since getting added to the S&P 500 and investors are eager to see this stock double or triple but I think this stock is actually going to crash just like Nvidia had its alltime high eventually the stock crashed and I feel like this is going to be the same story for palank here where investors are going to be left disappointed because they expect the stock price to keep surging like crazy but then it's just reality is going to get set in reality is going to get set in a lot of investors are going to sell day Traders are going to sell and then the stock is just going to go back to like $30 yeah comment below guys what do you guys think of palank here and their current stock price of $35 and their current stock price of over $35 of that $135 Delta 38 cents came from Q2 shortfall the vast majority of which came from the general liability adjustment then in the back half of the year 12 cents is from the higher upfront cost in the 99 Cents Only portfolio another 12 cents is from the DNA adjustment and the remaining 73 73 cents is primarily from the flow through on the lowered sales Outlook which is mostly due to our more conservative outlook for discretionary sales at Dollar Tree with that I'll turn the call back over the month thanks Jeff on behalf of Rick and the entire senior management team I want to thank our teams for their continued hard work in a very challenging macro environment and for supporting our strategic review of Family Dollar our strategic review is looking at the full range of alternatives for family dollar with a focus on clearly demonstrating the full value of our two distinct franchises despite significant headwinds our Dollar Tree Banner remains positive even as they lap two years of extremely strong performance our non- multi pric stores were modestly positive this quarter and our newly converted multi- pric stores produced a 4.6% comp this is one of the best multi-gear comp performances in all of retail most importantly we have just begun to roll out our expanded multi price CU whoa let's see let me see let me see let me clean the camera guys guys so pank tier stock just reached its highest price ever over $35 and 24 so Plank's oldest highest stock price was $35 and8 now it's $35.23 that is insane so legendary day for paner investors the stock has reached its all-time high ever being added to the S&P 500 really made the stock surge like investors rallied they're very bullish on panker stock right now their market cap is over 78 billion more than PayPal PayPal's market cap is 70 billion pentier is worth more than PayPal that's insane so investors are like doing really well that have been holding palank to your stock especially if you invested in 2020 you would have seen like a almost triple in your investment and so pentier is doing really good although I think it's going to crash we might we might even see pantea reach $40 because when interest rates get cut that's typically a good sign for the stock market the stock market usually like rallies when interest rates get cut they do really good but if we see stocks like doubling or tripling that might signal like a reverse market crash where like that's just the dollar losing its value but who knows we will have to wait and see for the next few months if it's going to be a reverse market crash or the economy is actually going to get better but yeah but speaking of like planker stock um speaking of the economy getting better like have like a couple days ago we had Dollar Tree and Dollar General earnings and their stocks crashed like 30% like the consumer is maxed out so they cannot even afford to buy at Dollar General these are people that have a $30,000 salary and they cannot afford to buy Dollar General so these stores are these dollar stores are saying that the consumers are maxed out and they're like yeah and so this this is maybe like signaling like these Dollar Stores um these dollar stores having a lot of for foreclosures and closing down is making me think that the economy might might do like that like we might see a reverse market crash where like the Dow Jones goes to like 55k like stocks are doing very well but then the value of the dollar just decreases and then everything becomes more expensive we see a surge in price gouging that is basically what's going to happen like the economy might be pretty bad but who knows we'll see let's see let's see let's see if this is a reasonable price for palanker do you guys think palanker is undervalued or overvalued or is it valued at the right price a lot I've seen bare and bullish cases of palanker a lot of investors think the stock is undervalued some investors I've seen say that like the stock it shouldn't be the stock price shouldn't be this high for plank tier Technologies anyways comment below guys like is pank tier a good investment or is this stock overvalued like some people are saying but I I can definitely see the stock surging like $40 like interest rates haven't even been cut yet and and it's in a few days and then that typically means that the stock market is going to do very well yeah comment below guys legendary day for palanker reach its all-time high in stock price and we might see it surge even more or it could crash yeah comment below guys what do you guys think of the current state of the stock market right now let's see let's me put [Music] this and we still have thousands of stores to convert to our new format on top of that we're opening hundreds of brand new inline multi- pric stores this year and plan to do so for many years to come wow in light of all this we continue to believe the Dollar Tree is one of the strongest Platforms in all of retail with many years of strong comp and store growth still ahead of us okay operator with that Jeff and I are ready to take questions thank you we will now be conducting a question and answer session if you would like to ask a question please press star one on your telephone keypad all right let's see let let me make a video about this guys this is pretty pretty big news so Dollar Tree and their earnings calls say they don't see themselves leaving anytime soon they are making more stores so despite consumer buying power being low and Shoppers not being able to buy at Dollar Stores anymore we are talking about Shoppers that make $30,000 a year they did a study and like even the customers that make $30,000 a year cannot afford a shop at Dollar Tree and Dollar General that's how maxed out they are and so a lot of economists and like analysts were saying that this might signal like a back turn for the economy where like the value of the dollar keeps decreasing but Dollar General said that they are not going anywhere comment below guys do you guys shop at any of these stores and what do you guys think of like like Dollar General and the price of the devaluation of the dollar a confirmation tone will indicate your line is in the question queue you may press star two to remove yourself from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing the star Keys as a reminder we ask that you please limit yourself to one question one moment please while we PLL for your questions our first question comes from the line of Michael Lasser with UBS please proceed with your question good morning thank you so much for taking my question so putting aside what has been happening at Family Dollar the core Dollar Tree Banner has a number of Tailwinds such as multi- price point fright improvements and others yet a series of unexpected items that have indicated to be one time in nature have consistently been dragging down the earnings of this business so at what point can it move past the onetime in nature items and be on a consistent Glide path forward and as part of that what is an updated realistic operating margin for core Dollar Tree if it is a long-term low singled digigit comp grower thank you very much yeah good mik good morning Michael this is Jeff I'll I'll take um a portion of that question regarding uh general liability um and some of the other elements you know you point out I think a very valid point um the general liability uh adjustment we had to take is is one that we're we're not happy with um it's one in which as I mentioned in my uh remarks it is very complex as a result of um how these claims develop over time and having um new information around that we believe that the adjustment that we've taken today reflects not only that historic performance our current um outcomes as it relates to how these claims are developing but we're also U making sure that we're not anticipating any Improvement in these claims experienced on a go forward basis uh thus we feel more confident around the adjustment that we've taken reflects the the uh current Li ility that is sitting out there for once again not only these existing claims but the claims that have yet to be uh reported um that's that's the best way I can uh respond to that to you uh to Michael that we believe we we now have uh this behind us um the the second portion of your question I believe was around where do we think the operating margins of the um the long-term operating margins of the business would be you know as we continue to drive multi price and um we're going to continue to drive higher gross profit dollars per transaction um we believe that as we move forward and we get Beyond some of the um higher transformation cost uh that we're experiencing right now as it relates to some of the it uh Investments that we're making supply chain Investments that we'll be able to U achieve the the Outlook that we have provided Ed previously um on a longer term basis for the business um I don't want to U give any longer term uh view of the business other than what we've already given um in our um outlook for the quarter we've said that um once again Family Dollar I'm sorry Dollar Tree is going to be low single digits um we said that the um one second here in in our [Music] financial if I can find it real quick Jeff just do that Michael the mix we see too on the multi price remember it comes in heavy consumable first because that's what we could get in the short order as you look to enter the back half of the year with the holidays you get that discretionary benefit from from uh the multi price roll out yeah I I I found it here Michael I just want to make sure that I I quoted this appropriately um as relates to 2024 Outlook we we still believe that the um gross margins on the Dollar Tree Business uh will be in the range of 36% um and you know the flow throughs that uh we've had previously we said on a Consolidated basis the sgna will be approximately 26% um and um the uh uh the the sgn outlook on the Dollar Tree uh segment uh already reflects the additional uh cost that we've had um as it relates to the approximately 2,800 uh stores that we're going to convert to multi price that's the other headwind that that we have currently in the business as we're using third party labor for that thank you our next question comes from the line of Edward Kelly with Wells Fargo please proceed with your question yeah hi guys good morning so I want to just take a step back you know given the I guess the overhangs and the questions that investors really have you know at this point as you think about multi price point at Dollar Tree um how confident are you that um some of the weakness we've seen recently is just macro as opposed to you know push back on the multi- price point strategy um I know you have the conversions that are doing well but I think three and5 are in many more stores just curious as to like what you think consumers are really saying there and then you know you had optimism around Q4 so when you know do you think you can start to turn the corner and then the other thing is Family Dollar and I don't know what you can say but it is there anything you can tell us around your confidence and your ability to come to some resolution in that business um that is a creative to shareholder value thank you yeah and it's Mike I'll take the first one uh you know we said we're we're still in the early Innings of multi price um and I'll tell you that we like what the customer is telling us with multi price so we're surveying our customers we're listening to them um they're telling us with their comps uh you know I highlighted how strong our multi- pric stores are performing uh you know compared to stores that just have uh the do25 uh and we're really growing traffic uh we're adding new customers and our customers are letting us know that they like the product and then when you look to the second half we we really think they're going to like the discretionary product uh so we've seen it as our stores have set you know our Associates are our customers and our Associates are telling us they love this multi- pric product they're excited about you know the holiday season and all that so um we'll continue to to learn as we go we've made changes as as I mentioned in my prepared remarks um you know we're a couple hundred stores behind where we are that's because we want to be better we want to get it right when we roll them out and so we took the approach we added some call them Milestones or stop gates to say we're not going to convert a store unless that store is ready to be converted so we can improve what the customer sees when they come in and the overall performance of of the multi- pric stores then Jeff I'll let you talk to the FD strategic yeah just a couple things that add to that um if you think about the do tree uh segment you know last year this time we added over 2 million new customers we're now lapping that we continue to add beyond that so it is absolutely resonating with the customer if you think about the fact that we continue to maintain our market share uh in this environment at a time when we're actually seeing customers contract their spend it's not that we are seeing uh combination of things so we're seeing contraction of spend we're not seeing necessarily a loss from a competitive uh standpoint so we continue to add new customers maintain market share um continue to to resonate with the customer when uh Mike had spoken about the new uh inline conversion stores that multi price uh delivering you know 6% plus comps in uh consumables and even positive almost a 3% comp in uh discretionary so U very very favorable uh for us as it relates to uh Family Dollar um we're we're excited about what we're seeing in Family Dollar um also from a standpoint of we're starting to actually see some discretionary Improvement we believe we're beyond the the biggest headwinds that we've had with respect to the customer with SNAP we're continuing to see Improvement and Shrink um we've invested in people time uh technology uh and systems on the Family Dollar side and this proof points are really starting to uh deliver improve uh shrink results there um the customer uh is is is resonating uh with a number of the resets that we've had it's just that customer right now is under some of the more significant um uh budget pressures and then they're working through it and when we're seeing that customer use all tenders not only that may be government assistance but also using uh credit where it makes sense thank you our next question comes from the line of Simeon Gutman with Morgan Stanley please proceed with your question hi good morning everyone uh Mike I wanted to start with um Dollar Tree thinking about multi price roll out can you remind us why what's the the timing of the roll out why can you go quicker and if labor is a constraint um could does it make sense to hire your own and then was there any Rhyme or Reason to the first 1600 stores so thinking about what the results could look look like further Downstream as you get get further along the way sure siman so there there's two pieces to this one is the bandwidth of our own internal team to to get these stores done with both the new store openings we're doing renovations we're doing and the multiv roll out that's why we really leaned on third party to to take off uh as much as we could and go as quickly as we could uh the other gating process is as we turn our our distribution Network on with multi price that then feeds the stores uh that we convert so there is a little bit of a gating factor in terms of the product coming in the DC being set for multi price uh and being able to service those stores so we'll do when you look at it we said a couple hundred behind this year so instead of 3,000 that's that's 2,800 or more uh but then there's another 300 new stores that open up multi price as well and you'll see a similar Cadence each year as we go through to all stores that that we can put multi- price in um so it's really a question of our our own bandwidth to process it and then our ability to work with vendors to get it into our DCS and get it out to uh the stores I'll tell you s when we do the execution right the the only challenge we have is is keeping up with the product because the customers um love it thank you our next question comes from the line of Matthew boss with JP Morgan please proceed with your question great thanks um so Mike at at the Dollar Tree Banner could you elaborate on the softening progression of same store sales in the second quarter and any changing trends that you've seen so far in the third quarter and then just larger picture I I guess maybe could you speak to Performance versus plan in the roughly 80% of your doors at Dollar Tree outside of the 1600 converted stores I think you cited these as flattish comps this quarter but pre pandemic 2017 to 2019 Dollar Tree Banner comps were pretty consistently in that 3% run rate just how best I think about the difference in the corridors relative to pre-pandemic Performance sure Matt good morning um so first in in terms of the trends I I think it's a little bit of the I call it the the who the how and what the who is the income level um well we saw in Family Dollar early the the lowincome pressured Shopper we saw that drift up it materially drift up in the second quarter as the middle income uh the greater than 125,000 that person started feeling the pressure as well uh from you know the the macro environment um and then the how they shifted to buying for need versus buying for want uh and so really that showed in our discretionary mix leaning towards consumables and then finally the what you know this started uh with sensitivity on Big Ticket items and has come all the way now to us as people have you know maybe changed how they how they celebrate a party this this summer fewer guests um fewer parties um they're really tightening their belts and and the macroeconomy is driving to to behave a bit differently um and so when we look at all those things together that really that really pressured us as you as you look then at how we exit and where we go I I'll tell you Q2 is always one of those quarters where there's really no holiday uh all you have is is Fourth of July whereas Q3 we get back to school and Halloween and then when you look at Q4 you get that Harvest you get Christmas uh and really that demands you go to Dollar Tree it's it's help people celebrate their lives and so that gets our people coming in so those were the trends and as we look out I I think Jeff would say our our current trends you know reflect our overall forecast uh right now um and then finally on the on the core doors I mean I I would tell you I still think yes they were in that that half a percent um but you look at some of the two-year Stacks uh when you really look at the multi-year performance of these uh stores I I think it's some of the the best in retail um and as we roll out the multi price we really feed that you know Thrill of the hunt and we get it to more doors they come in for the thrill of the hunt on the multi price and we get to sell the rest of the store so I really think we end up getting that boost to the core uh from from the rest uh from the roll out of multiplus thank you our next question comes from the line of John heimbuck with gugenheim Partners please proceed with your question and my a couple of quick things the um when you look at those 1600 stores can you can you touch on uh you know volume right um you know in that comp right the unit throughput the multi- price point penetration and then when you think about consumable right so a Dollar Tree the consumable um share gains right kind of flattened out a little bit do you think that's more um it's more you uh do you think it's the competition and and what's what's the plan for I know you you want to get to eight of 10 doors uh multi- price point I think you were three today you know what what's the plan now to get there go faster go slower what's the Thought yeah so uh to the first one um as we roll out the the 1600 you know right now you get that mix where early on it's consumable uh and then we go into the the full kind of set for this year that gets into the discretionary and we'll get to like 15% penetration in the store in terms of the multi- price penetration in the store um and and then you know John on on share gains I mean we're we're growing our our our unit Market is growing um our dollar Market's growing um we are taking share uh in a in a belt tightening environment uh but we continue to be incredibly relevant to the customer and I and I would say we continue to be needed by the customer as they adapt uh to the to the macro conditions um and then in terms of you know where this could go you have a a steady roll out um we continue to learn from the roll out and a big part of why we're behind 200 stores on the roll out was we simply won't convert a store that's not ready to convert it's it's something we learned from the early roll out there was this tendency to kind of hey we can we can muscle through this um and when we saw remember Rick talked about you know 50 absolutely love 25% are in line and 25% are behind in order to try to influence that we changed our process to say we're not going to muscle through we're going to make sure a store is ready to convert uh and ready to to realize the full potential of the multi price when we execute it uh and we'll continue to learn from the RO out and make changes as we go and then John on the Family Dollar side um while the consumable uh comp did flatten out a little bit I would say in contrast on the discretionary side we also saw uh some flattening out of the decline in discretionary um continue to uh see the the resets that we're doing in that particular area what we're focusing on expandable consumption and price points that is very attractive for the customer given their their needs is uh starting to resonate for us and these comps once again are on top of last year some of the the highest comps that we had for for the uh last year thank you our next question comes from the line of Chuck gr with Gordon haset please proceed with your question uh thanks good morning um on the on the stores that have been converted um Jeff and Mike can can you unpack that 4.6% conflict between traffic and ticket and then can you also talk about the four wall profitability of those stores as as you've progressed um on the roll out you know if you pull out the estated dollar growth for the entire Dollar Tree Banner X the general liability is up 10% year to date curious you know how how the four wall um profits are looking with with the higher costs to to roll that U multi price point effort out effort out thank you yeah so um great great questions there Chuck um you know as we uh if I unpack some of these as a relates to the stores that have uh converted and you you mentioned the 4.6% uh uh comp there we we haven't given the detail between traffic and and ticket um we um as as we look at it uh overall um it's it's really being driv driven by by traffic um ticket here right now um is uh you know flat at best the Dollar Tree and it is um in those particular uh stores also uh ticket if you can imagine the that when you have a multi- pric item in the basket you you also still have a number of do25 items and it's the increased traffic that's coming in um that that that basket is is staying relatively flat overall but we're really being driven by traffic as it relates to the the sgna I think you very appropriately pointed out the uh the headwinds and and sgna other than um the general liability um has been as a result of the uh what we call other payrolls that third party um labor that we're using to implement the stores uh we're going to have that this year we'll have it uh next year we had called it out um uh previously as a as a headwind of of 20 plus uh uh cents this this year um as a as a headwind to our overall etss um the the other area that's impacting our sgna um is is absolutely on the depreciation side and um it's the cumulative Investments that we've been making not only in new stores um but in other initiatives as it relates to supply chain and um it those Investments uh are starting to uh level off as we've gotten not much further in the overall um transformation and um as we move forward we'll be giving you um other uh estimates as we U you know look forward to subsequent years but we're not updating any forecast at this point in time thank you our next question comes from the line of Paul leis with City please proceed with your question um I mean macro pressur that you cited Dollar Tree's middle higher income consumers do you think that customers shopping less overall you think they're going somewhere else and wonder if you think you need to change anything on on the pricing side or how fast you roll out M be price and then second I'm curious if you can talk about whether you're taking any actions behind the scenes to separate uh aspects of the Dollar Tree and Family Dollar business that might that might have some sort of p&l impact but if you plan to do that uh over the course of the year as you think about the Strategic review of Family Dollar thanks yeah Paul I'll take the first one I'll let I'll let Jeff tackle the separation business um so this is macro belt tightening I mean we we see it um we see we're growing traffic we see the 2.8 million new customers we've added we hear the feedback uh on Multi price and that they love that you know they can get more we get more share of their wallet they can not have to you know drive somewhere else to to fill in the shop um but they're really changing as you look at some of the discretionary in Q2 we saw some changes in terms of how they celebrate um and uh that is just belt tightening by our consumer um and one that we feel they need us more now than ever uh and so we'll be there to help them celebrate as uh as they need do need the discretionary uh and go back to you know a little more celebration and invite more people to a party and and doing all the things that uh really the kind of the holidays demand Jeff yeah just to add that um you one of the things that we do we try and double click on the number of different things we're seeing from our overall customer base based on customer insights and we continue to see customers buy more so they're expanding their consumption and we see individuals who are Contracting their uh spend right now because of this macro Bell tightening you see more people Contracting than actually expanding but that is that is more the issue as Mike I said it's a br belt tightening it's not from a competitive standpoint those those individuals uh net shopping elsewhere as it relates to Family Dollar in the Strategic review uh we continue to operate uh both businesses with the intent of continuing to uh maximize shareholder value in order to uh grow both um as we had mentioned earlier uh even last quarter we had decided that we were going to shift some of the uh investment ments as it relates to new store openings and some of the renovations um tilting a little more towards Dollar Tree versus Family Dollar but um other than that um we continue to operate the two businesses with the expectation that um you know once again we we we are uh bullish on both um the question probably didn't go this far but I think it's probably easiest to address this at this point in time on the Strategic review we are looking at a wide range of operations including those they would include outside parties and those that would um ex we should be able to execute um by ourselves and we're we're very pleased at the progress we're making on that strategic review at this point in time thank you our next question comes from the line of Christina Kai with Deutsche Bank please proceed with your question hi good morning and thanks for taking the question Jeff I I wanted to ask if this challenge consumer backdrop that we've been seeing is just changing the way that you view if any incremental Investments might be needed in the business just thinking about the overall value engineering labor score standards and as you see the BT tightening as you noted just how do you think about core Dollar Tree's value proposition and how do you see the evolution in the back half just given peers is greater mark an activity thank you yes uh Christina you know as we think about this we want to manage the business for the long term um and these are you know uh different situ in this period of time where we're seeing some belt tightening doesn't mean that um this is not uh this this has some impact on the uh the sector of this business longer term the Investments that we're making around store standards the Investments that we're making uh with respect to our uh roll out of the multi price we believe is all core to providing a great experience for the customer a convenient uh opportunity and delivering value um so we we feel as if um as we work through this um we we have a we're mindful of what the current macroeconomic environment is but we also understand that we we need to remain true to our transformation and how this will deliver value over time thank you our last question will come from the line of Scott chiarelli with truest Securities please proceed with your question uh good morning everyone um so you guys took some tougher medicine at Family Dollar uh over the last couple quarters and seems like the profit performance at Family Dollar actually has started to improve a bit once you get through the adjustments but Dollar Tree seems to keep suffering from additional issues and expenses quarter after quarter would it make sense to do a harder reset at Dollar Tree and Dollar Tree expectations whether that's through store closures fully or permanently resetting labor costs Etc because I think investors tend to despise the death of a Thousand Cuts thanks I think the the best way we think about this is um this quarter uh we saw a pullback um in a higher income customer uh we believe that we are positioned appropriately to um meet that customers needs over time as they're looking for for Value we believe our multi- price uh offering is what's going to uh give us that um that support the Investments that we're making um as it relates to once again store standards and other things that we're doing is is part and parcel to making sure that we deliver the experience of that higher income customer is looking for um we will continue to be diligent and disciplined as we think about those Investments on a go forward basis but we believe that it is um in line with what we need to deliver over the long term yeah and as I look at just the new stores we open the renovations we're doing and then when you talk about you know more than than 3,000 stores that will touch this year that is an investment in our store standards that is making our stores better you know for our for our customers and so we look and and we we like what that future looks like we we like the ability to kind of touch the chain every year and get be back on a track of really showing our customer that we care by bringing in new things that excite them uh new things that that wow them uh and really true to who Dollar Tree is so I I mean I look at it and say our our customer needs our business more than ever and and we're continuing to evolve the business to meet them where they are and the last thing I'll add is you know if you think about the 99 Cent Store acquisition that we did of leases uh yes we've had some higher than expected upfront costs but we are really excited about this 161 stores that we've been able to uh acquire they're in the markets that we believe we need to be in at very attractive overall leasee rates we believe that we have the credibility and and latitude to grow very aggressively in these particular areas these stores are of the size and scale that uh other stores that we've had in this type of situation have been able to outperform against the broader portfolio so while there's some short-term uh pain here as we kind of work through this we'll be very excited about what this is going to deliver for us once again over the long term thank you we have reached the end of our question and answer session I would now like to hand the call back over to management for any closing comments uh thank you everyone uh for your time this morning and thank you for all our Dollar Tree and Family Dollar Associates out there serving our customers and we look forward to speaking to you again next quarter is outside the White House and actually caught up today with Jens just moments ago Megan hey Scott that's exactly right so we've been here just outside the White House all morning because there was a meeting this morning between the Biden Administration and top Tech leaders on AI we saw Sam Alman of open AI we expected Ruth porat of Google Dario amade of anthropic Brad Smith of Microsoft we're all here and then we we caught up with Jensen hang of Nvidia as you mentioned we got to talk with him for a few minutes about the 2024 election about that meeting about Ai and his thoughts on all of it we have the tape here for you let's listen can you tell us about the meeting today well we're talking about uh energy uh about this new industry called AI factories and artificial intelligence and obviously uh we're at the beginning of a new Industrial Revolution and uh this industry is going to be producing intelligence and what it takes is is uh energy and of course a lot of great computer science and and uh uh large Computing systems that Nvidia makes and so so we've got we've got to make sure that that uh everybody understands the needs coming the opportunities of it the challenges of it and um and do it in the uh the most efficient and uh scalable way we can absolutely do you see the need for a federal role here in terms of federal investment in combination with private investment well there's probably going to have to be uh Public public private collaboration in this area because because the uh the rate of uh growth is really quite High um Al although although artificial intelligence uh consumes a lot of energy to train it also saves a lot of energy when you consume it uh because ultimately it's not about training the model it's about using the model and uh whether it's in healthc care or uh climate uh climate technology or uh just running the power grid artificial intelligence has the opportunity to really save a ton of ton of energy and so so I think people are are grappling with uh the the scale of of the opportunity ahead and of course the scale of the challenges ahead and so it's going to require public and private collabor ceration do you think the US is doing enough at this point to be competitive with China and other countries well this this Administration is determined to do the most and do do it the vastest and that's really that speaks volumes about about uh the reason why we had this meeting today and so it's really great is there enough money behind it at this point well you know if this country doesn't have the money I don't see anybody else in the world that that can possibly take advantage of this incredible new industry and so uh you know I think people are starting to to realize that AI is not not just a new computer science it's a new way of doing software it's going to of course revolutionize the computer industry but it's going to create a whole new industry that sits on top of it uh that produces um uh intelligent skills and and produces knowledge and this industry is going to be quite large it's going to be the you know hopefully the most exciting of the new industries that the world's ever seen can I ask you a quick question about export controls is there any policy US policy that you would like to see changed in order to make sure that you're able to make sales overseas well export control and National Security uh industrial resilience um uh supply chain resilience all of those all of those matters are really complicated and and uh this Administration understands the Nuance of it and so uh we would like to see uh of course the US Industries be as vibrant as possible to export uh American Standards all over the world and to have the rest of the world be built on on American Standards um uh of course National Security incredibly important and we have to safeguard all of that at the same time and so so the uh uh this is why policy makers have such a such a difficult job they have to balance all of these uh various requirements and make sure that that we have a great policy that that somehow balances and keeps all of this uh up in the air and thriving and so I think the the uh uh and the most important thing for us is just you know make sure that we inform uh the administration on what we know about about the technology and the industries that that we're cultivating uh and and uh on her % make sure we comply with the policies can I ask you one more question on tariffs with this election there's a lot of talk about potentially across theboard tariffs of 10 to 20% and up to 60% on China do you have concerns about how that would impact nidia's business or concerns about the policy in general well I'm not very very informed in most of that stuff I think the um our company of course uh serves serves Industries globally and uh we're one of the few companies in the world that serves every single AI company in the world and uh uh we're in healthcare and Logistics and transport a and Retail and etail I mean the the number of industries that we serve is really quite large and so you know obviously all of these matters are are complicated and and requires uh Nuance thinking from from uh the administration so I I trust that they're going to make great decisions yeah absolutely the number one thing we tend to hear from Business Leaders is on stability especially when it comes to this election do you have thoughts on on supporting one candidate over the other especially when it comes to keeping a calm stable business environment uh well you know one of the things that that's really important is uh and this affects us in export control is just to have a a stable policy um of course policies have to be has to adapt to the to uh the changing uh environment and and uh in in our world the changing environment is is literally real time and and so uh I I um appreciate the challenges that has on on the administration and and U meanwhile we have to some simultaneously seek and um uh strive for uh American Technologies to be the safest choice to be the best choice and uh we want the rest of the world's uh Industries to be built on top of our of our of our industry and so uh stability matters uh um and of course we have to continue to be the best which which uh American companies know how to do uh to the extent that we have stability I think it's going to be great what about on taxes there's obviously very different stand between these two candidates on either raising the corporate tax rate to 28% or cutting it to as low as 15% on the other side any preferences there um or any thoughts on sort of how that would impact Nvidia well you know like whatever the tax rates are we support it you know it's a as simple as that I think the uh this this company was built in America it benefited from all of the infrastructure and and uh uh and uh the support and the amazing intellectual Capital that's in in this country uh and so so to the extent that we can pay back through taxes we're delighted to do it absolutely so no endorsements at this time we're we're uh we're focused on building our company building our our technology and um supporting whatever Administration is here absolutely anything you can tell us about what's next for NVIDIA well uh you know we're we're in the process of uh going into our uh starting the production of our new generation called Blackwell uh every single generation we try to increase the performance tremendously and called Blackwell uh every single generation we try to increase the performance tremendously and when we int introduce new generations uh and the performance is is uh three four times higher we're essentially reduce reducing the cost of computing and reducing cost of artificial intelligence by the same factor and so uh each generation reduces energy consumption uh increases performance reduces cost and so we're we're in a hurry to get to Black well we're in we're full volume production of black well and and uh uh every company in the world is is choing it the bit you know for us to ship it to him hey Scott so you heard it all there a lot of details to sift through on policy he spoke about the need for a public private cooperation when it comes to building out AI didn't want to make commitments when it comes to the 20124 election but said they would support whatever corporate tax policy was out there he spoke about the need uh for stability especially when it comes to export controls wanting to see stability with whatever Administration comes next so I'll let you guys live through it but a lot lot from Jensen Hong let's turn to Boeing and the possibility of a strike here more than 30,000 machinists in the Seattle area voting on a labor deal with a midnight Pacific Time deadline looming are fill of bows on the ground and Renton Washington with the latest so what do we know Phil Sarah we've been at this union hall for a couple of hours now talking with machinists who are going in casting their vote on whether to accept the deal and if they reject it whether to go on stre strike here is the deal that they're voting on a 25% pay hike over the next 4 years kicks in with 11% right away and then 4% 4% and 6% cost of living adjustments in there a commitment by the company to build the next plane here in the Seattle area and this is being recommended for approval by The Machinist Union leadership but for the rank and file who we talked with that's not good enough not even enough to to live in the area we work I mean unless bought a house 10 years ago yeah you know so 25% is not enough not even enough to to live in the area we with to build the next plane here in the Seattle area and this is being recommended for approval by The Machinist Union leadership but for the rank and file who we talked with that's not good enough not even enough to to live in the area we work I mean unless you bought a house 10 years ago yeah you know so 25 % is not enough what what do you consider the the amount that most workers would say okay I can live with that I think people might be willing to accept 35 I plan to reject the contract because uh they could do way better than what they did when when you say way better you mean 25% is not enough what do you mean well we haven't negotiated a contract in 16 years so there you go meaning you expect more than 25% well yeah with the way inflation and times are nowadays people on 20 bucks an hour camp and the challenge is stops down almost 40% this year well you never want to strike if you're running company it's it's going to be costly any way you look at it and you're right s this is not a good time for Boeing but the way that the rank file members look at it is they haven't negotiated truly negotiated a new contract in 16 years and they feel like management at Boeing over the last 16 20 25 years have shoved down their throat a number of things that they have been forced to accept mainly lower raises the movement of some production to non-union South Carolina that still bothers a lot of these Rank and file members and some of the people I've talked with they've been here 15 20 25 years so they have long memories and for them they don't believe this is enough yeah even as overall approval of union membership among Americans is ascended right now uh Phil important story on a day where we're watching a lot of airline news in particular that's fil Theo on Boeing Steph you know he he used the word great uh yesterday here in San Francisco at the conference that we of course were broadcasting live from when he talked about demand but you know Josh spoke about more broadly the semis which were one of the weakest parts of this Market it led to the feeling that there was a lack of stability with the technology trade but here we go week to date you know broadcom for example is up 20% this week get better than Nvidia Marvel's up 13.2% AMD 112 Taiwan semi 9% you want to look at the foundation of where this stability feels like it's coming from look no further than the semis right and Scott I think that has to do with the fact that across the board and all the names you just mentioned and and then a whole host of others they all beat earnings they all grew total revenues at the minimum AMD was the was the weakest and it was up 10% in terms of revenues but you had across the board Qualcomm and lamb research and tsmc I mean these the numbers were phenomenal and broadcom also was pretty phenomenal their AI business in their quarter grew threefold year overy year their VMware business is growing 4 billion on a revenue run rate basis those two pieces within broadcom represent over 50% of total revenues and then add on at Goldman conference they're very very bullish about their business and they're reiterating all kinds of great targets I mean their AI business at the beginning of this year Scott was 7 and a half billion dollar that was their target for the full year in AI they're now at 12 billion I me that's just these numbers are crazy they're great and so for me when it fell last Friday 10% on Monday I added to it I added again to it uh yesterday because I don't think it's fully appreciated because I think everybody gives all the credit in the world to Nvidia which they should it's a wonderful company been a great stock was $7.5 billion that was their target for the full year in AI they're now at 12 billion and that's just these numbers are crazy they're great and so for me when it fell last Friday 10% on Monday I added to it I added again to it uh yesterday because I don't think it's fully appreciated because I think everybody gives all the credit in the world to Nvidia which they should it's a wonderful company been a great stock but there are other names to play as well especially when I don't think it is as appreciated in the marketplace and I have a cyclical driver on top of AI and vmw I have their their uh cyclical businesses right networking and broadband and storage that is actually at a trough and I think based on the last two quarters that business seeing order growth of 20% in each quarter that bodess well for next year and the earnings power on top of this other momentum so to me that's the one that I have been betting on it's done well for me it's up 94% in the past year so I have definitely a lot of exposure uh in this theme and I just think this one is the bet that I'm going with Amy you got the NASDAQ this week up 4 and a half% it's far and away the leader out of the major averages because of what we're talking about yep um and I wouldn't be surprised if it continues I agree um there's a lot of momentum especially when you hear Jensen W speak you just get excited he sounds rational he sounds confident he you know he competent and confident so um it can continue I mean where I would worry sort of going is when we get back into earning season and last earning season wasn't particularly great when we so it it sort of gets it runs up into the news and then if you hear something about Capital spending that isn't quite as robust or you know um the numbers that have to come in in terms of AI growth and revenue growth for some of the hyperscalers um that's when we'll get some more data but that's actually a month away so this can continue for a little bit take a look at shares of Kroger sharply higher for grer this morning more than 6% after reporting Q2 earnings EPS beating Revenue quality quarter across the board and some upside on guidance and how you see the world as well yeah if you look at overall our teams are doing a great job connecting with our customers obviously there's a lot of change going on with the customer right now and the teams are doing a great job continuing to invest in price uh giving a customer great experience so it's really well balanced all the way around and just super proud of what everything everybody's getting done you upgraded the the range on same store sales to 3/4 to 1 and 3/4% also boosted cap back so is is it that with the change in consumers you're selling more private label or some of your own brand what's driving this the stronger Outlook well the stronger uh narrowing The Identical sales growth is really if you look at the first half is done uh it turned out to be uh in line with where we thought it would be so as we look at the second half uh the momentum is moving in the right direction if you look at our brand customers it's also the reason why it's so important for us to continue to look for uh cost opportunities uh to do process changes and get cost out the other uh part of your uh question in terms of uh you know we uh are uh seeing uh cpgs uh starting to be more aggressive with trade dollars and we would expect uh that to uh happen as you go through the balance of the Year especially around the holidays as some of the cpgs are uh focused on uh more focused on tonnage growth we well joining us now is John burer he's sova's founder chair and CEO John it's great to have you back on the show and that's exactly where I want to start with you right now because not only did we see solar stocks including Sova move higher today but in the case of your company specifically dramatic moves in the past month the past three months how much of this is tied to the election and presidential outcomes as we look to 2025 how much of it is a rebound in the broader Market well thanks for having me yeah it was a it was a great debate we uh we we had a bipartisan moment there there I was really pleased to see that uh you know maybe uh president Trump wasn't for solar in the fields but he certainly was for solar at rooftop and and and vice president Harris rley agreed so I'm going to take that as a win moment here for for our industry given that we do rooftop solar and in storage uh overall we feel very strongly uh and have been that the election is going to regardless of the outcome be uh very uh fine for our industry and we're going to continue to grow we're seeing utility rates continue to move up uh we're seeing equipment prices solar panels batteries inverters continue to move down we expect that to to stay the case uh we're seeing labor rates uh moderate if not move down a little bit and now we're starting to see the cost of capital really move down as well with interest rates coming off uh and more liquidity in the market you see the you made reference morning the stock pric is moving up so we've we've had a nice period of time where I think people are coming back and realizing that regardless of the macro environment there's been a lot of concerns about are we in recession or not or or headed to one that regardless of the macro uh economic uh outcome here in the next few months and quarters that uh our industry is going to continue to grow so we see a very positive uh environment for us uh regardless of the election outcome and indeed I just came back from Anaheim with a big annual solar in storage conference and the there's a great deal of optimism about where we're going uh regardless of the outcome here in the next 54 days or so yeah so it sounds like my takeway from you right now is that after What was seen as a hard year or even couple of years with the FED on the cusp of of cting rates and the economy is still doing better than everyone expected it sounds like the solar industry is at an inflection point where do you expect to see that demand grow more significantly on the business side or on the consumer side absolutely the consumer side when you look at where the retail rates are going for utilities and have been they've been double digits uh in for a couple of years there and and mid to high single digits in the past year in terms of rate increases and inflation is has been falling tremendously as we just saw this morning maybe not you know a little bit more in terms of desire to fall uh to get to that 2% uh Target for the from the FED but still it's come down quite a bit and yet utility rates continue to move materially higher and they're expected to continue to move higher as we move forward regardless of what the economy does so consumers are starting to see again uh equipment on solar panels and batteries are moving down so that makes essentially utility rates moving up equipment moving down and cost of capital moving down really gives a powerful value proposition for home owners in this country after a headline filled week norfol Southern has ousted CEO Alan Shaw effective immediately want to get to Morgan Brennan this morning with details on this story hey Morgan hi Carl well norick Southerns board terminating Alan Shaw for cause unanimously appointing Mark George the Company CFO since 2019 to the CEO role that is effective immediately this after preliminary findings from an ongoing investigation found Shaw violated company policies by engaging in a consensual relationship with norick's Chief legal officer nabanita nag who has also been let go the decision coming just days after CNBC broke news of the investigation it and a tough two-year tenure for Shaw who took the helm amid intense labor negotiations with rail unions this is a tenure that spanned 2023 is toxic Ohio train derailment and cleanup efforts that's something I covered closely even sitting with sha in East Palestine that was an incident that resulted in a record $600 million settlement and residents uh with residents and triggered more scrutiny of safety regulations and then just earlier this year a contentious proxy fight with shareholder Anora which fought for Shaw's ouer and a majority of board seats that was a fight that resulted in we'll call it a part Victory with three board seats turned over but Shaw keeping his job at that point so what's next Nori Southern reiterating full your guidance as it looks to improve service and margins board chair Claude Mojo saying in the release that mark quote embodies our corporate values and is a champion of our safety culture in close partnership with our accomplished coo John or they will continue to improve NSS operating performance and close the margin Gap with peers now analysts expect to see minimal disruption to the railroads operations as for compensation with Shaw specifically fired for cause he will be forfeiting any severance package any outstanding stock awards and pending the outcome of that ongoing investigation clawbacks on compensation are not off the table so shares of norick Southern down fractionally guys and this is one that we will continue to watch especially because you're going to get those new CEO the first CEO the first comments from the new CEO at Morgan Stanley's lagona conference tomorrow where we're do they stand with the activist pressure Morgan and the sort of new challenges facing this new CEO and I think that's a key question here and cor not giving a comment on this but of course as I mentioned this proxy fight three of anora's picks for the board were successful in taking over those positions on the board and given the fact that this investigation has come to light certainly um with some of the reporting we've seen out there in the last couple days I will say from my own reporting uh it's very accurate I think the fact that they are involved with the board and they are a key shareholder in the company uh really speaks to how and why this came to light and how quickly all of this has happened but Nori Southern's very very clear and they've been very clear they have Rewritten and and uh specified those rules in recent years about these types of relationships uh and that speaks to why Shaw was fired for cause I'd also note uh nag was not fired for cause so she will likely based on my reporting um you know be seeing some of those Severance and and and stock benefits as she leaves the company as well us crude oil rebounding a bit this follows what's been a steep selloff and a close at its lowest levels since December of 2021 that took place earlier this week worth noting the S&P energy sector is the worst performer on the week the month and as Carl just said the year as well Al proft RBC Capital markets Global head of commodity strategy joins us now hel Lima good to have you can we start off talking about China and Chinese demand what you're seeing there since it clearly plays an important role in the in the uh price moves of this commodity I mean it is the big story of the year for the oil Market I mean the reason why oil has been under so much pressure has been underwhelming Chinese demand so we have seen lower levels of imports into China significantly lower lower levels of refineries utilization in China so this is the story that has been so much concern to Market participants you know the other story we're watching obviously is what's on the supply piture but it's all giving to concerns that we are going to be in an over Supply situation for 2025 so hence why when OPEC took the step last week of announcing that they were continuing the voluntary cuts of two million barrels for another two months the market Still Remains very focused on the demand side of the equation so when you're doing your analysis you know how much time do you have to spend on trying to figure out the performance of the Chinese economy in 2025 and what that's going to mean for demand I mean that's always a big part of the work of the barrel counters is looking at China I mean there other you know centers of demand that we watch as well you know India has actually looked you know relatively robust but at this stage I mean if you are having problems in China it's very hard to overcome that from a market perspective so obious viously in the coming weeks and W we'll be watching not only the sort of import levels into China but also where the Chinese economy is growing more broadly do you factor in different election scenarios in terms of your outlook on us production because you have the candidates speaking differently about I mean one of them is drill baby drill the other one not much on oil although production has done quite well in the B Administration even with more regulation and permits Sarah that is such a great point because I think we've seen a real Evolution frankly in the Harris position I mean Trump has been the consistent drill B drill American Energy dominance if you look at KLA Harris on the campaign Trail in 2019 she was of the view that you should keep oil in the ground essentially taking an anti frocking position she has now really evolved and if you look at the debate that just took place Not only was she saying that she was not going to ban fracking but that actually us production was important for reducing dependence on foreign oil so essentially reverting back to the old all of the above you know view that some Democrats used to hold so I think we've seen a significant change in the Harris position I think it mirrors frankly also the change that we saw in the Biden position because yes they came in very strong on their climate credentials killed Keystone Exile went back into Paris but you've seen you know as they were facing higher energy prices you know telling producers actually here to produce more Shale they actually released from the they've been very very focused on using their tools to try to keep as much oil on the market as possible then there's the refining hel Lima and all the capacity that's come online in the last year uh what do you think that means for refining margins from here I mean that is something we are obviously watching and that has been you know the products Market was kind of one of the early indicators that we were having some demand issues so clearly we're going to continue to watch what's happening on the products Market what's happening with demand for diesel for gasoline so that is going to continue to be a big story Al Lima thank you as always appreciate it thank you we've got so much to talk to him about Michael it's great to have you on the program edre good to see you I don't know if you had an opportunity just to hear JD Vans I'd actually just love to get some of your reactions even to that uh before we get into so many of the other issues uh any anything uh anything strike you well my first reaction is I'm so glad I don't have to run for public office I mean it's just like it's just I mean nothing in particular um it's it's uh but having to sort of like tow the Trump line has got to be hard on TV he comes on and says stuff and some of it's true and some of it's not the thing that um I guess I that he's been saying lately that you know speaks directly to some of the work you just mentioned is their their insistence of that there's this thing called The Deep State and they're going to come in and politicize the the the federal Workforce and this series it's not just me i' I kind cated a group of seven writers we sort of air dropped them into the federal Workforce just to say who are these people who are the Deep State and the stories are amazing I mean it's like it's like they tear jerking public Serv and and I would love for the Trump operation to sort of like be poked and prodded a bit more about this plan the project 2025 plan to to like oh we're going to sort of like eliminate huge chunks of the federal Workforce and we're going to we're going to make 50,000 of these employees political employees so we can fire them on a whim and if they're poked and prodded on that I think I mean I think that the answer is going to be embarrassing uh that there it is not a way to run the federal government and in some cases kind of a little dangerous so that that's the but but but uh that that's what JD Vance has been talking about lately that sort of caught my ear Michael two things one is former president Trump has said that that he's repeatedly said that he's not necessarily in favor of the 2025 plan but one of the things he has said that he's absolutely in favor of is Elon musk's suggestion to him and he now wants Elon Musk to effectively run a group of people to look at efficiencies inside the government you spent a lot of time looking inside the government how much efficiency is there really uh to ring out so this is a great question it's not it's not the worst idea in the world to like turn the Public's attention to the efficiency of the federal government there are things that can be done I mean but but but it's almost in the opposite direction of the noise he's been making I mean we have 4,000 presidential appointees who run the government and they and their and their nominations are held up for years in Congress and so effectively the management layer at the top of the workforce is is hamstrung I mean that's something you would want to address I mean eliminate eliminate some of some of that friction um the there you know there is I'm sure you go into some of the agencies and there's larden there's fat and there's waste I mean of course there is there is in the private sector but but what you actually find when you kind of kick around you know what to most people are obscure ages gencies uh Department of Labor or Commerce or agriculture is you find you find like like people doing their best it at really kind of mission critical jobs in spite of a kind of a hostile public in spite of a neglectful Congress like in spite of managements that that's that turns over every two years so there I'm sure there are things to do I'm just not so sure the spirit in which they operate is the best Spirit to come in which is like these are these are wasteful inefficient corrupt people and I'm going to whip them into shape by firing a bunch of them and politicizing the rest that doesn't seem like the brightest approach Michael let me ask you a different question you've covered Wall Street you've covered Silicon Valley you've covered business for a very long time and you've covered the politics and policy of it all it feels like with this election there are more folks uh in the world of of business taking a political role or a very vocal role that maybe a function of social media I don't know but where you have clear divisions now in Silicon Valley for example um you know it it just seems different is it different you know this is a longer conversation but um I I think one of the things that's happened is just social media has forced everybody into feeling like they have to have an opinion and and there and there's a mechanism to have a quick opinion uh so that people are you know they're out there and they're saying things and they get Anchored In opinion and then they're all of a sudden in a tribe and they're and they're they're sort of forced to to defend that as opposed to just doing what business people historically have done is lay lay lay low and let the storm pass uh so I think that's partly it and and partly I mean we're these are such polarized times right so you got to pick a side uh and you're you're constantly asked to pick a side the latest economic data is keeping some inflation fears alive PPI the wholesale price measure was up 210 in August about in line but if you exclude food and energy the core was up 310 very similar to CPI yesterday was slightly hotter than estimates and on the jobs front the number of Americans filing for unemployment benefits looked okay again last week at a relative historically low of about 230,000 a bit above forecast we're not seeing widespread layoffs yet though any signs that the labor market is broadly cooling but uh we're starting to get a little bit of that in the payrolls at least and my next guest says you could make an argument for the FED to start with a half point cut although a quarter point is more likely for more I'm joined by former Cleveland fed president Loretta Meer she's now adjug professor of Finance at the Wharton School at the University of Pennsylvania and a CMC contributor welcome to you thank you very much so now you can talk freely you can tell us what you really think that they should go 75 or two point I full points um what what really do you sort of make of the the situation we're in right now economically yeah I mean we know that inflation has come down quite a a bit um the most recent data yeah was not according to expectations but it didn't take away from the fact that inflation has moved down over time and the committee has said it's become more confident that it's on that path back to 2% it's not there yet more work to do but on its path and the labor market obviously has moderated you know we've seen the slowing in in terms of employment growth but it isn't weak right the labor market is still solid right it's just moving down so the real question is what do you do with policy at this point and you know we they've said and I think I've never seen um chair pal be as explicit as he was at Jackson Hole that we're going to enter this new phase of bringing the funds rate down over time so you thought that speech was pretty significant I thought that speech was very articulate and more um direct than you might have expected um a chair to be at that point so it was very clear that okay they're going to enter this cycle and then the question turned out to be do you do 25 50 to start with what you thought the clarity was basically around the rate cutting cycle is starting so when I was thinking back to Jackson Hole a couple of years ago when his Clarity was really all about inflation we're tackling it this is front and center the new phase that we're entering for you is a rate cutting phase a focus on the labor market what exactly is it yeah well there's two things one it's a rate cutting phase but remember it's a rate cutting phase from very elevated fun fed funds rate so I think of it as being reducing the restrictiveness of monetary policy not going into immediately to a neutral stance but they're going to be informed by what's happening on the labor side of the economy now as well as the inflation side when we started raising rates right we had to only focus on the inflation side because inflation was so elevated and labor markets were very tight so tight I mean what do they used to call the great resignation when have we ever lived through a period where workers were calling the shots entirely no right and so at that point it made perfect sense to put all the focus on the inflation part what's happened over time in the fed's been very clear about saying this is that those risks and the two parts of the Mandate are coming into better balance and so now it's very very important that they do start really focusing on the labor side of the economy as inflation has come down they're not done yet inflation's not back to 2% yet but significant progress has been made and over time I think it is on a path to 2% now it's about is the labor market continuing to moderate or is the labor market weakening sure and that's kind of the focus is going to be and that's why I think the FED will be starting this new phase of bringing the funds rate down um 25 versus 50 I mean I could make a case for 50 if I wanted to but I think it's going to be hard to communicate that that kind of case given where the markets are but also more importantly is do you signal as a Fed policy maker if you start with 50 that one right maybe the economy is worse than the average person thinks or two you believe you're behind the curve and maybe that builds in expectations for even more quickly rate Cuts than are already in the market and so that's such a hard case to communicate and there's no reason to do it right so stay away from the complication and Signal we're entering a new phase right it's not a oneand done right there's going to be a path here and we're going to be very attune to not only where we think the fed the the economy is going but also the risk around that forecast as for the latest inflation print today and where the market goes from here let's uh bring in 72 Asset Management Chief Economist Dean Mackey and CFA research Chief investment strategist Sam Stow ofal morning guys good to see you both morning Carl Sam let me talk with you first about I I guess you're drawing some caution into looking at periods after the first cut right it's not always roses oh that's right well Carl it's the big difference between between wanting and having that uh in the period between the last rate hike and the First Rate cut the S&P has gained an average of 18% going back to 1990 yet in the 30 days after the first cut we end up seeing the market tread water gaining less than 1 half of 1% most of the action is below the surface however uh in the sector areas with a lot of the leaders being in the defensive areas but I have to include technology in there because because investors don't want to be giving up on the growth right that said you are looking for maybe a postelection rally am I right absolutely so typically the uh the seasonality gets shifted during the election year instead of August and September being weak it's September and October and you look at a majority of styles sizes sectors and sub Industries in negative territory in September and October but then the reverse is true in November and December once the uncertainty of the election has been lifted you find that all sizes Styles sectors and 97% of the sub Industries are in positive territory uh led by more of the growthy areas Dean how about you how you thinking about today's print and what is on the line uh for retail sales uh in terms of what the path should whether it's 25 or 50 what the path should look like from here well I think the bottom line is we remain pretty optimistic on consumer spending uh if we look at the labor market consumers are still getting solid labor income growth and inflation is coming down especially gasoline prices and that's giving strong real income growth to Consumers and we think that will keep them spending also household net worth right now relative to income is higher than it was at any point in the 70 years prior to co so we think that is also supporting consumer spending at this time so we remain optimistic on growth right now does it also support higher inflation numbers you know the market and the FED is feeling so confident that inflation is in the rear view mirror but if you continue to see this real wage growth translate into better spending does that keep inflation still a risk well we have seen a tremendous moderation in inflation so I think we have to give the Fed Credit there for bringing inflation down um you know I think it's always a risk if we you know if the FED were to cut too fast I I think if the FED were to cut in the way the market is expecting them to then I think you would be seeing you know late next year into 2026 some risk of inflation uh Reviving back up but I don't think the FED is going to cut at that kind of a pace so you're not worried about these sort of hotter core readings and PPI today and CPI yesterday doesn't doesn't feel like the the street is too worried about it although it does reverse a recent Trend yeah I mean the inflation numbers are going to go up and down and and I do think there's a risk that the FED doesn't get inflation all the way down to 2% that it gets stuck in the two and a half 2 and 3/4% range that's not a disaster and it wouldn't cause the FED to retighten for example but I think in the near term that that is the main risk on the inflation front Jesus Christ talk to with X sha right now Chief investment officer of public investing at Goldman Sachs Asset Management good morning to you uh we saw the CPI number yesterday we're all really waiting for what J Powell is going to say on September 18th so maybe you can give us a little bit of a prediction about what it may be but maybe what you would do about it in advance uh I I got to tell you I'm so excited because it's you know very rare that you get to see an easing cycle begin and we're about to do this so next week we're going to start the eising cycle it's going to continue for a while um we don't know how many total Cuts we're going to get we're going to the fed's going to have to feel that out but I think what's important is not to focus about kind of the next week's information but it's really setting up the playbook for this entire cutting cycle and there's a lot of opportunity out there but you know by the way I'm really concerned that people are hanging back they're facing this uncertainty around this election and they're going to miss the opportunity uh to lock in yield to lock in returns uh in the equity Market if they don't pay attention Okay so when you say you're worried people are going to miss this opportunity why don't you spell out the opportunity as you see it in terms of what people could actually be doing then okay so let's start in the equity Market because that's where the big returns are going to come you know we all have been focused on the largest cap companies um the AI companies and and passive kind of S&P um you go into a cutting cycle most of this interest that's being paid by companies is actually being paid by smaller cap companies right those are the ones that have floating rate uh loans um they're the going to be the primary beneficiaries in the corporate space of rate cuts and you want to be investing in those in those small small caps but you got to focus on the quality and so you know when I think about small caps it's going to represent a meaningful opportunity you look around the corner January the best month for small caps is coming up and on top of those things I think the second half of the year um you're going to start an IPO Market which is going to create opportunity and m&a and and lbos and and and that's really critical to the space because that shrinks the space on the lbo side it brings new growth to the space and that new growth is going to be high quality because investors going to be Discerning this time but she you're not are you suggesting go buy the Russell 2000 are you suggesting there's certain ETFs you buy or you're saying you have to be buying individual equities yeah so I think the tough thing about buying the uh Russell 2000 is there is a lot of Po poor quality as we've seen meme stocks and other things so you know I uh obviously I'm biased but I prefer our um our ETF in the space GST uh GSC um and you know that's where we really focus on quality companies that are both Growers as well as represent value um but I I do think you can take any really high quality uh small cap active strategy and that's going to perform over the course of the next 6 to 12 months and what would what would you do with the the Magnificent 7 or even the S&P 500 if if you were if you were there right now look I I I would do exactly what everyone in the Market's been doing you see one of the biggest withdrawals one of the biggest outflows of large caps um over the course of the last month or two and that is because people have really gotten overweight those large caps whether it's Global Investors whether it's us investors you know if you had passive allocation you've got to overweight this space and it's time to diversify your Equity portfolio but by the way there's also going to be opportunities on the fixed income side let's talk about those comments and whether or not we do see Kroger as indicative of the consumer spending story John well Dominic let's just scroll back to yesterday and talk about food at home which is the Kroger story which was a point z.0 so was a flat uh story for the CPI had food away from home which was up Plus 310% in the month so what's this is kind of also the story of goods and services goods are are basically flat services are still showing some strength so this is kind of what what Kroger is probably going to face here is a flat market for pricing and that has been true for food overall it was a 2.1% annualized return for for food prices so I I would expect you know like your your headline LED with this will be about the merger with Albert SS most of all because they're going to try to overwhelm this weakness with some kind of national excitement over a multi- thousand store strategy that's going to be able to take on the real elephant in the room which is Walmart can we talk about all of this in context of what the current White House views as anti-competitive or monopolistic practices and whether mergers are still a thing right now we know that the justice department and the Federal Trade Commission have not been kind to some of these types of mergers just how are we handicapping or how are you handicapping the likelihood of these types of deals happening yeah Dominic let's just step back here and and throw out the market shares in grocery right now Walmart's at 23% 23% so the thing you have to understand how did Walmart get to 23% they have 4,200 stores for number one they're they already have a national footprint and the the penetration of grocery online nationally is 12% at Walmart it's 18% so they are a $630 billion market cap stock they are the driver the consumer take returns out performance in the ETF and they are basically becoming an internet you know delivery Juggernaut that's eating into the sales of of the krog of the world so if you put Kroger in play they're at 10% market share and then 1% less 9% is Costco now what what's interesting about Costco here just to make it more more complicated Costco's got six or 700 stores but they're giant warehouse stores so Costco has found a way to compete with Walmart and they're doing it with far less stores than Kroger so Kroger says okay how we're going to do what we're going to do nationally is go National buy our competitor Albertson which is the Safeway brand and basically get to about 45 4600 stores and then sell 500 off and be at the same level on a store count framework with Walmart but the difference here is they do not have anywhere near the the e-commerce capabilities of Walmart and that's the story here is what what defines Grocery and what defines you know concentration and and then you got another wrinkle Dominic which is all the Democratic attorney generals oppos the merger and the Republican matur generals support it so it goes beyond the FDC into kind of a partisan provide as well my next guest says while we make it a typical election pullback in the weeks ahead early indicators for the next part of the bull cycle are just picking up for more I'm joined on set by Binky chat he's chief chief Global strategist at Deutsche Bank uh Binky it's great to see you again welcome so you are expecting a little why why do we always get this rockiness around the election the markets just don't like uncertainty oh so around the election we typically get a pullback uh and and just to be clear that only happens in close elections for the last 20 years all elections have been close so it applies to all of them it's simply the market buying protection for vola around the actual election and so typically you see the market starting first week of October so a month ahead basically pull back four to 5% uh and typically bottoms with the election maybe a day before uh and as long as you get a clean result and uncertainty is resolved uh you get a pretty strong rally that's what I was going to say there are already people being natural to expect the market to uh be unhappy about that uh yeah I think you know there will be volatility there's not a whole lot of uh historical examples of when we had a hung election but we do have one and what happened with the market during that time because that would have also been right you know with peak of almost near peak of the doom boom before the NASDAQ I just going to say you've always got to keep in mind what the trend in the market has been and the trend is coming really from the business cycle so that's Bush Gore we were in uh the midst of a downtrend in the market um we dipped down a little bit more so I'm just saying the pattern still held we di down a little bit more relative to that Trend right when we didn't get the resolution we dipped a lot more below that Trend uh I I misspoke it was March of 2000 that the NASDAQ peaked so we were already down significantly by the fall and therefore it was a pretty pretty big headwind no matter what so so I was referring to the bush Gore election actually and and so uh once we you know it looked like we were going to get a resolution yes it did require the Supreme Court but the Market's always thinking about where things stand and so just before basically we actually got the result you did see the market rally and of course you know after that the downtrend continued yeah having one a sample size of one is never anyone's favorite to extrapolate from yes but it does conform to the same principle so it just says you have to be mindful of the trend uh you know the trend has obviously been very positive so far even though we have just had basically two back-to-back pullbacks what is the going on with the business cycle we just heard from the fed lorda m who's with the FED until June talking about how it's a little more it's a little less clear how to balance inflation and the labor market right now yeah what I would say is that u i mean we've had this issue uh because of the peculiarities basically of this uh pandemic recovery cycle so so not to sound like somebody that can't hear but let me just take an example from where isets uh you know if you think about S&P 500 sales uh given the peculiar nature of the recovery I mean we're talking about you know 10% GDP growth 10% inflation uh we had S&P 500 sales growing at 26% year on year at the Peak at the peak and then they continue to slow because it's obviously an unsustainable pace for the next 2 years now if you have something very elevated and that's slowing for two years it is very natural to extrapolate or be at least concerned that we're going to go right through uh I still get plenty of inquiries you want to talk about the negative sales growth for the S500 well that's why I mean you've been of correctly bullish during many of these recent years about the overall Market digesting that whole adjustment period so so S&P sales growth landed uh 5 to six quarters ago at 5 and a half six back in the pre-pandemic range it's slightly actually above average so there's absolutely nothing wrong with it and uh I went to this example so if you do the same uh and think about the labor market the same way two different measures so what everybody tends to focus on is you know uh uh the actual employment number so if you take private payrolls and and we are after to the trend here so if you look at a very slow moving measure which is the year on-year growth rate and it looks actually kind of similar not in timing but very similar to S&P vant sales growth we up at 15% we came down and what I would say is for the last 7even months we the labor market in terms of employment looks already like it landed at 1.4% give or take second decimal begin with the markets as investors continue to make some sense of the August inflation readings and what the numbers mean for the FED less than one week to go till that interest rate decision joining us with his Outlook as bimo wealth management CIO young Yuma young great to have you back we've been talking with you for weeks about whether or not this rate cut path needs to be front loaded you argued to some extent that they should start with the 50 but it doesn't sound like you think that's what will happen yeah I thanks scl it's great to be here it does seem like the fed's probably going to lean toward just a 25 basis point cut given the recent inflation numbers but we do think there's a lot of latitude for the fed and a lot of logic for the FED to start with 50 basis points the risk right now between the labor market and inflation or balanc that's a fed's own characterization and short-term interest rate the fed's fund funds rate is very restrictive that's the fed's own characterization as well given those two things we do think that bringing the FED funds rate down more quickly should make sense here but uh we still expect 100 basis points by year end but we'd like to see it front loaded here in September uh but it's possible we won't get that has any of the commentary from I'm just picking here uh dollar stores or some of the financials on delinquencies uh do you think that kind of concern is going to get ratified by numbers uh like retail sales I think retail sales are still going to be pretty strong here there's some strains in the lower consumer end and those are showing up in some of those numbers but overall sales look healthy I think it's just a distribution of sales where those are happening uh who's stealing market share and who's able to capture some of those tight dollars on the bottom end of the on the lower end of the economic spectrum but overall we think earnings growth is pretty healthy uh the job picture remains stable and retail sales we think are still going to hold in pretty well here I'm surprised that you're still calling for 50 basis point cut I know you say might not do that but after these back-to-back inflation readings showed core firmness more than anticipated yeah if you look under the hood we don't think it's all that troubling those inflation readings uh we think that the shelter prices it was more of a blip that drove some of the CPI uh higher numbers in CPI we have oil prices that are not only low but look like they're going to stay low for quite some time given the OPEC overhang and that should filter through to the economy as well in terms terms of some softening inflation pressures uh sure we think it's probably less likely now that the FED is actually going to cut 50 basis points uh and it'll probably just do 25 but we still think the logic for a 50 basis point cut is there given that shortterm rates are still very restrictive and giving those RIS or balance that that really points toward a direction that should have shorter rates here low rates I want sorry I wanted to ask about utilities cuz I think you like it everybody's liked U this year up 20% second best to technology it does feel like the perfect mix of a defensive play and a softening environment low rate environment and some growth there given what we're seeing with generative Ai and data centers and and the need for utilities has the market already figured that out or do you think there's still opportunity well the market has figured that out that sort of defensive growth mix that utilities offers right here it's pretty unique actually but if you look at the longer term trajectory utilities on a 5-year basis is actually the second worst performing sector in the S&P 500 so there's still a lot of catch-up trade to go here and if you look at valuations utilities relative to its own history those valuations are not stretched and they're probably less stretched than some other sectors might be so yes the market has caught on to this but we think the runway is still pretty long here and it's a nice place to hide out especially in what we expect could be short term of volatility over the next couple months finally on the election and this week's debate I know some of the desks this week or today were mentioning that yesterday the Democratic policy long basket for example was up 3% but your advice is not to try to trade around the election right well there are going to be some sectors that uh without outperform under different administrations we think that's true we still think uh trading around the election unless you're really focusing on the short term is probably not the way to go here what we'd be looking for actually are uh perhaps some pullbacks or other volatility over the next couple of months and provide opportunities to scale into positions that uh that might have pulled back more than warranted so that's the way we'd be playing this rather than trying to gain certain sectors uh based on polling numbers which can change over the next couple months yeah I think the PIN code this morning said this election is going to be a a knife fight in a foam Booth uh definitely won on the margins uh younga B good to see you again thank you bring in show music please question is now is is there more room to run for the shares let's get to Sima Modi this morning talk about what the street is saying as well as what Oracle said earlier in the week and some of the action in semis today SEMA Yeah Carl Jensen Wongs comments lifting nvidia's market cap by over $200 billion yesterday that is the fourth largest single day increase for any company in history that is certainly inviting Street reaction this morning Bernstein naming Nvidia a top pick writing that clients that uh Blackwell delays seem to be mostly a nothing Burger margin worries are overblown their price Target is 155 a share Morgan Stanley's Equity strategy team using fundamental and quantitative analysis adding Nvidia to its list of names to hold for the next 12 months they say if you want exposure to AI you can't not hold Nvidia they think Blackwell availability later this year should further cement its compe itive position the big question investors are now trying to answer is whether yesterday's move was indicative of a sustainable rally mizuho is more cautious writing that flows into Tech yesterday were solid but they did not suggest a wave of active buyers nor a rush to get long or semi- names they actually said there's some characteristics of a short squeeze we are seeing Nvidia shares up another 2% guys all right guys let's see let's see all right guys you want to see all right guys you want to know how to make all right guys you want to know how to make a viral Finance video you have to S to make a viral Finance video you have to sell apocalyptic news you need to you know sound the alarm for World War III that the stock market is going to crash the recession is going to ruin the economy you have to use these phrases to make a viral Finance video you have to sell fear you also have to profit off of people's hope so like you know some people want to become rich they want to make like 10K a month you have to promise them that you are going to tell them how they're going to get rich you have to sell them like a real estate course for like 500 a month a day trading course telling them that they will make like 4 k a week or a course on how to start an Amazon FBA business promising they will make 10K a month there are some people that do Amazon FBA that are very profitable but a majority of them are not and you will and you will you need to tell them that this is going to make them a millionaire if you follow their advice or if they follow your advice that's basically how you make like a viral Finance video you basically have to like profit off of people's hope um and yeah and these are the types of videos that go viral in finance and again the other fi other viral Finance videos is that you have to sell bad news like Nvidia stock is going to crash to like $50 so you have to buy the dip right now or like Nvidia is going to crash to like zero or you or you can also sell like a really hyper superficial hype like Nvidia stock is going to have A1 trillion market cap by now and retire ear early like phrases like this is what's going to make like your Finance video goes viral what whether like although Nvidia does have like a like a long projection like it is likely that they will reach A1 trillion market cap by like 2030 just because of inflation and like the dollar the value of the dollar keeps decreasing Nvidia might actually become A10 trillion doll company but that actually might be worth like that 1010 trillion is actually going to be like5 trillion like in today's money so yeah we will have to see how the economy goes and you also you can to like make a viral Finance video you can also talk about talk about Bitcoin you can say bitcoin's going to go to the 100k this year and then like just rally people to buy Bitcoin like Bitcoin is going to go to a million dollars we have people from like micro strategies Michael sailor him he owns like thousands of Bitcoin and he's saying it's going to go to $10 million then recently he said it's Bitcoin is going to go to $1 13 trillion when the supply room in like 2040 and then Bitcoin just keeps like appreciating in value that you can say ethereum's going to go to 5K then ethereum's going to go to 10K like phrases like this it's going to make your Finance video like go very viral you have to like also like teach people how to like save money and budget like these videos do very well or like when you promote like a side hustle or recommend people to like pursue different careers like higher income careers these videos are like very profitable and yeah like a lot of Amazon fba's um videos do very well as well I'm not sure how well like the Amazon FBA business is right now but I'm pretty sure it's still pretty profitable but yeah comment below guys what did you guys think of this video was it helpful would you like a longer explanation I can I can talk about this for like an hour and how to like like we we could probably go into Amazon FBA and how like there's a lot of scams and how there's a lot a lot of legit people making like serious money running an am on FBI business but yeah comment below guys uh what what do you guys think of this video and if you want to see like stock market coverage Monday through Friday like And subscribe I'm going to share some news this morning that that is just hitting but is important two companies that we followed closely one of course being Warner Brothers Discovery the other being Charter Communications of course uh operates under the Spectrum brand and both cable and wireless Broadband um they have a new Carriage agreement just hitting the wires uh and it is interesting because it fulfills the Ambitions of both companies of course you got Warner Brothers Discovery the stock of which has just been getting crushed lately in part because of the loss of the NBA remember or at least the seeming loss of the NBA they're in court or they're trying to litigate to actually get part of the package back and say that was uh falsely or unjustly awarded to Amazon but the value of TNT has been at the center of that many have been saying uh those who are negative on the company of course an overall on what we were just talking about the decline of linear networks saying hey when you reup this thing you're not going to get paid at all well they did a deal with Charter a year earlier than they had to because their current deal would not expire for roughly another year and get this they're getting this they're getting the same amount for TNT uh now they don't put the number in there I hear it's around three bucks uh don't forget uh when you are the uh the cable operator you're just getting one big number from uh you're paying one big number to Warner Brothers Discovery to the programmer that number is going up uh under this new deal now how they a portioned at Warner Brothers Discovery is up to them but what they are uh what I am hearing is that it's a flat for TNT up for everything else and therefore this is a revenue accelerator revenue is growing under the New Deal done a year early with Charter what does Charter get well this expands on this strategy that has been embraced by its CEO Chris Winfrey to offer its subscribers as many of the streaming services you can all in one place and so now if you are a a spectrum TV select customer you're going to get ad supported Max uh and by the way you already get ad supported Disney you get ad supported Paramount plus uh you get AMC and you get the idea here they're trying to say hey it's all here in one place uh you can take your Zumo box your streaming box and it's becomes a seamless experience and this is the strategy being pursued by Chris Winfrey uh at Charter it aligned with of course what was the desire on the part of David zazo who runs Warner Brothers Discovery to get uh an endorsement SL affirmation for the value of his networks and he seemingly has done that and it perhaps going to turn around waren Brothers Discovery at least for a day for a stock that really has been just getting uh getting crushed bill baroo is going to join us right now uh because he is a continued believer in this trade he's made some moves which is why we wanted to bring him in here it's good to have you um so you bought more meta you bought more Microsoft and broadcom as we were just uh talking about can you take us through that yes we're just putting cash to work I mean I've highlighted it on the show over the last couple of weeks going back to August 20th we we trim Tech we had QQQ puts really now after this Tech Fallout happened we got rid of the puts and we have cash to put to work and we're putting that to work here going back to last week on the show with some Nvidia and Tesla and then as this week unfolded we're buying more Tech um broadcom just to kind of touch on that first I think Stephan made a lot of great points and I think she hit on that Legacy business which is really troughing out I think that brings some terrific upside I think the margin concerns across the uh semiconductor space as a whole uh we're we're uh you know a little overblown and we're seeing the some of the analysts coming this week and really as well U increase their um you know or re double down on them being their uh their top positions and top picks I think the other main thing to really look at here is when Tech sells off um I I look at a relative basis against the Staples and you kind of see where these names uh in in QQQ over the Staples from a relative strength basis and it double bottomed against the August 5th we chart that out and it also tested into the area going back to quarter 4 of 2023 we really broke out so it told me that this selling was overdone you see this the the last flush out on Friday in in semis and Tech in general um that's why we came in the week with ready to put this cash together when we look at um meta I mean they're advertising business Second To None they're implementing AI there alphabet um some of the D some of the some of the concerns the headlines I think overblown and you're actually seeing alphabet trade higher and respond to the January 2022 highs this is 382 retra there's a lot of technicals here I think it's a terrif time to see what happened yesterday as well and then follow through from here Bill appreciate it very much we'll see you soon back on the desk Bill baroo joining us there all right welcome back stocks retreating from their lows after the Dow fell more than 700 points as data and earnings weigh on the indexes but there could be more pain ahead according to our next guest he says the big Tech repricing hasn't even transpired yet joining us now Jeff kilberg kkm Financial founder and CEO and a CNBC contributor Jeff great to see you is today in light of what meta did in light of IBM take us Take A Part uh take a set aside for now caterpillar is today a kind of transformational day a Dem a day of demarcation in some sense I think it is TI it all depends on what you're looking through but when you talk about the NFL draft or your imminent stock draft there's more than one round in any of these drafts so I think we are just in the first round and there's seven rounds in the NFL Jeff so if you look at Nvidia or metaphor example I think you have to understand the actual exposure there's 484 different ETFs that own Nvidia van vti as well as SMH they have over 200 million shares of Nvidia just in those two ETFs so I think it's fascinating that we had three weeks turbulence 3 weeks of volatility and remember the vix is under 20 so there hasn't been any panic in the market but when you do see some rebalancing here Ty and you see some gaps on the chart back in Phil which I think is going to happen in Nidia down to 680 and even down to 400 and meta I think that's the repricing I'm talking about because in the bigger picture I'm coming up for air hold on in the bigger picture we're seeing the S&P 500 tie only down a little over 4% and you saw that bounce once again today all right let's talk about the fact that you've got you've got some improvement in the major indexes over the last couple of hours does that tell you anything it it does it speaks to the volumes that there's so much cash on the sideline but one thing it doesn't tell me is that these rates the 10e node you know go back to my bond leadership where I cut my teeth in the business trading 30-year and 10e Futures in Chicago the fact of the matter that the 10e note at 4.7% there's been a lag effect there's almost been a dislocation so I think this bounce back could be a little misguided due to the fact that we're just moving money it's almost like an accounting Ledger oh Facebook is going to spend $5 billion more on AI all that goes into chips purchases you know and I know that's not true there's people involved there's buildings involved there's a variety of different expenses that go to that capex for Facebook or meta on this extra five billion so I think when you see Intel up one and a half% AMD up one half% of course Nvidia the big winner I think there's an opportunity to put some more protection I own puts and at some moment in time here as we get further down I will be selling puts to add to exposure but right here right now I'm a little apprehensive and I'm using the bond market to give me that apprehension yeah I I guess what I would say here is what looked like it could have been not a a catastrophic day a disaster it looked like a now it's looking really rather more like a a pretty routine run-of the- M day where the market has go ahead that's right Ty we're conditioned to that we buy this dip and I think going back to the last 10 years we've been conditioned to buy the dip but I think it's very normal you see a 10% correction every year or so you see three or four 5% Corrections so I think this correction is just in the process it's only been three weeks but the way we look at markets everything is so exaggerated the reaction to Facebook exaggerated no way the Dow Jones is at 34 38 no it isn't in the last 5 months S&P 500 being up 25% EX exaggerated so I think we have to be calm be Resolute but understand that the market has the ability to move lower as the vix potentially goes above 25 so we would love we would wish you were here today cuz I know some people you know or admire Here Eddie George a great running back Nashville people down to 680 that own Nidia van e vti as well as SMH they have over 200 million shares of Nvidia just in those two ETFs so I think it's fascinating that we had 3 weeks of turbulence three weeks of volatility and remember the vix is under 20 so there hasn't been any panic in the market but when you do see some rebalancing here Ty and you see some gaps on the chart back in fill which I think is going to happen in N Video down to 680 and even down to 400 in meta I think that's the repricing I'm talking about because in the bigger picture I'm coming up for air hold on in the bigger picture we're seeing the S&P 500 tie only down a little over 4% and you saw that bounce once again today all right let's talk about the fact that you've got you've got some improvement in the major indexes over the last couple of hours does that tell you anything it it does it speaks to the volumes that there's so much cash on the sideline but one thing it doesn't tell me is that these rates the 10e node you know I go back to my bond leadership where I cut my teeth in the business trading 30-y year and 10 year Futures in Chicago the fact of the matter the 10e note at 4.7% there's been a lag effect there's almost been a dislocation so I think this bounce back could be a little misguided due to the fact that we're just moving money it's almost like an accounting Ledger oh Facebook is going to spend $5 billion more on AI all that goes into chips purchases you know and I know that's not true there's people involved there's buildings involved there's a variety of different expenses that go into that capex for Facebook or meta on this extra five billion so I think when you see Intel up 1 and a half% AMD up one half% of course Nvidia the big winner I think there's an opportunity to put some more protection own puts and at some moment in time here as we get further down I will be selling puts to add to exposure but right here right now I'm a little apprehensive and I'm using the bond market to give me that apprehension yeah I I guess what I would say here is what looked like it could have been not a a catastrophic Day Disaster it looked like a now it's looking really rather more like a a pretty routine run-of-the-mill day where the market go ahead that's right Ty we're conditioned to that we buy this dip and I think going back back to the last 10 years we've been conditioned to buy the dip but I think it's very normal you see a 10% correction every year or so you see three or four 5% Corrections so I think this correction is just in the process it's only been three weeks but the way we look at markets everything is so exaggerated the reaction the Facebook exaggerated the movement higher in the last five months S&P 500 being up 25% exaggerated so I think we have to be calm be Resolute but understand that the market has the ability to move lower as the vix potentially goes above 25 so we would love we would wish you were here today cuz I know some people you know or admire Here Eddie George a great running back Nashville great guy and Austin Eckler of the NFL now with the commanders will join us for the stock draft uh which is going to kick off right after this Jeff kilberg thanks very much awesome welcome back everybody vert Holdings a maker of cooling systems for data centers up 7% today after beating on the top and bottom line for the first quarter the company also revised its full year guidance hire shares on a monster run over the past year up more than 640 thanks to the AI boom joining us now in an exclusive uh in the exchange is ver CEO Goo alberi uh Mr alberi welcome good to have you with us and congratulations on the numbers you reported yesterday uh those numbers were very strong you're a kind of quiet player behind the scenes in this AI boom explain what you do and why your company is so Central to what's happening in AI well first of all thank you for having me uh today here um what we do is we power and cool uh the world's data so every behind everything we see digital there is a data center indeed there is a a myriad of data center around the world where everything digital is created we have servers are servers in those data centers that require power and that require cooling because they generate a lot of heat everything from the grid to the chip power transmission and power distribution and power management is uh is something that we do theti power train as well as the thermal chain that manages the heat that is created so without us be it on the cooling or on the power side without people like us without us the data center industry would not exist so let me ask you an elementary school question why is data so hot why is it why does it get so hot that's simply because you have a lot of power going into chips and other electronic components uh and that is the power needed to compute and when chips compute and other electronic components work that generate Heat and are we talking about I mean and then another Elementary School question for for someone who doesn't understand this like me would be okay so you got a Data Center and you've got all of these uh hot servers they generating electricity with chips and they're they're generating heat and so why can't you just throw more tonnage of of HVAC into the equation more air conditioning I assume what you do is far far more complex and involvement than just blowing cold air into a building it is more complex than that indeed but it is the cooling and Thal management but what happened in it was it what is happening with the it um change the AI acceleration the artificial intelligence is a transition from traditional uh CPU based servers uh to GPU uh which have a much higher Den and that density makes them more faster they make it makes them faster and more suitable for uh AI but that generates more heat density and it's more difficult than to extract that heat and handle it and that's where we come to play and everything that is then Downstream from that getting rid of that heat so verive I mean you've had an incredible run 600% uh gain in the stock market over the past year let me let me ask you two questions when you hear a report like today's from meta or it was it yesterday saying we're going to be investing heavily in data centers what is your does your pulse Quicken we have been in the data center industry doing power and thermal for multiple decades and we are very very close to all the big players and every player in the market so we have a very strong and a clear view of what's uh what's going on so clearly this part of an acceleration of the data center infrastructure investment that that we very strongly participate in and yes when those news come out uh kind of reinforce our belief and and our view of the market so let me conclude with a question that I know all CEOs hate to answer but I'm going to ask it anyway Revenue guidance uh for the year was 7.54 to 7.69 billion that's for your fiscal year this year how big do you think this company can be in terms of revenues in five years we have given at our last invest today in November an indication of growth between 8 to 11% in the next in the next few years and that's Bas in a certain evolution of uh of the market that we serve and and AI so we believe that's uh that's still a very good uh projection for us and let's see what the acceleration will be 11% over 5 years would be close to doubling I think if my math is is serves me right uh Mr alberi thank you so much for your time today and for explaining some Concepts that this Elementary School student didn't understand thank you so much app thank you with STS staging a huge turnaround yesterday my next guest is giving most of the credit to positive comments from nvidia's CEO Jensen Wong at a Tech conference most of the credit to positive comments from nvidia's CEO Jensen Wong at a Tech conference Nvidia led the tech turnaround but should it get all the praise let's ask Nick co-founder of data research Nick think are what h for for sir spe for for for for for was CRA who does this why would anyone ever see a Tik Tock money glitch and run straight to the bank no because it's stupid that's why what do you mean why what do you think yeah it's obvious I said is heavy is damn there for that free money no it's safe to say this Tik Tok money glitch just ruins so many people's lives as for some reason people think it's a good idea to try a Tik Tock money glitch now you may be asking what is this glitch well the the Tik Tok money glitch is you run up to somebody and you pull a gun on them and you say give me your money and then they give you their money it's like this crazy thing it's like Grand Theft Auto or something can you believe that short version is check fraud and if you are dumb enough to actually do this you will be financially ruined and likely to jail for this but there are a handful of scams going on currently the main money glitch people are talking about is there's apparently some glitch in the Chase banking app where you can deposit a large check that is bad and then you have a short time limit to actually withdraw the money in cash from the ATM before the check is cleared and I guess absolute idiots they're doing this on their own accounts and then you have other people who are doing this on their own account that has their first and last name their phone number their social security number their place of work um well I would say it has their bank account information but it literally is their bank account like I mean what do you think is going to happen on camera like yeah it's like they're giving away free money did you hear they giv away free oh free oh what naive enough and did no better to let scammers do this to their accounts so clearly the bank started to crack down on this and ended up freezing all the accounts involved with these Shady transactions as here you have a Chase customer getting their accounts Frozen while trying to do the money glitch oh wow it I knew it I told you I told you bro how much does it say [ __ ] bro he got a 7day hold he put $40,000 on the account and then they put him on a 7day hold bro KN chasee I guess in 2024 people are just posting videos and then he gets mad I love how he gets mad at the bank for not giving him $40,000 man I knew not to go with these guys man [ __ ] man this Bank sucks bro [ __ ] angry because Chase Bank W let them steal money from them honestly this whole clip just gives off the energy of this viral clip yes hi sir I'm here to pick up your daughter absolutely not Chase Bank will let me overdraft my account by 10 grand because that's what ended up happening when the checks finally cleared and they had already taken out the cash they got the minus what is my life what is my life what do I even do now bro well I feel like this problem isn't really that complicated though right because if you if you withdrew $110,000 let's say then you could just give them back the $10,000 so then the problem solves itself yeah just give the money back they already went and spent it if you can spend $10,000 in a day my life why do I have 11,000 missing from my bank account damn is this like humorous to you guys like do is yes as a matter of great question Kik haaha moment for yall bro yes I work very hard for my money tell me why I I I check my bank account after I hear about this about this Chevy Chase whatever I'm missing 11,000 from my Chase account he worked very hard he he had to write this is my check that I am depositing for $112,000 to me right now okay give me this is like bro imagine a bank robber like at at at the courthouse bro guys like look like can y'all believe this bro they got they got me down bad I'm getting cancelled out here just because of some thing I saw on Tik Tok wa what is this my I don't I I don't know whether to feel sad or to feel mad bro I like I'm in shock right now but I have Goosebumps like all over my body like I I don't know what to feel bro is this how a crash out starts like I did want to drive my car through a goddamn McDonald's and say it all this is like 11,000 from why would this this is this funny this is not cute bro this is not demure but what is this bro de deir has been a popular word for like one month and I'm already over it is committing check r at Chase Bank brat or deir let me know in the comments down below I feel like that's the new flavor of brain rot content that's currently yeah there's a lot of stupid girls on Twitter that use that word now I see it a lot circulating on Instagram because the other day I pulled an Instagram reel that said something around the lines of is Sonic the Hedgehog demure or brat and at that point I just turned off the whole phone I noticed that this dud smart I I would have maybe thrown it out the window has the exact same screenshot of his bank account as the other dude bro what the this one probably fake one of these has got to be fake right it's got to be fake bro told me tap in bro bro say he got the drop a day before one be F I'm like all right bet this my only bro my only account bro and they going wh is the same account no it's got to be [Music] bro they're both farming I hope so so what y'all need to do man y'all follow me go viral man this Chase glitch don't do this man y'all don't do this y'all save your account get your money otherwise man bow don't do it here you here I'm out so one of them might be real or we're just seeing multiple people just laring as self-inflicted victims and then you had this guy with an alleged this shit's so funny to megative 40 Grand balance this one they found out was fake I think this one was fake right man they really typ thing next day was supposed to clear look at my account yo what I thought bro what the this one seems the fake all them because who just reports themselves like just wiping their face aggressively uh like oh people do it seems try hard there's a lot of ual people that this happened to but from what I'm seeing there's so many videos of these people promoting it and they're all shopping spree on the way Chase glitch how do you do this unfortunately before I could download them all so these super viral videos of these people being really upset with massive negative balances I'm guessing they're fake but find some videos that didn't go super viral so I wouldn't be surprised these super viral videos that are still up are probably fake because I mean who wants to snitch on the themselves like that unfortunately a lot of people as we've actually covered on this channel here before yeah they sure I mean at least there's a little bit of Hope on Tik Tok y'all I want to hit that chase play so bad right now bro I'm seeing people my close friends going to 20 30k running it up on Chase I see somebody just hit 90k on on Twitter but I just know if I hit that play God gonna use me to be the example I just know no [ __ ] [ __ ] absolutely yep oh so let me just go ahead and praise him this a smart guy yeah but then there's just so many others that just rip away what little hope I have half of these have to be they will use [Music] these there's no way there's no way guys I can only hope that's a sket what's the upside of posting that video oh like what you do bro like you said everything was a go bro like you know how much trouble you got me look they calling me right now bro this is this is 100% fake that Chase banks on the phone 100% fake that's that one's actually funny hold up okay so this guy has a a fake screenshot of A99 billion balance let's go but uh speaking of snitching on yourselves um I found these two posts which seem a little bit more real as you see with the both of these screenshots day one $100 day two a whole lot more but still I'm trying to figure out why would anyone document themselves doing this it just it doesn't make sense the upside is what attention and cl I think the reason why it happens is that a lot of people aren't really taught at all about um people aren't really taught at all about how to think about things and they aren't taught like the economics of how the banks work so they don't really get like what's going on I I think that's really what what happened yeah Concord video got down I I have no idea why yeah I i' I'd have to look and check and uh yeah let's see here no no sense of danger consequences well I think that they don't even know that it's happening that's I think the reason why it's interesting is like they're not even sure sorry they don't even know why something like that's happening or what it is because they just don't know what the [ __ ] is going on I think that's really the reason why more than anything so yeah definitely makes sense the downside is fraud charges like I think that people don't even view it as fraud yeah that's the issue and by the way I think that the Concord video it seems like it it's it doesn't look problematic to me yeah now it's okay it was Private no it was but then it got I don't know I mean like I don't know my editor's probably fixing something like I why am I even thinking about this uh yeah he's probably fixing something it's okay it says private I see it yeah it probably just had uh like some sort of glitch or something like that yeah it's okay anyway uh I think there's a sound issue yeah it's no big deal like um you know there it is anyway uh I think people just don't understand that it's that it's fraud or they don't think they're going to get in trouble for it and I think that here's actually the biggest reason it's because people are broke and desperate so they will believe anything like this so they don't really like they want it to be true so much that they just believe it anyway hello but hey I mean I guess quick money no matter the consequences is attractive to some people people also have to remember there is no such thing as free money especially if it's a viral Trend called the Tik Tock chase money glitch that just said who's like oh there's this money glitch who does this like how can you think like this they're only thinking about now not the future Yes sounds like a great way to get arrested but then you have videos like this twis twins I'm not even going to lie I'm not even supposed to condone in this type of behavior due to the direction that I'm trying to project my life in but that chase bit play looking too sweet right now T No Cap I can just he what Chase bit play I I can buy so many Shigs like twins is hand for for 30 40 balls 50 balls like I love how my favorite thing about these videos is they remind me of like chaor Park Boys where it's like Ricky and Julian and Bubbles like their plan is to do some kind of scam and then retire for the rest of their lives on the $112,000 that the scam is going to make them like all they need to do is do this one thing get $40,000 and then they're just going to be good like then everything's going to be totally [ __ ] fine the big dirty yeah bro like we just do this one last job we get this done and then we retire and we're done forever guys we're going to be living on the high life yeah one last job Freedom 45 yeah you know how many sub I can get me thankfully this guy was only talking about it even though he was tempted but his comments just filled with people either claiming glitch or fishing for victims to try to like trick them into essentially scamming them if you got chased let me know someone pmo if you got chased let me know how do you withdraw it all at once p it's so sad isn't it it's so [ __ ] sad how do you who got Chase let me know I got Chase oh no that's bad news I saw a lot of people were calling this kiing but apparently this money glitch isn't kiing kiing is apparently when you open multiple bank accounts and you send various amounts of money to each bank account and keep paying each other off and you're essentially just I guess exploiting the latency of the banking system as the first account you deposit a 100 you send the second account $200 then you send the third account $300 then the third account sends the fourth account $400 and the fourth account sends guys I just thought of a new Tik Tok money glitch actually I think this one's too complicated because the chase money glitch was just put in a number and then they give you the money what yeah so put in like $5,000 and you get $5,000 well I want to put in $110,000 yeah can't be simpler than that yeah 4 how do I withdraw it all at once and then suddenly you have some money left over and then like three overdrafted accounts but the crazy thing about I guess like Advanced scams is it it takes so much effort that you might as well just make money because then you don't have the downside and it's almost the same amount of effort people who are trying to scam others in the comments here I'm assuming is like some sort of advanced fee scam and then you have this whole other scam going on in the midst of this where if you access Chase ATMs with contactless apparently the ATM doesn't close out from your account when you withdraw your cash you have to click that you're finished on the pad and apparently it's different from when you insert the card cuz when you insert the card once you take the card out you don't have ACC Chase is really [ __ ] up huh they're super [ __ ] that's crazy wow the people willing to mule themselves well it's like yeah does anybody have Chase oh you do can you withdraw $10,000 for me and send it can you send me to I mean it's free money man can you just send me actually uh uh can I get uh $117,000 yeah just real quick just do it just right real quick here why don't you get out 20 you keep three give me the 17 we both win how about that who does this how does this happen say when you do the contact list you technically still have access because it's just a beat so now you have people putting glue in the slots to where people insert their cards so they have to to use the contact list and then they just walk after them and Bank on the fact they don't close out their bank account before they leave the ATM and then they withdraw their own money from that person's account the world of scamming is just an allaround terrible place but it's just like such a [ __ ] scam like why do you do that it's like you know they have like seven 4K cameras at the [ __ ] ATM like if you go to the ATM like you really think that do you think there's no [ __ ] camera there I I I don't even understand this how many cards got cloned I don't even know we have the same ATMs where I work we force you to rth if you want to make another withdrawal yeah of course there is definitely some funny uh funny things coming from this so here have a tweet saying like yesterday a glitch in Chase Bank system allowed people to withdraw funds they weren't entitled to prompting the bank to place a 7-Day hold on the affected accounts as a consequence Chase accounts holders who participated in this glitch are now dealing with massive negative balances as well as 7-Day hold on their accounts and then they po do video which has to be a skit this one's scam sorry this one's a joke yeah yeah Yep this one was a joke it has to be [Music] kick the chevs kick the chevs we having a Chevy party later bring all the Chevy honors up I don't even like posting my accomplishments in life for all want to give me Che you up 100,000 everybody going to eat tonight blue Huns blue cars like this is clearly a parody of the people doing the money glitch picture money right there I wondering if Chase responded to all this so we have a New York Post article that says Tik tokers are trying to exploit a Chase bank glitch and discovering it comes at a huge cost the glitch videoos look an awful lot like check fraud one of the oldest scams in the book it's crazy how like I wonder cuz like I always think about this like how do you how dumb do you have to be in order for this to like be something that you're going to get caught oh like and like do right like like do you understand like multiplication do you understand algebra like do you understand like so what is supply and demand like when did World War II happen things like that right it's like what you know what I mean like yeah like it's just of seen happen yeah like where where are we here 1800s yeah obviously glitch videos look an awful lot like check fraud one of the oldest scams in the book video is urging customers at the bank to take advantage of a glitch quickly took off online prompting people to deposit fake checks for large sums of money but Chase quickly fixed the bug and is clawing back any money doled out to people who didn't deserve it a spokesperson for Chase Bank told the post consumers should be skeptical if something seems to good to be true it likely is if you think that like yeah there's this free money glitch where everybody just gets all the money as if you just put in a number and it just gives you that much money like how do you get it's unbelievable that people get fooled by this we are aware of this incident and it has been addressed regardless of what you see online depositing a fraudulent check withdrawing the funds from your account is fraud plain and simple the person added but I mean hey at least we're getting some pretty entertaining skits out of all it's funny what you you got chase you got Chase that's a skit right yeah that's a skit but I mean it's got to be at no one to rammed a police officer with their wheelchair and lied about it on national TV like this guy did you can check out because is just insane but other than that I'll see you guys next video that is [ __ ] crazy I don't understand how I don't get how so many people were fooled by this and I feel like the only reason why is because people are broke and desperate I'll link you guys the video this is a good one give it a like America's special I what I find to be really impressive and amazing about this is the fact that so many people the saddest thing about it to me is how happy they are they're so happy that it's happening they're like yes this is the greatest day of my life I'm finally going to be [ __ ] Rich you know stupid people yeah it's like how do you even think this way but I think that they're probably so desperate and so dumb that they just do it anyway they happened to my country too I feel bad for them a little bit I do too there are people who are victims of their own stupidity and that's really what it is I think that's exactly what's happened here is that these are people who are 100% just victims of their own stupidity and that's the reason why they act this way so yeah what who killed masculinity in video games I'll tell you who killed it blizzard oh my God does anybody else feel like masculinity has slowly been drained from Modern video games I was looking at recent staff photos of Ubisoft and Halo infinite developers and it's all starting to make sense it's a bunch of fat white liberal women and white liberal women have no interest in masculine mainly male characters they wouldn't even know how to write one if they tried this is why Rockstar a company founded by men that at least in 2018 was still mostly run by men I have a good Counterpoint to this is that shadowbringers was written by a woman uh so I actually don't think that it's entirely because of uh it's not entirely because of women I think it's like a cultural thing yeah from softare as well yeah it's the exception it is an exception I I think so and it makes sense right that men would be able to write better stories for other men yeah big wow what who could have thought and created the magnum opus Red Dead Redemption 2 a game with a manly well-written main protagonist Arthur if you want to see the seismic shift away from masculine characters honestly all you need to do is play a few games from 2006 and you'll see exactly what I'm talking about here's a war consider how many masculine military games came out in the 2000s abuck medle of Honor Call of Duty Brothers in Arms Gears of War operation flasho rainbow this is what it was all about bro like we had like I feel like a lot of y'all probably played at least two or three of these right yeah it's amazing experience absolutely Ghost Recon Splinter Cell all of these games were starring men and had themes like Brotherhood Duty sacrifice honor so the reason why Tyrion forging left the silver hand and was in Exile is because whenever he was in captivity he made a PCT with an orc named rrig and whenever it trig was captured during the burning of stthom uh Tyrion helped him escape and they escape together because his bond and his loyalty to a man who had helped him escape and be uh you know be free I guess was more important than any sort of organization at all the honor of it was more important than the organization and Tyrion shows that over it Brothers in Arms yeah exactly so it's propaganda for war yeah yeah that's the way that's the way blizzard used to be almost all of these franchises have either been killed off turned into multiplayer games or went woke I often wonder why so few modern games appeal to me and I think another big reason is this everything is just so gay now compare the games I just mentioned to the modern trash we have to deal with in OverWatch and Apex almost every character in these new games is either gay lesbian bisexual trans or something else I think this is an issue but it's not probably as big of an issue what is an issue is the fact that they try to to to like ride off of it like for example like with Concord or like with uh with OverWatch I think that's the issue is that in a lot of times they had characters that were gay or they had some sort of other type of orientation but they didn't use those characters as a m as a mascot to Virtue signal that they care about these types of issues I think the people that the problem that people really have is actually not with any characters orientation I don't think anybody really cares about this character because you're going to he's going to be talking about this and I guarantee you you're not going to be seeing a slide of Dion from Final Fantasy 16 you're not going to see that no you know why it's because the character wasn't created in a cynical performative way and also like this is another big issue and I think you can see this with Suicide Squad is that they completely caricature people that are LGBT it's not like this character is LG BT and this is like an after the fact like Soldier 76 I thought was good it's like yeah by the way he's gay okay yeah fine doesn't really have anything to do with it but yeah sure but like the issue is that they try to use these characters as mascots to promote their own virtue and I think that a lot of people can perceive that I know that I perceive that and I find it to be incredibly obnoxious so obnoxious I didn't even know that yeah because nobody cares nobody actually cares like what happened to a masculine dude with a hot chick on his arm I love the idea of Xbox game pass but I swear every time I open it up and look for new games there's just so many games that look gay now I refuse to play another cutesy 2D platformer or a game with a cutesy art style by some indie developer anymore I'm just done with these games God bro this guy is [ __ ] cooking oh man he's right yeah it's crazy like to me it's like I do think that there's probably an like there is not enough games that are like Doom that are out there like games that are just like by guys for guys about blowing [ __ ] up and like killing things that's absolutely true and it's like you can have the Cozy games too those are nice they're fine but where's where's doom and you know like Duke Nukem a hell divers right like let's yeah hell divers was the closest thing we got to that and think about look at how much that popped off people love if you want my 100% real thoughts on this I just think the entire video game industry has gone woke and gay and almost nothing they are making appeals to me in any way any so this is why I mostly play the best part about this is it he clearly cut the audio because he was clearly going on a rant about this and it's like okay cut let's just keep going yeah feel yeah I don't think it's necessarily about being gay I think it's about the performative nature of it because if you go back you'll probably see a lot of instances where like diversity or you know a strong female character like Cortana is a great example like Cortana nobody ever thought about Cortana as like oh yeah we have to have a have a woman in like the story for Halo people just liked Cortana because she was part of the story so the Tomb Raider stuff like that right and so it's the issue that and I think this is a big problem with Western developers because you can see this like Eastern developers never have this criticism it's always Western developers and I think that also like the reason why it happens is because people perceive the way that they behave as inauthentic and I'll give you an example of a difference in like a western development game balers gate three you can change you can have a dick you cannot have a dick you can have whatever you want and look however you want you can have sex with any character and nobody ever cares about it because the game is seen as an authentic work of art whereas when you look at the Assassin's on paper the job market now looks solid this is a fairly major story it's actually one that will impact my wanted to watch this because uh Bell is a game developer they made a game in unity it's called The Pale Beyond and now starting on I think uh January 1st they might be liable to being paying to to having to pay Unity thousands of dollars per download Alit will impact my studio it will impact a lot of game developers that make games that you play this is pretty crazy oh and by the way what the outcome of this is going to be is that you're going to have to buy more microtransactions in games and games will be more monetized it's either that or the game is going to be smaller in scope and you're going to get less content or it's going to cost more like this cost will not just the developers aren't just going to eat this cost they they this is going to be pushed towards the consumer for a long time we Dev been feeling more and more I would say betrayed and ignored by the engine maker unity in a world where you look at on real engine and see the march of progress while unities technical people do great things we do see them off chasing other Industries and making business moves that are particularly worrisome in fact almost a year to the day I launched a video in this Channel about another wave of developers essentially having a bit of a rebellion today though it's an even more crazy situation and I want to start setting the tone today with a quote from former Electronic Arts executive John rotello who is currently the CEO of unity he explained sold his shares by the way a week before this happened you by saying this you're 6 hours into Battlefield you run out of money we now charge you a dollar to reload and you're far enough in that that's going to be something that you feel okay about so he actually did yeah of course right yeah and that's a good point what he's making like and and again that's smart what he's saying is that once you're so invested into the game then they can start nickel and diming you and charging you because it will cost you more to get out than to just pay the fee use an analogy of a paid micr trans action reload of course that never came to pass but the point is that's the kind of analogy he used that's the sort of thinking that is going on recently said this if you're a seven figure developer you can afford 75 bucks a month true uh but if you're not you can just get started or choose for an artistic reason to give your games away for free or if you're a hobbyist screwing around or a student this is free you get the full power of unity 5 for free there's no royalties no [ __ ] around it's simple that's really what we're announcing things have somewhat changed since then because only a weekend after Unity highlighted the performance of sea of stars game on Game Pass getting humongous amounts of downloads and has separately sold over 250,000 copies they have managed to yep singlehandedly create an insane drama for themselves and actually worry developers and this all started well I think that it's it's reasonable for developers to be worried right because like whenever you realize that you're building a castle on Sand and they can just change the agreement like Darth Vader well then what the [ __ ] how can you possibly in good conscience develop and build a platform and build a game on something that could just be changed randomly and this is the problem right is that even Unity even if they undo everything I think people still won't trust them and people will still go to other platforms because who's to say they won't do this again in the future the blog post on the and it was released right at the same time as Apple's big showcase I wonder if they were trying to bury that news in Tech circles the title is Unity plan pricing and packaging updates pretty you know simple name for something that's going to generate a lot of rage because this is a update to unity's licensing plans designed of course to get more money out of users now in this there are some more minor elements as an example they are removing the unity service tier which was a smaller scale one used by smaller Indie developers and perhaps you know some solo devs right it's replaced by the much more expensive Unity Pro and while that may have a bit of a sting for some where things get a lot more spicy is this we're introducing a Unity runtime fee that is based on each time a qualifying game is downloaded by an and user we choose this because each time A Game's downloaded the unity runtime is also installed they're basically say saying right we're two products the unity editor the unity runtime you'll have your Unity subscription that will you know pay for however many seats you have that have access to the unity editor and then we will charge you based on how many times the unity runtime is distributed which of course means anytime your games are like downloaded right well yeah they effectively install something onto the user's PC that tells them that there's been a download of this game and they just want everybody to trust them that they have correct and enough fraud protection to know whenever a game is downloaded twice you see what I'm saying like how can you possibly trust them for this and they say this because yes each time a game is downloaded the unity runtime is also installed also we believe that an initial install based fee allows creators to keep the ongoing Financial gains from player engagement unlike a revenue share now how does this work well you have to pass a revenue threshold to be eligible at the free and plus tier that Revenue threshold is $200,000 and it's $1 million for the pro and Enterprise tiers and you think about $200,000 and so you have a video game that you spend a year making okay and you have three people that work on that video game so that's about a little bit under $770,000 for each person that works on the game assuming that it's divided evenly and that is also assum assuming that there are no secondary costs there's nothing else like that $200,000 might sound like a lot of money but whenever you actually start aggregating it and breaking it down for like what this money is going to go towards you will realize that that is [ __ ] nothing that is like nothing man there's operating costs salaries uh paying for voice acting if you have any voice acting in the game paying for anything yeah it's just it's nothing so this actually would affect a lot more people than you would imagine now obviously there's like the 99% of people that it won't really affect because 99 probably 90% of people or 50% of people just download Unity because they're like trying it out they're not genuinely using the product in order to make a video game for a commercial purpose now you might think 200 Grand in the bank fantastic here's the thing though uh what if your game cost 250 Grand to make right and maybe you got a publisher that would that you will have say sold 200 Grand a lot of publisher agreements uh I've even heard publisher agreements that are even Beyond 50% so like a developer uh you know signs a deal with a publisher and the publisher takes over 50% of the revenue massive yeah and then there's also the steam fees and then there's also yeah there's a lot man not uncommon yes I I know it's crazy Earth of copies you have not made back made back money and the bill for this sort of thing will come due right this will come due in a pretty damn bad time for you because you've now got to work out okay how is my studio being funded I'm not seeing revenue from the game that you know we released that just came out and it's very rare let's say A Game's budget is a quarter of a million it's pretty damn rare that a game is able to cover its production budget in like you know a month or two right yeah so this may seem kind of like not that big but that's um that that's actually a really bad time to have the bill also um interest that's actually a very good point that it brings up is like you know having to pay that very early on whenever you're also not able to pay other other costs that are going to be like immediately due especially like scaling costs like if you have an online game and you're selling a bunch of copies you're going to have to scale the uh support for like servers and stuff like that or like customer support and you're going to have to scale that first because then if you don't well then you don't have to the game that's making the money in first place so like yeah asking for that so early on uh yeah it's actually very harmful now now that I think about it I like this is charged to the developer what about the publisher because it's it's rev share everywhere but then well the developer um doesn't pay Bas in a REV share the developer gets to pay in a per installed basis which oh boy there's more there's there's wrinkles to that now then you have to uh pass an installation threshold on a lifetime scale to be eligible which is 200,000 at the free and plus tier and 1 million at the pro and Enterprise tier then fees are structured to uh basically allow for some I think also like a lot of game development for Indie developers is based off of a dream and I think this is the dream that you're going to make the next Among Us vampire survivors Halls of Torment to an extent not as popular as the first two but still also very popular um the the next Among Us uh the next like whatever game right Cult of the Lamb yeah many of the very popular like Indie Games cuphead stardew Valley valheim yeah yeah yeah yeah and so this is actually kind of comparable to like streaming to an extent is that if people feel like they can't really achieve a dream of like being like very successful like streaming because there's like a massive cap on it it's going to really hurt people's enthusiasm to get invested into it because they're going to realize that there's never a way there's like such a low ceiling for this and if I get to that ceiling all I'm going to do is hit my head and I think that's why it's so harmful and it's also not even harmful functionally for a lot of these developers because as Unity said and I think they're right a lot of developers never even are going to hit this threshold anyway but the problem is that saying that there is a threshold means that there can't be a dream does that make sense so you can't have hope whenever you have like this ceiling that's so low and if you develop and you do a great game you do so so well then you're going to have to pay them such a huge amount of money installment costs even from pirated copies and Bots that would done install in a virtual machine that changes IP you pay at once and can generate Unity so much fake profit um yes uh that that is also another issue this also hugely bad for steams and small Indie companies will be taking down their games because of unity and steam lose Revenue because of that well it's bad for everybody except for Unity and I think in time Unity will realize it's bad for them too and I think they already have that's why they're trying to walk back as much of this as possible right now allowances of scale 20 cents per install at the free and plus tier and then that scales from 15 cents to 2 cents per install for each more than 1 million installs per month at the pro and Enterprise level with a special caveat that if your game is installed in an Emerging Market there will be a significantly lower flat rate that's of course because a lot of mobile games are big in low Revenue per user regions at least say on a US dollar basis and then you can get some credits for the fee if you integrate more of unity's Technologies beyond the editor like say their gaming services or their mobile ad support ah yeah you can see how this is kind of working now so companies want money licensing fees those are not a particularly new thing now epic games right the creators of Unreal Engine uh their tool set is free but the understanding is that if you make a you know big old box game with it then you have the first million be royaltyfree and think past that they take 5% and of course because that's based on revenue and it's going up to a fairly High uh number there well it's it's a percentage base too I think that 5% is uh like I personally am not a big fan of I think if somebody buys a a program they should be entitled to 100% of the profits that they generate with that program because they bought the program like I I don't like all of this uh licensing like uh you know pyramid scheme type [ __ ] I think that it's unhealthy for society but uh I mean unreal unreal is free though uh I I thought that there was like a Dev version of unreal that you pay for is that true not anymore no it's free okay I'll just assume I'm wrong I think the idea is hey you make money we make money everyone's happy enough now this install Threshold mudar at a good point yeah yeah what would happen if Adobe started charging for every uh every video you upload and take some of the ad Revenue exactly yeah like I just I don't like this I I I I don't think it's good that you should be able to do this I think if you sell a service or you sell a product people should be entitled to the profit that they generate with that profit uh with that product it's like if I go to Like Home Depot and I buy something like a lawn mower and I mow somebody's lawn I shouldn't have to pay the people that make the lawn mower a dollar I bought the lawn mower I should have every right to use it however I want also a bit of a new question and at which point developers in the general audience then really found to become that this is one of the more poorly thought out deals for game developers that really many of us have seen in a very very very long time and they put out a Q&A the Q&A is quite bizarre so the unity runtime fee does not apply to our film gambling or education subscription plans at this time so if you're an industrial plan or gambling you don't have to worry it's just game and app developers you are invoiced monthly based on the like inst s in a given month and they uh the installations are just defined as installation and initialization of a project on an end device now this is the big thing there's some good there's some bad this is what people are concerned about is that somebody can intentionally install a game like a group of people can hate install a game and then cost the developer a bunch of money fees will only start being generated jan4 the bad news all of the installations threshold requirements those are retroactive right so um yeah if you have big install numbers uh yeah you're just going to be straight into this now there's a lot of problems here if you apply some of the old human brain thinking to this question so the more people who install your game especially on the perhaps razor thin margins that you'd planned before any of this became apparent the more money you then have to pay unity and your installation of a game can then actually actively harm a developer which is fairly crazy I did enjoy um of course and 20 cents is a pretty good amount of money like whenever you think about like I mean if a 100,000 people do something that's $20,000 that's a lot of [ __ ] money man Chris willart funny Twitter account many good funny things Pirate game delete it download it again keep on doing it company loses 600 bucks [ __ ] them dude fantastic so let's talk that developers and community members have highlighted and then un's attempts to squirm their way out of this because there is quite a large amount of trust me bro in this okay let's start with some problems hello Unity how are installs tractor monitored how is revenue determined do pirate installs count and how would that be determined well they're they're not going to say how and it's like I understand why Unity wouldn't say how because if they say how they also say how they're not tracked and if you know how they are tracked you also know how they're not tracked which allows you to work around their system so they're clearly not going to say this but again how can you possibly trust them especially whenever they're making such a massive change aside from other issues that many people have raised are we going to see more games delisted costs there are so many thoughts here I mean make a game game is premium game makes 200 Grand from inapp purchases after being installed 3 million times now owe Unity 20 cents per 2.8 million installs 560 Grand that's 360 Grand more than we made yeah this is one that is quite funny with the uh you know I just can't believe that uh I can't believe this is legal I hate this licensing stuff I think this is so harmful like imagine if every single time that you made something on a Windows PC you had to give Microsoft money imagine every single time that you uh played a video game and you uploaded a video of it you had to pay the developer money imagine every single time that you used to you know you drive your car and you're doing Uber you have to pay Ford money for that it's awful I don't know why this is accepted in any any capacity if you buy a tool you should be entitled to the profits of that tool why is it different because it's software is there any logic to this because it's clearly not different because most software doesn't require this like Windows or photoshop it's crazy imagine paying a tax every nail you nail on a house yeah they excuses updates I mean Windows does updates yeah what do you mean there's updates bro for people who can't pay up front yeah Windows does updates with the premium mobile model also Publishers are um are talking about things so devolver digital you may have heard of them uh definitely include what engine you're using in game pitches it's important information what a well-timed post from them cuz you've got to remember with all this stuff you know you sell your game valve takes 30% then that split I love seeing people defending getting cucked it's so bad like I I can't believe that people are okay with companies setting these completely Draconian rules where they just own a percentage of everything that you create with their product that you paid for it's so consumer unfriendly and Market unfriendly it's insane you and your publisher then you are charged the money like that is uh that's pretty rough because of where this is probably going to happen um like in the waterfall at least based on how they're talking about it uh developer AGR crab pointed out that if you put your game onto Game Pass that's potentially millions of installs that uh you could potentially be asked to pay a licensing for and a licensing fee for and uh well while it may not be you actually as it transpires Unity have a response to this and I don't think the industry is going to be particularly pleased by it uh I mean hey what about giving access of your game to people for free for a free weekend maybe even demos cost money even demos the epic game store free game option that could now cost you money for over the moon games they've said here hey Unity our game the fall was on Epic Games is a free game I was quite happy to sell them the rights for peanuts and the game was was installed like 7 million times how do you propose this will work I'd owe you more money than I've made in my life that's insane again what are unity thinking uh then of course there are developers talking about just aband abandoning the engine you know they're they're saying like all right you know what screw it uh here's one from Aaron we've used Unity 11 years now at fliply and I've been teaching kids how to make games with it at a nonprofit for 3 years afterday egregious announcement I'm actively planning to move us all to an engine with less hostile practices because yes be it yeah that's obviously what they should do that's absolutely what they should do it's not even a question the valve cut isn't so bad gives you access to a huge audience um I think that the amount that steam takes is pretty bad I think steam probably takes uh too big of a percentage for what they're doing uh it's like 35% right it's 30% it's 30 okay 30% 30% is a lot especially like they're not even really publishing the game they're just simply allowing it to exist on their platform like that that's [ __ ] massive 30% into a certain amount uh then it scales down to 20 as more sales are made really I didn't know that well at least that's a bit better 30% but it gives you about 10,000% more customers yeah I understand that and and that's why people still upload on the steam epic yeah epic games takes like a much smaller percentage that's why I think it's very important that you have uh competition in the space and that's why I've always been very negative about people that were just like anytime that any other Studio tries to make a launcher they get [ __ ] on because they're not steam absolutely not that's [ __ ] like a monopoly is not good for the consumer real engine be it gdau there are other engines out there and people are potentially quite interested in moving them uh I would bet a decent amount of money if I could Port everything in um Cod I think that's caves of cod which there's a really good Mandalore gaming video on I that is Seth I forget but anyway the only thing we'd lose is mobile and console which is uh big enough to stick around but it probably won't be a block of forever Cult of lamb buy Cult of lamb now cuz we're delisting it January 1 that's that's certainly fun um others have pointed out the potential for harassment here like yeah you could pirate a game install it to 500 virtual machines and you've potentially hurt a game developer people may say that's insane but like it's not insane at all people do all kinds of crazy stuff and also I would assume assume that the tool to do that would be usable for any game because it's just simply replacing the executable file that you're installing to each machine to being a different file for each different game like you don't even need to write new code for each different thing you just need to input the game into the code so it's like as soon as one person does this it's just possible for anything people are technologically proficient they can do spooky [ __ ] with with virtual machines right of course game maker default engine gdau and even Tim Sweeney have chimed in on all of this epic saying that they've got no plans to change their Perpetual license model um right and they're going to do it so that like they can't change the deal that they've made with you um when you sign on just a whole a whole bunch of the whole industry just taking this as the easiest marketing win they could possibly get there's actually some talk of a class action lawsuit coming from developers I don't know if they can sue Unity I really don't know about that and yeah I just I I don't know actually yeah I I really I can't say it seems like they probably can't but like I don't I have no idea you're wrong about steam just being a Marketplace that provide services to serve your product to multiple markets they're offering Cloud save they offer content management pushing new updates ensuring user product is a stable version uh yeah steam is uh steam is a great service I've been using steam ever since I was in high school I think steam is great I don't have anything bad to say about steam other than the fact that I think they take 30% it's a lot of money and it's also not good for an industry for there only to be one person working in the industry monopolies are bad but steam is a good company you're right um but ultimately then the point here is that Unity just decided to change the rules of things uh the rules of the game really arbitrarily because this is uh this is almost like a new utility cost the way that you've got to pay or at least they want to start charging you for Unity runtime deployments and again as you'll soon see all on a trust me bro basis and what's being said here I already committed to their engine for my new game put years of work into my pipeline I did so under a simple per seat license I'm happy to pay now when I'm close to release they bring something new on me not a price increase a fundamental change in how we do business together and that really it's a good point yeah a game can take years to make and they could be 6 months out from releasing the game and then this change goes into effect in 3 months and yeah you're [ __ ] that's actually a really good point like I don't really work in Game Dev so I don't really think about this stuff off the top of my head but yeah these are 100% this could happen like how n or silk song yeah exactly really like that is the point here so let's talk about the clarifications and the regrouping by the way if you want to do some supporting of uh you know aame developer we're game developer our first game the pale Beyond um is of course guys I'm going to play this really soon okay I'm I'm going to play it really soon it's it's GNA happen uh right after um ginin and Final Fantasy 14 yeah Steam and uh it's made in unity but hey I guess if you buy it before the first of the 1 of January how mad Bell would be if I [ __ ] streamed this game on January 1 I wait until January 1st to stream the game and see if they're still in unity we won't be charged like I don't know 15 or 20 cents um but also if you want to check out store. b. games we have got our art book and all those L do it on the main Channel man what a story okay so obviously Unity did put out some press responses here let's go through them Unity will only receive aggregate data from from various sources so they'll be working off estimates not hard one to one numbers cuz people people were wondering like hey uh what does the unity runtime phone home to give you a number no it doesn't they have some proprietary method of working this out in a in a method with no transparency that is literally just trust me bro we'll bill you accurately so that's cool uh demos yeah we're not going to overcharge you like trust us we changed the rules on you randomly so it can't get any worse right yeah there you go uh it's illegal in EU yeah EU is much more ahead of the ball and ahead of the game with like uh online piracy and not piracy excuse me online like privacy and uh different types of rules like I think EU is way way way far above them I'm just worried Unreal Engine will become a monopoly the good thing that you can keep in mind is that Unreal Engine is a phenomenal engine for running 3D games but again my understanding as not a game developer is that Unity is actually great for making 2D games and a lot of the people that are using Unity for that function are actually moving over to using another platform called go Dot and there's a couple of other ones so some of these people will use unreal but there are closer versions to Unity than unreal that's my understanding so it seems like of course this will like if Unity falls apart which I don't think it's really going to happen but like theoretically if it does happen if Unity falls apart it will massively increase unreal engines like piece of the pie chart like massively but it still will not be a complete Monopoly won't count but only if they aren't the same build of a game that allows uh players to continue progression so for actually quite a few demos that's um really quite bad at Early Access games they will count as to fraudulent stuff right so somebody uh spinning up the game on a bunch of virtual machines I don't even know how they catch that but again trust me bro uh they say that they they can't catch it there's no way like not even the the best like the best fraud protection places in the world right Banks get hacked if you think banks can't figure this out there's no way a video game developer can come on fraud detection stuff that they built for their ad platform they can handle it and they'll have a way for developers to submit their concerns again presumably after the developer has been charged and if a a developer has just charged let's just say 30 grand 40 Grand that's going to be very bad for their cash flow hug right especially if it's soon after a game is launched and the money hasn't came in yet you're you're just going to fire a torpedo at a developer right when they actually need that cash flow again this is absolutely abely crazy um they also did confirm that they will be applying the threshold to the lifetime installs of the game um and also weapon streaming Games built with unity also do count because everything that runs the game is counted in some way now wait so if wait so it's applied retroactively like wait how does this work I don't understand this they will apply it to Lifetime installations did I miss this yesterday because I feel like that's a uh that's a big one that's a really big one is that even legal uh I I don't know I'm sure we'll find out he now Steve totillo of axios then went and got a bit more info and there was a second round of updates from that QA um about reinstalls after a sort of regrouping within Unity apparently if the same game is reinstalled in the same device it won't count and somehow Unity can tell that again very suspicious uh but if a game is installed on a new device or new Hardware that counts so imagine this I'm a developer sell a game in unity you install that on your PC then you install it on your steam deck for some reason I the developer am charged twice for that even though you're doing it under one license of the game that you own Char it's completely illogical bundles will be exempt from uh fees and unity will somehow provide a way for developers to notify Unity again how's this going to actually work you know um subscription fees will fall upon the distributor not the developer so this is quite an odd one this means that say Microsoft will be facing large fees for every unity game they list on Game Pass like say the smashit Sea of stars now I wonder how Microsoft feels about this yeah I I have a feeling I mean Microsoft is a really big like we talked about how 10cent was a big company I'm pretty sure Microsoft is bigger than 10cent like Unity is really not that big Microsoft should just buy them and change the rule [ __ ] it pull an Elon Musk just buy it and change the rules now if C of stars like whenever I boot up my Xbox uh to to play Starfield what do I see when I go to Game Pass SE of stars like it's probably been downloaded millions of times and you know that could actually get to a stage or a state like obviously the Sea of stars devs are like okay but again you know how much money did Microsoft pay for that and could Microsoft end up paying more in unity license fees than the payout that was given to the developer right like that's actually potentially a concern and maybe that is all part of unity's plan because they're seeing M again via their proprietary method maybe they look at all of these premium uh mobile games and all these like Game Pass epic game you know free uh free games maybe they see all this and just look at the sheer amount of downloads and they're trying to find a way to monetize that I mean it very much looks like that's the case now of course these updates you may notice that these aren't really better because everything is somehow relying on unity's completely undefined trust yeah exactly like trust us we have a proprietary system that will make sure that nothing goes wrong well can we see it no can you at least give us an idea no is it exact or an estimate it's whatever how can anybody trust that [ __ ] me bro data Gathering and it's somehow being able to uh identify legitimate installations by some method even though the runtime doesn't phone home and they seemingly only are using AG data um and the end result being that the distribution of your game will inevitably end up costing you in some way because hey guess what if it cost your publisher that's going to change the deal for you as a developer especially because any money that something uh you know will cost to your publisher it's not like you pay you know in um in your recoup you pay it back one to one publisher money costs money so this is going to the idea it's it's kind of funny um yeah whenever they charge the publisher the publisher charges the developer if a publisher is on the hook for let's just say 100 Grand of of fees from something like this the developer you know in some publishing deals that could cost the developer more than 100 Grand because of how the recoups work so again a lot of publishing I think that's true yeah just oh my God deals would probably need to be changed to account for something like this as I mean as a new cost in the balance sheet um and then they're also throwing Publishers and distribution Partners under the bus and that means that taking deals with developers can well just become less less lucrative right it's quite crazy like I'm glad that we are making smaller scale PC games where it's like you know where that's like a lot better but still like one of the things that really helped us with pale Beyond is we released the demo and that meant that we had um suffice to say um well they released the demo and that's the thing right is like bellor Studio they would have had to pay 20 cents for every download for that demo if they hit this threshold so basically they would have had to pay if it's 200,000 downloads they would have had to pay theoretically assuming they didn't make any money off of it or they broke even with the money that they did make that's $40,000 everyone was demos are excluded now that's a big change to just kind of oh we're not going to do this now they said most oh you're right you're right you're right I did read that I I was assuming that it was new information apparently it might not be they did say that some demos might be exempt but not all of them so basically if the demo is successful it's not exempt that's what I'd probably assume very happy with our wish list numbers I think right now we have like 160 170,000 wish lists but through like Steam nextfest and all that stuff our demo did really for us and there's a chance then that actually some of those demoes like some of them $150 games could be charged that would really I mean that would suck so this is all kind of whack um again Mike ble here of course ble games um the thing that sort of propelled his career I think a lot that people know about was like say Thomas Was Alone he's made many projects since um I keep cycling back to this tweet and how hilariously exposing it is given their model legally cannot be collecting real user data it amounts to a guess a guess they are refusing to break down to those they are hoping to Bild we can't we can't judge it and we can't tell you how we try to judge it but you can appreciate that we're not going to tell you how it works oh my God walk back imminent but it reveals a lot yes because they say we leverage our own proprietary data model and you know it's got to comply with gdpr and all that too and you may think surely everyone in unity knew this was happening well yeah and they were all ignored uh heard from inside Unity the blog post was reviewed for weeks and internal concerns about purc confusing messaging Game Pass Etc we all ignored it's resignation time for some folks hopefully we see a walk back I feel for Unity let's see what happened to their stock because uh yesterday um let's see Unity stock oh ooh that's bad ooh and then if you look at five ooh [Music] that one's all right that one's okay this one's worse oh my God yeah it's actually going down like that's CEO getting fired yeah that's huge aside about John rello the CEO of unity the man who wanted to sell you bullets in Battlefield um and last year had to post an apology because um of the way that he called some developers um you know what I I want to some [ __ ] idiots for pushing against monetization yep there is president and CEO of unity software I see where this is going on well the S Unity guy is the same guy who brought loot boxes to FIFA in 2009 yep can't get demonetized for swearing but you know you can look at my screen and what I'm highlighting right now um this is what he called Developers for pushing back against monetization um you know all right no um so this is something I can make no inference about certain pieces of information here um a lot of people are um you know going quite far in saying uh certain things and it would be uh you know a shame if that got them any trouble right got them any sort of notice in the mail um I suppose a lot of people do find some of this information to be curious and pertinent because on the 6th of September 2023 John ralo president of and CEO of unity software Incorporated sold 2,000 shares of the the company this move is part of a larger Trend uh for The Insider so over the past year has sold a total of 50,000 shares how many total shares does he own cuz like it's 2,000 a lot cuz if it's 2,000 out of 3,000 that's a lot if it's 2,000 out of uh 500,000 it's not he's got 300,000 plus yeah if he's got 300,000 plus shares I actually I I really don't think that he sold 50k total yeah but like that's over the past year I mean I I don't know it's very hard to say yeah it's 0 6% of his shares I really actually like originally I thought this was very telling I think that if you contextualize it around being 0.6% it's not like this guy's really Cashing Out Who over the past year has sold a total of 50,600 and 10 shares and purchased none of course please consider this above information about this announcement being planned along in advance and then think about uh of course John rell's sale of shares I make no inference uh about these two pieces of information obviously though you're now aware of these bits of information it seems as though that's not the case now this all appears to be some form of top down push from the specific focus on the kinds of games Unity thinks can make them the most money it's the core thing and look you guys probably feel it as as Gamers it's like like if you're not the whale the developers don't care you look at D4 and you're like look at all that cool armor I would maybe play the game to get that armor oh no it costs $3 they're not making it for me they're making it for the whale well Unity makes it feel like that to us now right and the fact that this does not apply to gambling it is sad that like it's this is kind of like an aside but it's sad that like I can't look at like video game skins and be like wow I I can't wait to earn this in the game I have to go buy it yeah I don't know like you know you go back and you think about like classic wow this it was really cool you know the way you were able to do that back in the day and that's an interesting oh man it's an interesting thing with cway it doesn't it doesn't apply to that the fact that there are credits if you implement their proprietary um advertisement technology it just says absolutely everything look I fully expect a walk back here it's either the walk back and they wholesale cut it or they walk back to a water down version of it which case they'll have made progress and it could just be the out of touch CEOs doing the usual thing saying it's only a vocal minority it's only the Twitter users real developers won't care real developers are too bought into our system and that actually is is partially true yeah it's not cost I mean this is the same logic they use with the battlefield bullets yeah and he's right the problem isn't that he's an [ __ ] the problem that is is is Right you've built your whole pipeline around using Unity every month costs you tens of thousands in in in in cash flow right to to pay for your team and uh you want to spend four or five six months of you know stalling some progress to redo all your stuff on and real engine that's probably going to be more expensive than these fees from Unity so you can see they truly do have a captive audience so that is the sit situation um there of course if you want to get something that is the making of the pale Beyond uh because this is a book it doesn't have an activation fee isn't that insane store. for now bro like wait till they start charging you for paper you you know like you buy a thing of paper oh you print something on the paper you want to sell it okay well now we you got to give us money for the fact that you used our paper games bloody house screw the SE Suite of un not that many trees left guys come on my God the PO people of that company you care about the environment Don't You by these donkeys it is rough all right that's it for me you can check out yesterday's video and I will see you again on this channel tomorrow well this is a great video I'm really glad that I watched this and I'm uh I I totally support them by the way like I'll link you guys the video Bell has a vested interest in this he has made a game and he sells a game on Steam that was made by unity he is directly affected by this so he understands exactly how this will affect his bottom line his uh you know his studio and the people that work there this is very shitty that it's happening obviously a lot of people asked me to look at this I wanted to bring attention to it because I think how problematic this is and huge W for Bell were talking about it and I will be covering every update to this story as much as I can because I think it is absolute [ __ ] [ __ ] and uh don't buy my game I literally can't afford it as it's just a stunt from Unity where they give us something complete nut [ __ ] they know it's going to get trashed on and then they introduce something less [ __ ] oh the anchoring strategy I don't think that's a good idea for busino business transactions that's only good from a uh from an end user because an end user isn't thinking about the long-term effect of the diminished Trust like because Unity is selling to other businesses like consumers are stupid but businesses aren't stupid yeah trust is more important than in business business yeah exactly I'll link you guys video one more time make sure to give it a like uh I'm very very glad to see B were talking about this there are a number of developers that actually contacted me and they wanted me to talk about this myself because uh you know they know that we're involved with game development and uh you know we play games we you know do this stuff a lot I talk to developers and uh this is affecting a lot of people in like a very serious way and so I I just hope that you know if Unity can't get their [ __ ] together people can go over to another uh uh another engine and use that instead so there it is uh do you think it would be better for devs to move to Unreal regardless of possible walk back I think that the reality is that if I was a development Studio this is what I would do I would stick with unity even if they walk it back until and then I would also start developing for another engine simultaneously or developing for another engine like start moving towards that direction like I would realize that this is a sinking ship even if it's not sunk already like I would not do I wouldn't just like immediately leave because it that that wouldn't be good for the studio right it would might hurt the studio might hurt development uh it would probably hurt the uh the developers would make people have to repeat their time uh so I would wait till the next Studio new project and then I would transition over to a new uh a new thing and and the thing is that's the problem right is that this type of an effect and this is the problem that like quarterly earnings report uh capitalism and not really capitalism but quarterly earnings report um like culture uh creates is that this is an effect that will happen in seven quarterly earnings reports from now but it is a reverberation from something that happened today so like yeah you might not change it right now even if they changed everything back but you're going to remember this in a year and a half how do you think this will affect us Gamers oh um it'll just make you have to pay more money shorting Unity right now might be the most free money you could ever make from buying options yeah I wonder what's going to happen I really do I think unreal is uh better and more technologically advanced personally I think that you're right but Unity still seems to offer better uh better support for games that are smaller in scope and are two-dimensional uh that's my understanding as somebody who's not a game developer the unity disaster gets worse all right yesterday I talked about the fall of unity and today I'm talking about it again why because it continues to get much much worse the picture continues to change because I'm now fascinated by it long story short watching a company implode like this and scratching my head as to why makes me want to figure it all out if not for certain then at least plausible speculation on what the reasons might be the secret agendas or the hidden motivations I'm not going to bore everyone with a lengthy recap of stuff they've already heard because most people probably understand the gist of it already however the Crux of the issue is this Unity Technologies a video game software company responsible for making the unity game engine has recently adjusted their fee structure on top of a flat Subscription Service they will now charge game developers per install with retroactive terms of service changes and that monetization scheme will have a severe negative impact on a great deal of prod it's like a reverse sponsorship or instead of them paying you for every install you pay them projects going further they deliberately pulled down their own transparency GitHub repo tracking changes like this and reversed a number of commitments from years prior about having the best interests of the community at heart in essence they destroyed the totality of their Goodwill jeopardized a multitude of projects angered the entire industry top to bottom and they did all of it for what more money sure the CEO is an industry Paragon of how to squeeze more money from an audience I discussed that last time but deeper than that it seems like there must be something more Sinister happening avoiding the topics I focused on last time you can just go watch the video if you want to hear about those let's take a look at the board of directors we already know about John Rell however you say that the CEO he sold that's the super villain who wanted to charge people a dollar for bullets after they play the game for hours so they're hooked when you are 6 hours into two playing Battlefield and you run out of ammo in your clip and we ask you for a dollar to reload you're really not very price sensitive at that point in time yeah he was a former EA CEO bit of his stock right before this all happened he was the former CEO at EA Games he wanted to charge Gamers per reload In the Heat of the Moment when price aversion was lowest and the industry hates him for good reason but who's this guy well the industry doesn't hate him the public facing people whose presence online is related to an actual audience of consumers hate him the industry [ __ ] loves him that's why he's the CEO now the industry hates him but it wasn't until now Tomar bar credit where credit is due tugging on this thread is the result of a post on r/ Unity from a user named zit I'll link to that down below Tomar bar is on the board of directors at Unity but he is also the CEO of a company called iron Source now iron Source itself is an important piece of the potential puzzle because iron Source actually merged in November of 2022 with unity Technologies this at the time was a $4.4 billion deal pretty big but the landscape surounding that deal is what matters most for reference iron source is a company that specializes in mobile game development monetization and distribution okay so Tomar bar sitting on the board of directors at Unity Technologies and also CEO of iron source is a figure of Interest it always comes back to mobile games the more things change the more they stay the same but it turns out that when you go down the list of Insiders who are selling stock in the company this guy is by far the most aggressive over the past year alone according to fintel it appears that Tomar bar has sold upwards of $20 million in unity stock which is interesting to say the very least well how much did he have though because like if he was part of a merger with his own company he probably has over a 100 or 200 mil in stock so if he sells over a million or 20 million that's less than potentially 10% so so I don't know I I want to see what this what this percentage wise is because there's plenty of times where people diversify their stocks for a multitude of reasons that doesn't necessarily have to do with any insider trading it's on the right side remaining shares okay let me see so how much did he start with has sold upwards of $20 million in unity stock which is oh wow oh wow yeah he used to have is that 4,000 total or 4 million I mean oh that yeah that's a lot more okay interesting to say the very least now remember that $4.4 billion merger between Unity Technologies and iron Source well it turns out that deal had a number of shall we say complications first at the same time as this $4.4 billion deal or merger was taking place a company called app Loven made a competing offer to buy out Unity completely for $20 billion but Unity rejected this deal citing that the deal quote would not reasonably be expected to result in a superior proposal end quote I find that exceptionally odd on a personal level given that the comparable market capitalization at the time was significantly below $20 billion making this an offer that came with a sizable upside premium I see so he's going to try to draw the correlation that they didn't sell because they knew that they were going to do this thing in the future and then this is indication of intent of them using insider trading and hedging their bets I think that's what he's going to try to do still the deal with iron Source would leave unity in control while the deal with app Loven would reduce them to 49% voting rights so yeah it's a bit complicated and they rejected the offer anyway after rejecting applovin Unity merged with iron source and now the CEO of iron Source Tomar bar as we've said sells tens of millions of dollars worth of stock while the company destroys every shred of community Goodwill that it has but it gets better during the deal with iron Source two investment companies Sequoia capital and Silverlake pledge to come on board with a billion dollars invested in the deal itself wow that's honestly peanuts compared to applovin but when the deal eventually did come through two more people one from each of those companies joined unity's board of directors Egon Durban and Rola Botha these nuts starting with Egon Durban he is a founding principal and managing director at Silver Lake which it now appears I [ __ ] you not has sold the entirety of their directly held remaining stock in unity Technologies disclosed as of yesterday Al 5.3 2.3 is 5.3 7 I think there's something fishy going on here yeah so Egon Durban once again big shout out to zit over on Reddit the connections here are fascinating and I wouldn't have known about half of them without their post wow aegon Durban was embroiled in Scandal when he advised Elon Musk about the potential to take Tesla private that was a whole Fiasco with a legal Quagmire where Elon said he was going to take the company private and then the SEC got involved etc etc but Egon Durban still has major ties to both Twitter and musk as shareholders attempted to oust him and failed in the wake of musk's Infamous takeover well now that we have EV musk in the mix once again let's Double Down Egon Durban came on board through Silver Lake but rollaf Botha came on board with Sequoia Capital yeah roaf Botha is part of what's commonly referred to as the PayPal Mafia alongside Elon Musk what the but roaf Botha came on board with sea Capal yeah roaf Botha is part of what's commonly referred to as the PayPal Mafia alongside Elon Musk the PayPal Mafia for those that don't know is a list of former employees and Founders at PayPal who have since gone on to create a giant spiderweb of technology companies oh that's [ __ ] amazing bro this is like a [ __ ] comic book I love this this is amazing yeah the lore oh my God the Legion of Doom includes names like Peter teal Chad Hurley co-founder of YouTube Yan Wong founder of Reddit and yes roaf boa a partner now at seoa Capital sitting on the board of directors at Unity get this in October of 2022 Roa boo was predicting success quote unquote for Elon musket Twitter stating that his firm Sequoia Capital conducted due diligence this is the guy yeah I bet they did and the business model can be improved but let's expand on that comparison see Twitter actually made radical changes to their API pricing model not long after elon's takeover and those changes are not dissimilar to those of unity personally I ran up against this when trying to map these huge political bot networks with my team and now I can't do that because I got locked out of the API based on those changes and I can't afford to pay thousands of dollars per month to do it hosting costs have long been the elephant in the room for tech companies the more traffic you get the more ensive it is and Twitter decided to start ruthlessly charging Developers for API requests that resulted in a lot of applications being deprecated because they just simply couldn't afford the costs being passed down to them in such a way and the trend is far from over Reddit much like Twitter went down a very similar route opting to start yeah Reddit got [ __ ] on but I remember whenever Twitter did this everybody was like nobody really gave a [ __ ] about this at all Reddit did the same change yeah they did that's why they had the Reddit blackout spontaneously charging for AP usage and Reddit CEO Steve Huffman is on record praising Elon musk's new monetization tactics for Twitter as a platform explicitly saying that their conversations had been inspiring for him Flash Forward today and we now see Unity I wonder how much like I actually wonder how many people buy Twitter blue because I see people with the check marks all over the place I don't know I bet a lot of people do yeah and they're spamming ads like I wonder if how much money Twitter's actually making because everybody people are either saying Twitter's making a lot of money or Twitter is losing a ton of money but I feel like they're saying that because they don't like or they do like Twitter but I wonder what the actual numbers are opting to continue that very same Trend logistically protecting game developers from Bad actors will now be completely impossible because every time you spin up a virtual machine it's a brand new install right and they have no way to differentiate that and you could easily Target Developers wanted to but focusing on the Casual mobile game Market remember Unity accepted an iron Source merger at 4.4 billion instead of a merger with app Loven valued at 20 billion focusing on the Casual mobile market we see this right here Unity is offering a runtime fee waiver if you switch to level play as it tries to kill app Loven would you look at that the people that are trying to [ __ ] oh man [Music] level play is a service from Iron Source here's a much better visualization of what's actually happening from a user named Sosi on Twitter the yellow indicates the portion of develop I don't feel like that's I mean Iron Source merges with unity and then they try to freeze out somebody who was trying to buy them out at a price that they felt wasn't good I I feel like yeah this is kind of it it's Cutthroat but it's not corrupt will now lose between 10 and 25% of their Revenue with unity's new terms of service the orange they stand to lose between 25 and 50% of their revenue red can lose between 50 and 100% And that scary black line off to the left not huge but it is there yeah that's the area where these new terms will bankrupt your company because Unity decided to charge you more money per install than your app is even making okay so these are the amount of downloads and this is the revenue per download oh wow this is such a good chart I love this oh [ __ ] look at this so this is these are the amount of people that are making the money okay wow so if so this is these are the amount of people that are making the money okay wow so if you're in this black line you get bankrupted by default holy [ __ ] and also the dark red like the maroon color too orange they only take 25 to 50% of your money that's not really so bad right most talking about small scale free mobile applications in games and unity can make the argument that do you want to know where I would say 90% of the uh 90% of the people from Unity are in I I'll show you 90% of the unity users and the people that are doing it are probably right about here so it's not actually going to affect a lot of them and what this does is it allows Unity to say and for it to be te technically true that almost nobody will be affected by this but what it leaves out is that a lot of people download Unity without the purpose or the goal of making it a massive commercial Pursuit they're downloading it for another purpose they're downloading it to train they're downloading it to teach themselves they're downloading it so they can work on something else with like another company they download it for any other reason right so it's like they can say that 99% of people won't be affected by this and it can be a technically true statement while at the same time being disingenuous because of the way that like the revenue is weighted it's if I have my gripes with the mobile game Market those people still it's like using median instead of mean you know or vice versa depending on the statistic we have jobs and deserve fair treatment let's go big picture here Unity is being raped over the coals rightly so for their decision to implement aggressive pricing on their customer base that decision emulates a pattern that began with Twitter was mirrored by Reddit and is now making its way through the broader markets the decision itself appears to be aimed at killing a competing service after Unity actually rejected a buyout offer from that Services owner in favor of a merger with iron Source who stands to gain the most from this entire controversy meanwhile the CEO of iron source and the directors who came on board through Sequoia capital and Silver Lake during the deal relentlessly dump their stock in unity standing to gain massively as the business gets funneled into level play the vouchers that's the key anecdotes are beginning to surface right now more and more where developers are being offered runtime fee wavers to switch over and some are being told that their fees will be covered with credits because they already use iron source as their ad provider the Golden Goose here receive credits on cover 100 so they're try I see I see okay that's very cute so they're trying to force a switch he iron source and the g developers being affected are just casties of a hid agenda thankfully there are still ways for developers to fight back as an example there was recently a collective letter from game companies announcing that they will be turning off unity and iron Source ad monetization in retaliation which is probably the single most effective action they can possibly take this entire move appears to be designed as a funnel to steal market share from applovin through insanely damaging policy shifts but when the advertising Revenue starts to take a hit companies do actually take notice there are some big names backing this letter AER Voodoo Century Games Etc as the dust settles and the real targets become clear reality continues to Dawn that Unity may have just completely killed their own business entirely they could well they did that but they were trying to do they were trying to kill a bigger business right I mean it's it's a long shot I mean this this might have worked right cuz you've got to look at it from their perspective like Twitter did this Reddit did this why can't they do this turn back I guess but no one will ever trust them again period they could stay the course and maybe and it's like I'll tell you why they can't do it it's actually very simple is that Unity is a business to business business and Twitter and Reddit are business to Consumer so that means that business to business uh like relationships off trust them again period they could stay the course and maybe and it's like I'll tell you why they can't do it it's actually very simple is that Unity is a businesses to business business and Twitter and Reddit are business to Consumer so that means that business to business uh like relationships operate on a much higher level of trust and long-term trust and that's why this damage this damages Unity way more than it would damage Reddit or Twitter because the people are [ __ ] stupid but the companies that are building a castle on what is effectively sand they're realizing it and they're saying never mind I don't want to do this anymore yeah people don't care companies do exactly yeah companies have accountability for this because companies need to be accountable for this because a lot of them literally are by fiduciary responsibility because they could be publicly traded so that's why it's not going to work for Unity funnel a fair number of projects into level play over at iron source which appears to be the actual goal but how high is the cost of that action casual Mobile gaming might be the future of the industry from a raw numbers perspective it might be the largest vertical out there even in terms of player count but it's not the only one and taking the type of reputational hit that they have already taken doesn't exactly seem worth it to me who knows Twitter did something vaguely similar right off the bat and never looked back R it's because Twitter already had 50 other problems that's really what the difference is and also like everybody is already coded to either like or not like Twitter to begin with because they either like or don't like Elon Musk so there's really no objective viewing of any of this the red and the Reddit stuff the reason why people sided with Reddit is that the only thing that's more annoying than corporate overlords are subreddit overlords moderators the people that have a [ __ ] a sense that everybody else needs to listen to them they want to tell everybody what to do on their own little sub so nobody who's like they're basically they're the losers at least the corporate guys are making a lot of money at least they've got a nice car this guy does the same [ __ ] thing and he's living in his mom's [ __ ] base he's a loser and also I can't look at pictures of titties because the subreddit got put on private no I don't care about this remember the basketball subreddit bro you think basketball fans give a [ __ ] about a Reddit API they don't even know what that is the F API shut the [ __ ] up or is that a Pokemon turn it on and for Twitter nobody gives a [ __ ] nobody gives FU uh Elon Musk was Loved Before He bought Twitter no he wasn't I think that Elon Musk uh when did did people Elon Musk started being disliked whenever he started involving himself in Social politics right like as soon as he started involving himself in like uh you know trans issues or in other social issues uh any of that stuff I think that's whenever people really started yeah the Dogecoin I don't even I think Dogecoin people didn't really care about that so much yeah I think Joe Rogan Experience was kind of the uh the turning point and I'm not making a a judgment on this right I don't I don't give a [ __ ] like you don't need to tell me like listen I know you're typing out your opinion about Elon Musk right now just remember that your chat's going to be like you see the screen popped on board soon it's gone see do you remember what was in the middle here probably not it was gone nobody literally nobody cares about what your opinion on him is and it's instantly deleted it's been finished so don't waste your time my point is that a lot of the public scrutiny was already on him at that point and I think that what happened is that people will support Elon Musk in whatever he does even if it's bad and some people will will not support him in whatever he does even if it's good he's become one of those polarizing people Twitter did something vaguely similar right off the bat and never looked back Reddit hopped on board soon after and maybe Unity is just third in line for the new industry Norm trailblazing as they go but somehow this one seems a bit different the anger seems more physical even and the consequences are ramping up fast Yeah final example here it seems pertinent to back up what I'm saying for this part Unity decided to close two of its offices in mid-september after quote credible threats unquote but those threats were made by their own employee the company is being ripped apart at the seams and honestly I'm not sad to see it sure the threats are Overkill there's no place for that obviously but it demonstrates that we've crossed a line between typical outrage or online grumbling as some people call it and actual consequences for their actions all all when I don't really think that there's a lot to say about a death threat like it's one unhinged person I don't really think is a lot to like especially because it's a person at the company like I wouldn't I wouldn't put it past them that like it was done on purpose I really wouldn't like the everything that I read about the leadership and the people that are involved with this just seems really shady and like if I was them and I was operating on that level of like uh like shady stuff I would probably do that too because the the truth is that it worked it actually caused a lot of mainstream media Outlets to stop promoting and talking about negative stuff about Unity for like a whole day and it also got them to run defense for Unity and say oh this is wrong don't do this so it actually worked I made the video yesterday one day is all you need because here's the way that a lot of uh a lot of media media goes right is it everybody shits on a company everybody hates something for like a period of time and it doesn't matter what it is I think CO's a great example right people are saying CO's coming back does anybody here actually care about what the death rate is is that actually going to make you want to wear a mask again if they say the death rate is as bad as it was in 2020 would you start wearing a mask again no why is that it's because people's give a [ __ ] meter has been depleted and there is a time limit on the give a [ __ ] meter that people have that's just how it is and I use CO as an example because Co is a direct threat to your physical safety at worst right like I I don't please don't do not try to educate me on what you think Co is but that is what a lot of people believe it to be so the point is that if people don't have a give a [ __ ] meter that is unlimited for something that is potentially a direct threat to their physical safety imagine how much their give a [ __ ] meter is depleted for something that doesn't even affect them at all so having somebody Miss just simply one day of negative coverage people just lose uh people just lose interest brain dead ass take it is a brain dead ass take you're absolutely right and do you know why it's because most people are brain dead I'm right I didn't think it could get much worse I figured the situation would die down if anything but no it has not decidedly has not the agendas and motives in play here are fascinating whatever they ultimately might be and I really wanted to talk about it that's it links are down below to support please consider patreon locals or Channel memberships AdSense is extremely unreliable these days and as I get back into the full swing of much more frequent content generation it's just a helpful thing for me to have there's more like a cyber SEC product affiliate list social media etc etc but I'll cut it there and stop rambling as always thank you for watching and have a nice night I'm glad I watched this one I didn't even know about some of these little connections I'm glad to know about this there has been an update there's been a situation Unity has released an open letter to their Community I'm Mark Whitman and I lead Unity create which includes the unity engine and editor teams I want to start with this I am so sorry what we should have spoken with more of you and we should have Incorporated more of your feedback before announcing our new runtime fee policy our goal with this policy is to ensure that we can continue to support you today and tomorrow and keep deeply investing into our game engine you are what makes Unity great and we know that we need to listen and work hard to earn your trust we have heard your concerns and we are making changes in the the policy we announce to address them all right our Unity personal plan will remain free and there will be no runtime fee for Games built on Unity personal we will be increasing the cap from 100K to 200k and we will remove the requirement to use the made with unity splash screen okay do people care about that I don't know uh no game with less than $1 million in trailing 12 Monon Revenue will be subject to that fee for those creators on Unity Pro and unity Enterprise we are also making changes based on your feedback the runtime fee policy will only apply beginning with the next um LTS version of unity LTS what does LTS stand for long-term support version okay got it uh shipping 2024 and Beyond your games that are currently shipped and the projects you currently are working on will not be included unless you choose to upgrade them to this newer version of unity so that's kind of good I mean I'll have to say that like basically they're saying anything that you're currently working on is not going to be related to uh to the new policy I I think that's good so yeah never upgrade exactly um we'll make sure that you can stay on the terms applicable for the version of unity editor that you're using as long as you keep using that version uh for games that are subject to the runtime fee we are now giving you a choice of either 2.5% Revenue share or the calculated amount based on the number of new people engaging with your game each month both of these numbers are selfreported from data you already have available you will always be build the lesser amount I'm going to be honest guys I think this is a really good paragraph I unironically think this is a pretty good paragraph This is good how can you trust what they say if they literally change if they want to well I I bet probably the reason why they're walking a lot of this back is because the lawyer the lawyers at Nintendo and mihoyo told them that they're not able to walk it back uh that's probably the reason uh I would say that's probably the biggest reason uh more so than people leaving so yeah but I mean like again I will give credit where credit is due this is a good paragraph uh we want to continue to build the best engine for creators we truly love this IND his and you are the reason why I'd like to enjoin you to invite you to join me for a live fireside chat today yeah they had to wait till I was asleep to [ __ ] do this because they didn't want me to react I bet it's of course all about me um so let's go ahead and read some of the comments that people have uh overall I think that uh this is my opinion about this uh I think that this is obviously pretty good uh their response is about as good as you as you could have expected them to have uh however I don't really think that it's going to restore the trust that a lot of these businesses might have lost in unity I think that it's going to stop people from immediately moving away from the software especially knowing that these policies won't be applied immediately so people will probably finish out their projects in unity and then based off of how Unity does in the next 6 months a year or two years from whenever they finish that project in the future uh they'll probably make a decision whether they want to leave Unity for good or not which is going to probably depend on the current state of other development games sorry development engines like God dot unreal and I think there's another one that I don't remember so that's probably what's going to happen Unity turns into Mutiny oh that's good very good and uh anyway let's look at this uh if I understand correctly after the first year of my game uh made with unity uh reached more than a million dollar USD and uh more than 1 million people got it that's whenever the fee starts uh hi there no Contex SpongeBob that it's correct yeah I mean overall this is always is it's definitely a huge Improvement that's the point that I'm making right is that it is a huge Improvement it does make things a lot better but I don't think it really solves anything else you guys see what I'm saying huge Improvement negative 100 is still 50 yeah exactly yeah the issue is the versatility well I think the issue really is that people don't want to build a cast on Sand they don't want to go on the unity and be like okay well I want to invest the next 3 years of my life building a game on an Engine That Could Just One Day decide to change the rules so I think that's the way a lot of people feel give the worst Choice first so people can take the less worst one yeah I don't think that's uh I don't think this one's really that bad because it allows people to make a decision about the future if that makes sense doesn't win back any of my trust on an incompetent team yeah I kind of agree with that too uh also their previous policy sounded like it could have been acted on retrospectively yeah something like that starting in November you can't have can't use Unity unless you have Internet available uh I think that's like kind of more of a meta thing right it's not really that big of a deal but I can see kind of why people would be unhappy about that just overall like as I said I don't think this is going to really bring a lot more people back to Unity or trusting Unity again it's just going to keep people from leaving immediately which is probably the best thing that they can do like what Unity needs to uh rely on right now is to just simply tread water and hope that people forget yeah it's just damage control and that's it it's just going to slow down to collapse yep there you go how many games earn more than a million dollars a lot of games can earn more than million doll and if they could earn more and that's what everybody want that they're not quite able to I think that's what the issue Isel already dropped Unity so it's already dead and that's the issue right is that once the trust is eroded everything else kind of goes away afterwards what's this year xbx went back on a decision to require internet to use the console well they did uh they did have to go back on decision because PlayStation was farming them that's what happened it stops the B think that's the the best that they can hope for leadership made this decision it's only damage control the only thing to truly restore faith is to change leadership all I think that the problem is again to make Finance you have to sell from a community like that is so hard you have to especially because it's a business-based community but I do think that this will stop people from immediately leaving video to make a viral Finance video you have to sell apocal on for try to nintend isn't a normal thing um I don't know it doesn't really matter like I'm just saying like that that's that's totally different brand damage is often unfixable yeah look at like what happened forz yeah I think that what happened with blizzard like anytime blizzard does anything it's bad how much do the other engines charge unreal is like 5% something like that so I think 5% I mean like at this point they just have to it's not about being better than onreal it's about being more trustworthy than onreal and that's what matters more than actually having uh a better Revenue split the project red also has Brand damage during cyberpunk 2077 so bad that it tanked their portfolio yeah we'll look at what happened with throne in Liberty and in seesoft throne in Liberty comes out the beta comes out it's such a disaster in seesoft loses multiple points on their stock because of how bad it is UN was never in competition with unreal um I I think that to a degree it is and like I I I know what you're saying right because like unreal is used primarily for 3D and uh Unity is used primarily for uh uh 2D like for sure but of course it is there just because the two circles here I'm not saying unity and unreal are like this right I'm not saying they're like this but what I am saying is that they're probably like this or like this so it's not a matter of do they have overlap of course they have overlap Microsoft said uh XBox doesn't reach 100 million Game Pass subscribers by 2027 they'll shut it down uh it's only at 27 million subscribers well I don't think they're probably going to do that realistically not at all you guys don't understand what a vent diagram is diag building the future of video to help editors realize their Creative Vision faster and push it further this past spring we unveiled early explorations of generative AI in our video applications and today we're excited to share an update on progress and new capabilities that will help creatives overcome common editing challenges Guided by our community's input the Adobe Firefly video model is trained with Creator rights in mind and designed to be commercially safe with firefly text to video you can use text prompts a wide variety of camera controls and reference images the r b roll that seamlessly fills gaps in your timeline quickly explore ideas for Unique visual effects create elements for previs visualization like atmospheric overlays or use text to video to generate inspiration promotion [Music] graphics with image to video bring your still shots or illustrations to Life by transforming them into stunning liveaction clips and coming later this year to 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which is being recorded we will discuss adobe's thirdd quarter fiscal year 2024 Financial results you can find our press release as well as PDFs of our prepared remarks and financial results on adobe's investor relations site the information discussed on this call including our financial targets and product plans is as of today September 12th and contains forward-looking statements that involve risk uncertainty and assumptions actual results May differ materially from those set forth in these statements for more information on those risks please review today's earnings release and adobe's SEC filings on this call we will discuss Gap and non-gaap financial measures our reported results include Gap growth rates as well as constant currency growth rates during this presentation adobe's Executives will refer to constant currency growth rates unless otherwise stated non-ap reconciliations are available in our earnings release and on adobe's investor relations website I will now turn the call over to shantu thanks Jonathan good afternoon and thank you for joining us adobi had an outstanding third quarter we saw strength across Creative Cloud document cloud and experience cloud achiev revenue of $ 5.41 billion representing 11% year-over-year growth Gap earnings per share for the quarter was 376 and non-gaap earnings per share was 465 representing 23% and 14% year-over-year growth respectively our success reflects our strong execution against an ambitious Innovation agenda to deliver value to our customers the product advances we've launched in the past 18 months are delighting a huge and growing Universe of users and Enterprises empowering them to unleash their creativity accelerate document productivity and power their digital businesses our vision revolves around adobe's deep technology platforms across Creative Cloud document cloud and experience Cloud which when integrated provid Prov significant differentiation and value we're amplifying creativity and productivity by enabling the convergence of products like Photoshop Express and acrobat as knowledge workers and creatives seek to make content more compelling and engaging we're bringing together content creation and production workflow and collaboration and campaign activation and insights across Creative Cloud Express and experience cloud new offerings include Adobe gen studio and Firefly Services Empower companies to address personalized content creation at scale with agility and enable them to address their content supply chain challenges adobe's customer Centric approach to AI is highly differentiated across data models and interfaces we train our Firefly models on data that allows us to offer customers a solution designed to be commercially safe we have now released Firefly models for Imaging vector and design and just previewed a new Firefly video model our greatest differentiation comes at the interface layer with our ability to rapidly integrate AI across our industry-leading product portfolio making it easy for customers of all sizes to adopt and realize value from AI Firefly powered features in Adobe Photoshop illustrator Lightroom and Premier Pro help creators expand upon their natural creativity and accelerate productivity Adobe Express is a quick and easy create anything application unlocking creative expression for millions of users acrobat AI assistant helps extract greater value from PDF documents Adobe experience platform AI assistant empower Brands to automate workflows and generate new audiences and Journeys Adobe J Studio brings together content and data integrating High Velocity creative expression with the Enterprise activation needed to deliver personalization and scale overall we're delighted to see customer excitement and adoption for our AI Solutions continue to grow and we have now surpassed 12 billion firly power Generations across Adobe tools I'll now turn it over to David to discuss the momentum in our digital media business thanks shot newu hello everyone in Q3 we achieved net new digital media AR of 504 million and revenue of 4 billion which grew 12% year-over-year fueled by innovation in both our creative and document businesses with document Cloud we continue to reinvent how people create edit share review and sign digital documents with PDF and acrobat across mobile web and desktop for decades PDF has been the deao standard for storing unstructured data resulting in the creation and sharing of trillions of PDFs the introduction of AI assistant across Adobe Acrobat and reader has transformed the way people interact with and extract value from these documents in Q3 we released significant advancements including the ability to have conversations across multiple documents and support for different document formats saving users valuable time and providing important insights we're thrilled to see this value translate into AI assistant usage with over 70% quarter over quarter growth and AI interactions in addition to consumption we're focused on leveraging generative AI to expand content Creation in Adobe Acrobat we've integrated Adobe Firefly image generation into our edit PDF workflows we've opt cized AI assistant and acrobat to generate content fit for presentations emails and other forms of communication and we're laying the groundwork for richer content creation including the generation of adobe Express projects the application of this technology across verticals and industries is virtually Limitless Tata consultancy Services recently used Adobe Premiere Pro to transcribe hours of conference videos and then used AI assistant in acrobat to create digestible event summ memories in minutes this allowed them to distribute newsletters on session content to attendees in real time we're excited to leverage generative AI to add value to content creation and consumption in acrobat and reader in the months ahead given the early adoption of AI assistant we intend to actively promote subscription plans that include generative AI capabilities over Legacy Perpetual plans that do not in Q3 we achiev document Cloud revenue of 87 million growing 18% year-over-year we added 163 million of net new document Cloud AR other highlights include expanded acrobat customer value with multi-document support for AI assistant enhanced meeting transcript capabilities and support for larger documents optimized AI assistant for mobile web and desktop experiences including voice enabled conversations on Android continued strength of pdf-based collaboration with shared links growing greater than 70% year-over-year increased top of funnel through acrobat web with monthly active users growing over 35% year-over-year as a result of Link sharing and our Microsoft Edge and Google Chrome extensions key Enterprise customer wins include Amazon Charles Schwab Disney Home Depot KPMG Red Bull Sutter Health and the US Treasury Department with Creative Cloud the demand for Creative expression and design across media types and surfaces has never been greater consumers are sharing edited photos more than ever students need to create presentations creative professionals asked to create more images designs and videos faster than ever before small businesses are looking to engage prospects on social channels and large Enterprises are defining their content Supply workflows to deliver personalization at scale AI has the potential to empower creative professionals communicators consumers and organizations of all sizes to be more creative and productive our strategy is to build technology that will create more streamlined and precise workflows within our tools through features like text to template and express generative fill in Photoshop illust generative remove and Lightroom and the upcoming generative extend for video and Premier holy crap we're exposing the power of our creative tools and the magic of generative AI through Firefly service apis so organizations can generate and assemble content at scale wow as we integrate Firefly Innovations throughout our tools usage continues to accelerate Crossing 12 billion Generations since launch the introduction of the new Firefly video model earlier this week at IBC is another important milestone in our journey our video model like the other models in the Firefly family is built to be commercially safe with fine grain control and application integration at its core this will Empower editors to realize their Creative Vision more productively in our video products including Premiere Pro with Express we're on a multi-year strategic journey to dramatically expand our reach across customer segments Adobe Express is our AI first content creation application fulfilling our mission to enable creativity for all the allnew release of Express across web and mobile earlier this year has been embraced by millions of users they love how easy it is to create anything in Express with strong enthusiasm for our image editing features powered by Photoshop video editing capabilities powered by Premiere Pro document and presentation workflows powered by acrobat and unparalleled generative AI features powered by Adobe Firefly our integration of adobe stock and design templates with our unique Firefly design model ensures that content created in Express can St out express empowers a broad array of individuals and businesses from solar preneurs to the largest Enterprises in the world we're continuing to grow Express as we ramp our goto Market activities to support recent product releases including Express for individuals Express for Education Express for teams and express for Enterprises as a result in Q3 we drove 70% Your over-year growth in cumulative exports we onboarded over 1,500 businesses and millions of students in Q3 we achieved 3.19 billion in Revenue which grew 11% year-over year in constant currency net new Creative Cloud AR was $341 Million other highlights include new AI powered features in Photoshop that accelerate core creative workflows and streamline repetitive tasks generative fill in Photoshop was upgraded to Firefly image 3 generative image was made generally available and the new selection brush and adjustment brush tools were introduced making selective edits easier than ever broad-based Innovations and illustrator including significant improvements to Vector generation enhancements to text to pattern and the allnew generative shape fill these advances unlock new ways for pro designers and illustrators to quickly bring their Vision to life strong adoption of the latest version of Lightroom and Lightroom mobile which now includes the new generative remov feature millions of users have unwanted objects from their photos with a single click strong demand for Firefly Services which provide apis tools and services for Content generation editing and assembly empowering organizations to automate content production while maintaining quality and control total API calls tripled quarter over quarter Acrobat Pro single app continues to be a growth driver in Creative Cloud reflecting the increasing adoption of PDF as a preferred format to create collaborate and share visually compelling content key Enterprise customer wins include the brandtech group denu Estee Lauder Google media monks meta MLB newal Brands Pepsi Co stagwell group and the US Navy we look forward to hosting Adobe Max the world's largest creativity Conference next month in Miami where we will welcome more than 10,000 members of our Global community and engage with hundreds of thousands more online we will hear from inspiring creators and unveil Innovations across our clouds in summary we are excited about the pace and caliber of Innovations across our digital media products and the continued execution across multiple growth drivers I'll now pass it to anel hello everyone in Q3 we achieved experienced Cloud revenue of $1.35 billion 1.3 subscription Revenue was $1.23 billion representing 12% year-over-year growth customer experience management remains top of mind for b2c and B2B companies around the world as they focus on digital strategies for customer acquisition engagement retention and expansion Enterprises want an integrated platform to deliver personalized experiences at scale to their customers while maximizing the ROI of their marketing and customer experience Investments through the integration of experience cloud and Creative Cloud Adobe is uniquely positioned to combine the right content data and Journeys in real time for every customer experience the revenue growth we're driving across our categories content Commerce and workflows Data Insights and audiences and customer Journeys all built on the Adobe experience platform demonstrate the strength of our business Global Brands trust Adobe to build their content supply chain and deliver personaliz at scale making us the number one digital experience platform in the industry customers are embracing the opportunity to address their content supply chain challenges with Adobe gen studio with Native Integrations across experience cloud and Creative Cloud gen Studio empowers marketers to quickly plan create store deliver and measure marketing content and drive greater efficiency in their organizations Financial Services leader vanard is creating an integrated content supply chain to serve the Strategic goal of deepening their relationships with a broad range of investors leveraging the Gen Studio solution Vanguard was able to increase quality engagement by 176% by focusing on one toone personalization and to realize millions in savings by improving content velocity and resource allocation with an end-to-end content creation workflow other highlights include the general availability of adobe content hub further enhancing the value of adobe experience manager assets content Hub enables Brands to reimagine how creative assets are used across their organization and with external agencies driving content velocity and major efficiency gains AEM assets is used by the majority of the Fortune 50 including eight of the 10 largest media companies nine of the 10 largest financial services companies and eight of the 10 largest retailers increasing importance and Adoption of workfront to streamline workflows across marketing organizations and agencies we extended our leadership in this category through the general availability of adobe workfront planning which delivers a comprehensive view of all marketing activities in an organization and enables teams to optimize marketing planning and execution Global Brands including deoe interpublic group and NASCAR are using workfront planning to drive productivity gains and meet the rising demand for highly personalized marketing campaigns continued momentum for Adobe experience platform and Native applications including realtime customer data platform customer Journey analytics and Adobe Journey Optimizer we expanded our a portfolio with the general availability of adobe Journey Optimizer B2B Edition which leverages generative AI to deliver personalized experiences to buying groups the decision makers practitioners and stakeholders responsible for major purchasing decisions strong industry analyst recognition including the Forester wave for B2B Revenue marketing platforms and three IDC Market scape reports across digital asset management and headless digital Commerce for both Enterprise and look at this Steve Jobs's customer sells for 900 johnon and Johnson Mayo Clinic New Brand D's first sold for 2.9 Million UPS we look forward to unveiling new customer experience management Innovations across content data and Journeys at Max next month showcasing Integrations across Express Creative Cloud and experience Cloud for Freelancers solopreneurs and marketers across agencies and Enterprises our pace of innovation commitment to customer value Global partner ecosystem and category defining Solutions position us to continue our Market leadership I will now pass it to Dan thanks anel today I'll start by summarizing adobe's performance in Q3 fiscal 2024 highlighting growth drivers across our businesses and I'll finish with financial Targets in Q3 Adobe achieved record revenue of 5.41 billion which represents 11% year-over-year growth as reported and in constant currency our focus on both growth and profit profitability has been a Cornerstone of our operating Philosophy for years rooted in strategic prioritization Relentless Innovation and Laser focused execution our Q3 results reflect this approach we're making significant investments in our technology platforms launching Global campaigns to expand our customer base and attracting top tier Talent while delivering worldclass cash flows and profitability third quarter business and financial highlights included Gap deluded earnings per share of $376 and non-gaap deluded earnings per share of $465 digital media revenue of 4.00 billion net new digital media ARR of 5504 million digital experience revenue of 1.35 billion cash flows from operations of 2.02 billion and RPO of 18.14 billion exiting the quarter in our digital media segment we achieve Q3 revenue of 4.00 billion which represents 11% year-over-year growth or 12% in constant currency we exited the quarter with 16.76% year-over-year in constant currency Adobe achieved document Cloud revenue of 87 million which represents 18% year-over-year growth as reported and in constant currency we added 163 million of net new document Cloud ARR which was a record for a Q3 growing our ending ARR book of business 24% year-over-year in constant currency Q3 document Cloud growth drivers included usage and Mal growth across Adobe Reader and acrobat usage and Mal growth via third-party ecosystems including Google Chrome and Microsoft Edge extensions which are driving free topay conversion demand for acrobat desktop and mobile subscriptions across all customer segments and geographies strength and monitization of our AI assistant with new acrobat subscriptions strength in smbs driven by our reseller partner Network and strengthen Enterprise and public sector sales with a number of large deals closing in the quarter we achieve creative revenue of 3.19 billion which represents 10% year-over-year growth or 11% in constant currency we added 341 million of net new creative ARR in the quarter growing our ending ARR book of business 11% year-over-year in constant currency Q3 creative growth drivers included new subscriptions for Creative Cloud all apps across customer segments including teams Enterprise and education with back to school demand strength across our Acrobat Pro illust rator Lightroom and Photoshop single apps on adobe.com growing demand for AI first Adobe Express offerings in Mobile emerging markets and education early monetization of our new Firefly Services solution in the Enterprise segment continued momentum with new subscriptions in Emerging Markets that's it and contribution from customers stepping up to our higher value creative PL promp videos turning to our digital experience segment in Q3 we achieved revenue of 1.35 billion which represents 10% year-over-year growth as reported and in constant currency digital experience subscription revenue is 1.23 billion growing 12% year-over-year as reported and in constant currency Q3 digital experience growth drivers included strong subscription Revenue growth at scale of a and Native applications up greater than 50% % year-over-year strong subscription Revenue growth with Adobe experience manager and workfront success in Booking transformational deals as well as individual solution selling continued strength and retention and expansion across our Enterprise customers and growing pipeline for our gen Studio solutions to address the content supply chain opportunity turning to the income statement and balance sheet in Q3 Adobe delivered year-over-year EPS growth of 23% on a gap basis and 14% on a non-gaap basis this is primarily driven by Revenue growth and discipline prioritization of our investments which resulted in operating margin strength in Q3 oh my God Adobe stock the company continues to deliver worldclass margins while making significant investments in AI model training and inferencing capacity adobe's effective tax rate in Q3 was 17.5% on a gap basis and 18.5% on a non-gaap basis RPO exiting the quarter was 18.14 billion growing 15% year-over-year as reported or 16% in constant currency current RPO grew 12% year-over-year exiting the quarter our ending cash in short-term investment position at the end of Q3 was 7.52 billion and cash flows from operations in the quarter were 2.02 billion in Q3 we entered into a 2.5 billion share repurchase agreement and we currently have 20.15 billion remaining of the original 25 billion authorization granted in March 2024 we will now provide Q4 targets which factoring current macroeconomic conditions and year-end seasonal strength for Q4 we're targeting total Adobe revenue of 5.50 to 5.55 billion Digital Media Net new ARR of approximately 500 50 million digital media segment revenue of 4.09 to 4.12 billion digital experience segment revenue of 1.36 to 1.38 billion digital experience subscription revenue of 1.23 to 1.25 billion tax rate of approximately 16% on a gap basis and 18.5% on a non-gap basis Gap earnings per share of $358 to $3 63 how much and non-gaap earnings per share of $463 to $468 in summary I'm proud of our year-to-date performance which stems from a powerful combination of product leadership rapid Innovation diversifi business and financial discipline given the massive markets we're catalyzing I'm confident in our ability to drive growth and Industry leadership wow John back to you Adobe stock than Dan adobe's focus on responsible Innovation with customers at the center continues to be a unifying purpose for the company the content authenticity initiative which we founded in 2019 now counts over 30 so Adobe let me repeat start it all overal so Doby reported record revenues for their Q3 earnings but their stock plunged over $50 after the market closed so this means that adobe investors and people that use Adobe aren't satisfied like this company does get a lot of complaints about how terrible it is to unsubscribe to their servers they basically make it impossible for you to unsubscribe but yeah comment below guys what kind of issues do you guys have with Adobe software because a lot of people are saying that they have a monopoly on a monopo on editing software acce for success in an AI powered world yeah guys comment below what do you guys think of adobe next week we will bring employees together for our annual Adobe for All Conference to celebrate vision and purpose and the impact that has on our customers and communities I'm confident that adobe's culture Innovative product road map Global Market opportunity trusted brand and the unwavering commitment of our employees will continue to drive our success thank you and we will now take questions thank you if you would like to signal with questions please press star one on your touchtone telephone if you're joining us today using a speaker phone please make sure your mute function is turned off to buy your signal to reach our equipment please limit yourself to one question per person again that will be star one if you would like to signal with questions star one and the first question will come from Alex zukin with wolf research hey guys thanks for taking my question and congrats on what looks like a very strong Co um it's one question but it's a two-parter the quarter itself particularly on the digital media AR what looked very strong it looked unseasonably strong because you haven't grown net new AR sequentially in a 3Q I think in almost four years so maybe just comment like what drove this unseasonable strength is it pricing AI traction and particularly the document Cloud net newr uh but at the same time given all the product momentum you went through in the script it it's a bit confusing to understand why the Q4 uh guide is the lowest it's ever been sequentially for a Q4 on net new digital media AR which I think makes people a little nervous about you know maybe the go forward the the next year uh performance and so maybe just address this dichotomy because it looks kind of seasonally a little bit different than what we're used to and I think it's Weighing on the stock after hours I'm happy to start uh Alex and then David can certainly also add to that I mean to your point uh we had a strong quarter and uh when I think about digital media uh document Cloud to the point that you made acrobat continues to perform the AI assistant and guys being financially literate does not mean guys being financially literate does not mean you're going to get rich as we had said we expect creative you can make a lot of money and then lose a lot of it you can also make like a low salary and within a decade become a millionaire end when you look at it as what really matters is if you apply Financial basic financial principles we would see going into I can see like if you read all these Financial books and don't apply it that's just a waste of time it and saying it's the strongest ever Target that we have put out there for Q4 but for the people making low salaries continue to focus expect creative to again grow when you talk about you all the and investing not making a big deal out of it you know from our perspective when we look at what we guided to the delaying consumerism stronger we expect a seasonally and just seeing Investments grow continued innov that's the person who's going to that's the person who's going to become wealthy in the long term again just a little bit more context behind the streng docent Cloud yeah comment below guys what do you guys like about wealth principles and which wealth principles do you apply for your Investments that's really what continues to drive this business and that underlying strength is going to continue not just in Q3 but it's going to be something that we're able to you know bet on and uh and grow on going forward because we've got a lot of flow optimizations associated with that um as we look at uh you know Creative Cloud again we have a broader set of offerings than we've ever had right we have things like uh with Creative Cloud uh we we have higher value higher priced offers thanks to AI Innovation that's happening in the base plans that are impacting uh how uh how the Creative Cloud business is is uh is doing uh we also have a broader set of uh of offerings than we've ever had now with web and mobile uh including premium and lower priced uh offerings that are you know driving more proliferation and the blend of those two things also sort of comes into the strength of the quarter and and how we think see things going out but as you look at um the second half overall you know we came into the second half uh with a with a strong expectation of how the the second half was going to play out uh and frankly it's playing out as we expected in terms of the aggregate Q3 Q4 number in terms of the specifics on timing uh Q3 was a little stronger than than uh you expected and and for a good reason given seasonality I think a lot of that can be explained by a few deals that would have historically just uh closed in q Q4 closing earlier than expected in in Q3 and that changed the dynamic in terms of the linearity that you would typically see between Q3 and Q4 very helpful guys thanks again and our next question will come from Mark Murphy with JP Morgan JP Morgan thank you so much and I'll my congrats uh David I'm wondering if you can compare the AI monetization opportunity that uh you're sensing with the image models relative uh to the the future potential uh with you know with your audio and video models just for instance how many tokens might be consumed when someone is generating um a video versus an image and then tying in with that just how optimistic are you maybe being able to solve um some of the limitations with the current video generation models where you know the facial expressions um can lack realism or they can't handle uh the object interactions or uh they don't provide enough detail or resolution in the videos yeah happy to happy to take that um let me just sort of take a little bit of a step back and and talk about you know the the core strategy uh that we have for AI and the and the conversion then in terms of how we think about monetization so you know I think we've been incredibly consistent with what we've said you know dating back you know a year a year and a half uh ago where we talked about the fact that we were going to develop the broadest set of models for the creative Community uh and we were going to differentiate the models based on quality commercial safety uh integratability into our tools and controlability and and as you've seen very methodically over the last 18 months we continue to bring more and more of that Innovation uh to life and that fundamentally is is working as we've now started to integrate it much more actively uh into our base if you look at it with uh with uh fo photography we now have in our tool generative remove we have ai assisted edits in design we have uh generative uh pattern generative fill shape uh we have uh in um in Photoshop we have gen remove uh we also have uh gen fill and I can continue on with all the generations but we've also now started to integrate it in Firefly services for what we're enabling Enterprises to be able to access and use uh you know in terms of batch work and through apis um if you look at sort of how that's played out as we talked about we're seeing accelerated use uh and generative credits being uh consumed because of uh of that deeper integration into all of our tools and that is is playing out um as we expected uh when you look at then how that converts to monetization um first and foremost we've integrated it a lot of that value into our core products and with more value and and more pricing uh we're also seeing that when people use these generative features they retain better we're also seeing that when people come to uh Adobe to try our Creative Cloud applications or exess express application they're able to convert better um and so there are all these ancillary implied benefits that we're getting but in terms of direct monetization what we've said in the past is that the current model is around generative credits which is I think where you're you're going with this and we do see with every subsequent capability we integrated into tool total credits consumed going up now what we are trying to as we go forward you know we haven't uh started instituting you know the the Caps yet uh and part of this is as we've said all along we want to really focus our attention on on proliferation and usage across our base we see a lot of users excited about it it's some of the most actively used features that we've ever ever released and we want to avoid the generation anxiety that that people feel um but we're watching very closely as the econ the the economy of generative credits evolves and we're going to look at you know instituting those at some point when we feel the time is right and or we're also looking at uh other alternative models what we did with acrobat AI assistant has proven to be very uh very uh effective and so we're also considering other opportunities like having standard CC plans that have uh you know a core set of generative capabilities but also having premium API sorry cre premium AI plans that will include things more like video and other things so we're very happy about the Innovation that's that's coming and we see the opportunity to uh engage very deeply in the monetization but we want to play it out over time and proliferation continues to be our primary guide and then lastly in terms of quality we're I don't know if you had a chance to see you know some of the the videos we put out there uh integrated directly into Premiere also text to uh text to video image to video more controllability we have also the ability now uh to generate not just you know scenes with humans and dogs and organic animals but all these like overlays and things that creative professionals actually want to to work with and so we're very excited about the set of things that they can get out of the box to get going and human faces and things will just continue to get better we have a lot of great research that you'll start to see and I hope you get to play with the models because we've taken a huge step forward there that's cool Mark maybe I'll just add a little to what David said uh which was great uh I spent a couple of hours with our video team they have just absolutely hit it out of the park uh I mean the work that they've done uh which is leveraging the image models with video and again I think to David's point the integration with Premier that's where we've always said it's the integration of the model in the application that differentiates it I think you know when uh other models first came out people were like wow you can describe it that's just such a small part of where the value is and the real value is you have a video you want to extend it it's a you know Game Changer in terms of what we can do so you know really excited about the stuff that we're doing in video and again to David's point this will be monetized differently from the way we have for images which was you know part of the you know sort of Base value pricing so I the way I answer your question is and the third thing I would say is remember we have the ability to create custom models as well and so when you ingest the video that people want to edit the ability to you know extend that is not just dependent on what the model is but also on what the new data is and again that represents you know really a unique ability for us so hopefully all those three demonstrate why you know we're leading the pack in terms of how people can derive value in the nonlinear editors which is where uh the action is going to be thank you very much and moving on to Keith Bachman with [ __ ] hi thank you very much I appreciate taking the question I wanted to to pick up a little bit on how we should be thinking about David just meant monetization and will consumption you think as we start to turn the year can consumption contribute to ARR growth uh as we look at FY 25 because I think there's pervasive fears that the state of competition May in fact limit your ability to to turn on that monetization if you will from either consumption or or price and I just wanted to see if you could uh lace in consumption against uh the backdrop of competition from our perspective Keith I think when you look at what we have with the apps and the models uh we just continue to think that's uniquely differentiated uh Firefly Services which is you can think of that also as a consumption model where we have that it's off to a really good start uh you know our ability to give Enterprises the ability to automate content and create custom models uh you know within Enterprises we're seeing real traction because it's a differentiated solution in that it's designed to be uh commercially safe uh and as it relates to the core subscription models again uh David said this but I'll reiterate it which is the core subscription models for products like Photoshop and illustrator I think the differentiation is uh the combination of the model and the uh the the technology and in video I think we will find additional ways to monetize it so I'm not sure who specifically you're referring to as it relates to you know competition in this space but from our perspective it's just unique I mean if you look at the acceleration of what we've seen of generations in Photoshop illustrator Lightroom uh you know it's clear that we're actually extending uh the value rather than having other people catch up and then one other thing I just emphasized there is that the commercial safety uh is so important to uh businesses of all sizes frankly and that is something that we feel very very very differentiated on in addition to everything Shan new said okay great and then perhaps for my followup I wanted to pick up on Alex's first question but you're guiding net new ARR down 3% year-over-year in Q4 and I think investors are you know thereby taking that as perhaps a framework when you look at next year but is there anything you know that net new AR will be down next year and I know you don't want to give guidance for next year but just just any kind of thoughts you want to address as it relates to the guidance associated with that new AR being down in Q4 versus you know a framework that we might want to apply for for the fy2 net new AR you're right Keith we're not going to give fi uh 25 guidance we'll certainly share more at Max and we would expect like we did last year that at the December earnings call we'll uh give color on uh you know fiscal 25 AR but I'd say a couple of things uh first as it relates to again the performance of the second half because to Alex in your question if there are questions around Q3 and Q4 and what that uh Trend means uh again we will hope to have record uh net new AR and fiscal 24 uh which I think is is a great thing we gave 1 1950 at the end of Q2 we're clearly on track to you know beat that number which uh we take as a positive sign and the other thing maybe perhaps uh you know tactically for you folks to think about as well as it relates to the Q4 guidance uh typically you have Black Friday and Cyber Monday uh in the same quarter this time Cyber Monday I believe is in q1 and uh so as it relates to our Q4 performance uh you know it's uh it's the highest Target that we've ever issued you know we will go out and then continue to execute and um you know continue to innovate so that's the way I look at the business Keith okay thank you shant and the next question will come from sacket CIA with Barclays okay great hey guys thanks for taking my question um David may maybe maybe for you um you know you touched on some of the drivers in in document which which was super helpful but I'd love to maybe go one level deeper into some of the Dynamics in in that business which of course continues to grow net new ARR at a at a really nice clip so so maybe we can just talk a little bit about you know are there are there any pricing headwinds or or Tailwinds that we should keep in mind specifically for docent cloud and also maybe you can give us a sense for sort of where document cloud is in in its journey to maybe becoming more of a subscription heavy business do do do those make sense uh the first part does let me uh let me uh try to address the whole thing the question on subscription heavy uh you know it is a it is a very strong subscription business for us uh already but I'll I'll touch on that and uh hopefully I'll address your question so first if we take a step back and and look at uh doc document Cloud I mean the foundation of uh everything we're doing here uh is incredibly strong and it's a machine we've had for a long time but it continues to uh perform incredibly well and what I mean by that is the platform proliferation of what we have with acrobat and and reader um the fact that we have you know 40 years into this business the rise of PDF and PDF becoming the deao standard for you know uh content as a unstructured Content as a whole is a remarkable foundation for us to be building on um and the distribution we have across desktop web uh mobile uh including uh web extensions uh is is really the foundation of everything we do because that becomes the top of funnel for us you layer on top of that um the fact that generative AI in general has come out where uh unstructured content especially PDF unstructured content the TR three trillion PDFs out there that we believe are out there uh has suddenly inherently much more value than it did a year ago uh and this whole ecosystem is set up well for us um in addition to that Foundation we've also been over the course of the last few years really transitioning the way people share because if you think about uh uh PDFs and acrobat in general one of the most important things people do is they produce the PDF to share it with others often for comment and review engagement and by increasing sharing via links versus sharing as an attachment uh we see a lot more engagement and interaction that we're able to benefit from and that also helps with the top of funnel and we can provide more value then on that platform what we've done is with AI assistant we focused on consumption for the last uh nine months starting with the ability to look at a single PDF uh and ask questions of that PDF then we sort of then we added support for multidock so you can now have five or six PDFs that you're having a conversation with we added support for multiple formats so you can look at PDFs but you can also drag in you know uh Word documents or PowerPoint documents or a link to uh uh to a meeting transcript that you have um we're adding in the process of adding language support uh for uh other languages optimizations we're now starting to work on document type optimization so if it's a contract we know how to optimize the results uh you know even better than if it's a marketing document um and that's all about consumption but in addition to consumption we're now expanding because these conversations that happen with these documents are inherently about getting some insight and then sharing that Insight we've also started to do things that you can create richer uh content on the back end of it so Firefly is embedded uh now in edit PDF workflows uh we have the conversational uh content that now able to generate emails and presentations and those kinds of things uh We've now embedded in the convert PDF workflows the ability to Output to express uh and create richer media outputs um and you can start to see all of this stuff coming together uh in a in a very real way already but also in the months ahead the last thing I want to say on this too is that um what really working out well for us is that when we are out pitching this opportunity not just in terms of uh you know the individuals that use it but also businesses is that we don't have any security concerns right our our data governance model is the same data governance model that's happened if you have access to the documents you can have conversations with the documents uh and so it makes it a much easier uh thing for Enterprises to adopt because there's no system systemic or govern govern governance changes and so all of that continues to drive more adoption and as I said on the prepared remarks uh document cloud is substantially a subscription business but now with AI assistant being available to subscri subscribers and not as directly to uh Perpetual users we expect that to continue to transition even further super helpful thanks guys and the next question will come from Jay FL with Griffin Securities yeah thank you good evening um David I'd like to follow up on something that you said on the second quarter call uh and that was that um you said at the time that you were for the rest of the year going to quote poor gas on your GTM and as well engage in a full FAL campaign later in the year so the question is could you update us on on that I mean it does seem to be uh in no small part corroborated by some of your internal Investments that we've been able to see uh for example your icx team your go to market positions across multiple products strategy positions and so forth but you know you you've made this commitment for a substantial expansion but do you think you need going forward to continually accelerate the pace of investments in uh go to market um or do you think at some point perhaps soon you can begin to taper that off and then leverage that capacity uh um to revenue growth in dby margin expans margin expansion J I think we might have to have you join our our marketing organization given how much you know about the uh the market dynamics but a great question and so um uh first and foremost again if you're going to talk about Express let's take a little bit of a step back and and understand the Dynamics of where we are in the in the evolution um you know I think what what we had talked about in Q2 was that um that not only do we feel like we have an incredible product now but that product has built on a brand new platform uh that has the ability to develop AI functionality you know uh as a native part of that platform so the speed of innovation that we've been uh adding capabilities to express is uh is really been been a breaket speed and we're very excited about that um you know features like native integration of firefly so that you know everything that's generated here is commercially safe which again like I said is is important to individuals and to businesses uh but doing it with more control things like style and structure match uh and integrated into the image viewer the video viewer editor and the uh and the Design Surfaces so very excited about that um in addition to to those basic capabilities that are so foundational this is really the design model that we've been talking about Firefly design model this is where it's surfacing the most and so you combine what we're doing with templates and the design model and people are able to create and effectively get access to an infinite number of templates right we believe that we're moving from a template Centric uh you know uh set of tools for communicators to an AI Centric set of tools and we feel that with our design model and everything we have we're fundamentally going to create better content that stands out uh ultimately we also have you know great workflows that we've developed with Photoshop and illustrator and acrobat um and we've integrated all of this in ways that are fundamentally you know effective for businesses including bulk creation and assembly capabilities so small business businesses all the way through Enterprises are able to leverage this for their designer to marketer workflows um in addition to all of that Innovation to your point we've really been focused on the go to market since last time uh since uh we last spoke or right before we last spoke uh in Q3 we uh expanded the offer set significantly we've always had Express for individuals in Market but we added Express for teams Express for Enterprise and we just launched Express for Education this back to school year with a lot better support for classrooms and teacher student uh workflows as well uh on the marketing side we've been ramping uh ramping that very actively you know it's a net new audience to Adobe I mean that's something to really recognize this isn't about shifting existing audience over solely it's about getting access to net new audience and so for that we have to employ both uh you know traditional means uh with a focus on awareness campaign but also uh you know leveraging social because that's where this uh this audience is so you know you'll see us doing a lot more on social as a result and then on the back of all that we're ramping our our direct sales uh you know we have a very you know at scale inside sales motion that we're starting to lean into we have a very significant direct sales motion that we have in in Enterprises in midmarket that we're leveraging adobe.com Journeys we have a lot of businesses and individuals coming on adobe.com and doing a lot more optimization in in the App Store and that's really what you're starting to see in the numbers we shared with strong usage at 70% year-over-year uh cumulative exports a strong uh business you know momentum with over 1500 businesses sold and really great our best back to school season ever uh with millions of students now enabled on it so that's the foundation and and you know if you're you know the one thing I would say is yes we started pouring gas on it and we're going to pour more gas on it not less in the in the months and years ahead maybe two other things Jay just a big picture I mean we continue to invest in uh all of the key long-term things whether it's training of models whether it's Express whether it's a and apps whether it's gen studio uh you know while delivering what I think are phenomenal margins and so we'll continue to uh you know make those uh tradeoffs in terms of growth and profitability and maybe a little tongue and cheek uh part of the reason why uh David has the ability to invest as much in marketing is he uses the best marketing technology in the world from anel that is true thank you and our next question will come from Tyler radkey with City yes thanks very much for taking the question um wanted to ask you about the the digital experience side of the business so uh RPO look look pretty pretty strong in terms of sequential additions uh the implied guide for Q4 what was a bit lighter than consensus I know you did talk about some unusual Dynamics in terms of seasonal Cyber Monday uh but could you just talk about um the the the strength and underlying Dynamics you're seeing in the business heading of the KE thank you yeah when we look at the digital experience business we are pleased with the overall execution of the business we have a a big opportunity with what we call personalization at scale where whether it's a b2c company or a B2B company the ability to deliver personalized customer experiences uh to consumer or to hundreds of thousands of business customers individuals within businesses this is important for every company in the world and we have the integrated platform and the applications to be able to help them deliver those kinds of experiences and we have the unique ability to bring together the right content the data customer data and the customer Journeys across our experience cloud and the integration with Creative Cloud to deliver those personalized experiences and that's pretty unique to what we can do uh at Adobe and that's one of the things that we're seeing in the dynamic in the Enterprise Market is uh the Enterprises are scrutinizing all the deals that they want to do I think in this uh uh uh in this case they look at our offerings and see the ability to not only help with uh growth uh they also look at uh uh the efficiency gains that we can help them create and that's helping us uh as Enterprises scrutinize this spend and when you look at our guide uh we're obviously we are focused on uh most closely on our subscription business and that's the business that uh uh continues to grow strongly and we're showing uh good performance on the subscription business and our overall revenue is a combination of subscription and services where we really are focused on working with a a broad Global partner ecosystem to make sure that we deliver services to our customers and help them realize value from our offerings thank you hey operator we're at the top of the hour we'll sneak one more question and then wrap up thank you thank you that question will come from Brent Phil with Jeff thanks Dan just back to the the guide can we um just drill in I know you mentioned there were a couple factors that were uh were at uh contemplated that I'm just curious if there's anything else that you're seeing that is is different in terms of end demand or any any softness I know the US decelerate a little bit accelerated uh no Brent I mean I think we had a strong Q3 and you know we continue to see the momentum in the business and you know it's our typical uh you know considered targets that we do and you know I focus on execution so uh we're not seeing anything as it relates to you know a change in the business Dynamics I also mentioned that uh the last few weeks of Q3 as you know the summer seasonality ends uh we saw the traditional strength that we expect to see on our web traffic so you know I I think Max is coming up we have an exciting agenda in terms of what we're going to be talking about in terms of Max and so you know I mean if I take a step back and and think about it given this is the last question I mean you know from my perspective strong Q3 uh across uh every aspect of our business you know Revenue EPS digital media AR DX uh you know Subs Revenue acrobat certainly also continue to show the strength we have in momentum in the business and The Innovation road map I mean across all of the key initiatives that we've been talking about whether that's Express gen studio and you know the excitement that people have associated with automating all of that content a and apps on the data side uh Imaging and video the work that the digital media team has done on Photoshop uh and on illustrator and then what's coming down the pike on video and Firefly Services uh you know I think the AI monetization as well which I know is a a theme of a number of people uh that have asked whether it's acrobat whether it's uh you know the premium SK SKS as it relates to experience Cloud uh whether it's what's happening on uh gen fill and the usage of gen fill Lightroom and Lightroom mobile uh I think we're clearly demonstrating how AI can both uh Drive value uh for our customers and therefore you know we acquire new customers and retain customers better so you know uh feels good we look forward to uh uh seeing all of you at at Max and we're going to just continue to focus on Innovation and uh delighting our customers but thank you for joining us yeah thanks shantanu and uh we do look forward to the uh investor event that we'll be holding in Miami at Max on October 14th where we will be doing a Q&A with management we hope to see many of you there and with that thank you for joining the call and this concludes the event wow thank you that does conclude today's conference we do thank you for your participation have an excellent day wow so that was Adobe earnings guys um pretty cool stuff they talked about text to text to template which I found very interesting um yeah it's basically cool let's see h all right here with our trades is Ava a CR shares Chief investment strategist your trade on madna after hearing in part uh What uh the Mr bonel said so we have it as a sell unfortunately the company went from a boom to bus to once the co darling the stock has now dropped by 85% wow as you mentioned they're cutting R&D budget by 1.1 billion and their sales have come down from 18 billion to 5 billion in just three years and so their profits have gone from 13 billion to negative to a loss of 4.2 billion they might at some point turn things around but we don't see um light at the end of the tannel right now based on the data we have all right well let's uh Ava move along to Delta Airlines which adjusted and outlined its Q3 guidance to address the crowd break outage from July the shares though had moved uh higher in the session they're hanging on to an Ever So slight gain maybe a boost from lower fuel prices uh playing into that what would you do with this one it's another sell to dver bearish uh this is in general the Erland industry has been losing money to investors for years there are many problems uh uh unions labor cost energy cost crashes lwuit regulations so there are many things that can go wrong in this sector and the usually do it's not a coincidence that the price to earnings ratio of the average of the sector is only five and that's a very low PE ratio compared to other sectors it shows that people are not very enthusiastic with the sector we don't see we think there are many many more uh places to put your money in to generate better returns let's go to shares of signate Jewelers higher same store sales uh upbeat good outlook rebounding engagement sales AA what do you think so um unfortunately diamonds are not forever when it comes to Signet and I think there's a new trend um coming up with lab grown diamonds we do see today 18% um up the stock but that's because of better than expected news however to us it's a longterm sales the stories about Lab Ground diamonds are taking away market share from uh classic Diamond uh providers and and the reason is that um the diamond prices actually have dropped by 30% in the last years uh that's a significant drop and the market share of lab grown diamonds have increased from 0 to 40% in the same amount of uh period time and so we think that's going to be the trend in the future very interesting Ava OS thank you very much all right let's look at Adobe meantime Adobe Shares are falling in overtime after posting Q3 results beating on both lines guidance though coming in short of expectations joining us now ahead of the conference call with analysts is Adobe CEO shantu Nan shantu good to see you uh strong performance on the top and bottom line in Q3 that net new ARR in particular uh for digital media jumps out but I I know I'm going to want to get to this guide so I set up the quarter but tell me are you feeling iffy about the holidays well uh John thanks for having me first on your show and as always uh when we think about dissecting the business uh we look at what the second half performance was and uh on our Q2 earnings call uh we actually raised the targets we had a very strong Q3 uh across every aspect of the business as you pointed out uh net new digital media AR uh record for Q3 uh with over 500 million of net new ARR acrobat continues to uh surge along creative we said uh we would expect to see creative ARR also uh year-over-year show growth which it did and digital marketing uh you know again strong Subs Revenue and as we uh look at the rest of the year uh nothing's changed as it relates to uh The Innovation road map that we have and you know relative to the second half uh targets that we had given were on track to uh meet and exceed all of them so we feel good about the business well to my eye the uh Q4 Digital Media Net new AR that you're guiding to 550 million that looks strong as well so are there areas um where you you're you're cautious questioning whether it is um on the experience side whether it is on the documents side how is the AI adoption going with the credits uh in Firefly are those converting to more paid in that AR number well John uh hopefully we'll see you at Max as you know Max is coming up in Miami and we have an incredible CH again planned uh when you look at AI specifically and uh you know what I've always said is it's all about in Ai and I don't know if any other large company that's been uh demonstrating the amount of innovation road map acrobat AI assistant continues to do well where you can have a conversational interface with the trillions of PDFs out there as it relates to our Imaging Firefly uh models uh We've upgraded Photoshop to image model 3 we said we had over 12 billion uh Generations on Firefly with the fastest amount in the last month also driven by what we see in Lightroom uh we have a vector model and illustrator users who are creating logos and other brand assets are seeing the benefits of that just yesterday we sneaked a little bit of what we are doing with the Firefly video model as well as the ability uh to control that within applications like Premier Pro so I think we're really executing against it and you're seeing the inference uh which is where people are actually deriving value also go up and last but not least on the digital experience side as we have have delivered uh AI assistant for the Adobe experience platform and the experience Cloud that's where people they're creating more campaigns they're creating more content and they're creating personalized experiences for their customers so uh you know from my perspective we continue to Delight customers uh I think we've had a strong year thus far and we expect that momentum to continue mortgage expected rate cut on the way and mortgage rates hitting their lowest level since February of last year could we see a boom in refinancings joining us now is Matt H CEO of United Wholesale Mortgage he is also an owner of the Phoenix Suns and Matt it's great to have you back on overtime welcome back well thanks for having me so I'm that's exactly where I'm going to start because we have seen treasury yields and with them mortgage rates falling we're at a 19-month low for mortgage rates and the FED hasn't even begun to cut yet so how are you preparing for the possibility of a reemergence and not only refis but also interest in taking out mortgage loans uh if we do start to see a housing rebound here yeah no it's really interesting you know rates are really low right now and you know people are waiting for the FED to cut rates next week we all anticipate they'll cut 25 basis points but the mortgage rates are already lower right people are waiting oh it's going to happen it already happened the refi boom is happening right now people aren't really available and realizing but it people are doing refinances right now anyone that bought a house in 20122 23 24 should be refinancing rates are 30 or fixed in the fives not six and seven or eight and so people got to go to mortgag match up.com find the right originator but the truth is it's happening right now you don't have to wait for the FED it's it's really exciting and we're seeing a big boom already here at UWM that said how do you expect that trajectory to play out now as you do have a fed that's moving into an easing cycle yeah I think it's going to continue so it's not only refinances but also purchases right because now more more purchasing power someone buying a $400,000 house yesterday couldn't afford it but now they can afford it because interest ratees 5.75 instead of seven right so more homeowner demand more opportuni so we're seeing it on purchase refi and it's going to continue we really look at 25 is going to be an amazing year in the mortgage industry it's already a great year 24 but it's going to get even better next year we've been waiting we've been prepared at UWM and we're excited about it and it's already happening and you'll see it in our third quarter results but more likely fourth quarter and next year Matt is there a magic number on rates where the the homeowner is likely to feel more comfortable uh tapping into the equity to make purchases yeah I really think that the number is in the fives when we're there like I I said for probably a year and a half two years like when it gets to 5.99 5.75 you're going to see Demand on refinances you know anything in the fives is like amazing rates if you look over the span obviously you got to take out 20 and 21 where the rates were 2.75 and 3% but beyond those two years anything the five is fantastic and so we're there now and the fed's going to drop rates even more will that mean more mortgage rates go down even further maybe but 30-year fixing the fives um is a great deal people are taking advantage of rate ter but also to your point Cash Out equity and housing is is as big as it's been in a long long time people have equity and so cashing out it's been hard to get off those 3% rates but now at 5 and a half or 5.75 and being able to pay off some heavy debt from credit cards we're seeing a lot of people do that right now so opportunities out there right now and and we'll takeing advantage of it and you know I think consumers are as well I'm glad you went there because us homeowners are sitting on 32 ion Dollar in home equity right now that is a new record and we talk about depleted savings and we talk about cash strapped consumers that are tightening their belts but as you do start to see rates come down does this become another lever that consumers can pull on for more spending absolutely is another lever for them right it's it's it's their money there you know if someone has a 400,000 house and their mortgage is $300,000 there's 100,000 in equity now how do you tap that right once again you got to find the right place sometimes your servicer is not the right place you got to go a mortgage match up or or find a local lender that can actually help you with that and actually get you that Equity 30,000 40,000 50,000 at a rate and if you look at and do the math like some people talk about their mortgage interest rate rather than their actual housing rate because if you think about their housing rate and then also their credit card debt and their auto loans interest rates all blended it might be 7even or 8% so getting them down to 5 and a half 575 on a Cash out refinance is becoming very popular right now um Beyond just the regular rate and term refinance lowering your payment okay and we mentioned I mean you're the the owner of the NBA's Phoenix Suns you also own the wnba's Mercury so I would be remiss if I didn't ask you a question on a day like today where CNBC has reported on the Milwaukee Bucks in a deal a stake uh that values that team at $4 billion that's up from 3.2 billion last year your thoughts on Sports team's valuations do they continue to climb is there a point at which we start to see this peek out yeah you know it's great um I think you know I don't Focus too much on valuation I focus on how to make The Fan Experience great how do I do great things for the league the WNBA the NBA um but Adam Silver in the NBA has done an amazing job um valuations are going up because there's a supply and demand there's only 30 NBA teams and the truth is with the new TV deal that Adam Silver did an amazing job putting together it's going to make a big impact on valuations but valuations like I want to focus on winning you know how do we win a championship with the Suns or the Mercury and so that's what I focus on more than valuations valuations are for finance people I'm much more of a fan and I enjoy the game too much to focus on that but um they definitely are going up to answer your question is hockey going to come to Arizona oh I hope so it's a four sport town so hopefully we'll get it back at one point wow so Carrie Hall of BFA Securities and Omar agar of Schwab Asset Management it's good to have both of you here on another day where major averages are in the green so Jill I'm going to start with you here because and we just heard Mike Santo talk about it the Nick timos article at the journal laying out the possibility or the case for a 50 basis point cut um how much has that factored in to the market here and does this rally have legs in light of it thanks we we think there'll be a 25 basis point cut um our our economists believe we'll see one 25 basis point cut at each of the next five meetings and then quarterly cuts through the end of next year and you know I think we we are sort of weighing you know fedback drop but also the the macro data where you know we've seen volatility in the markets we think that could continue and bottom line is you know we're in a period where volatility typically picks up in the months ahead of a US election um the the yield curve has been a good long lead signal of volatility so that have been suggesting volatility could bottom Midway through this year and start to pick up um so so I think we're we're in a period where the FED is going to begin cutting we're we're expecting 25 bips and we think that you know this is going to be a period where you want to position for higher volatility own higher quality Investments within the S&P 500 okay Omar how do you see this Market especially as you argue that we are experiencing a b forged soft Landing what does that mean well we see a lot of this bifurcation in many things we see it in the consumers we see it in just the way the different parts of the economy has gone we we discussed this in the past about this idea of rolling recoveries and rolling recessions and now we're seeing you know very quickly on one hand you have softness in the labor market you have softness in manufacturing you have softness in the housing market and on the other hand you see that GDP growth is is pretty solid that you see the inflation which is a lot of what the the Fed continues to look for is on the right TR towards the 2% and the CPI and PPI numbers clearly reflect the fact that the destination for inflation seems to be moving in the direction that the fed and other central banks like to see and and overall you see that that that soft Landing discussion continues to favor and confirm a lot of what the FED is trying to do you know we we believe that overall you know the economy and the health of the US economy continues to be very good and therefore you know the FED is in a well position to decide whether they want to do 25 or 50 they have the flexibility to go for 50 which was a lot of the article today on the Wall Street Journal said but our belief is they're not going to go for 50 and a lot of that is because they don't want to sound that there's a panic or there is an issue related to the economy which is the reality the data shows that it's in pretty good health so Joel you gave us the overview what happens to small caps in particular you think during this period do we get more breadth in general or do the mega caps continue to outperform well I think within the S&P 500 were likely to see more breath we were in a period where magnificent 7 were the ones that were seeing the the really strong earnings growth and surprises but now we're seeing earnings growth decelerate for that segment of the market and and pick up for the other 493 I think for small caps that's what was expected to happen as well but it's sort of disappointed so so we've been tactically cautious on small caps because I think even though fed cutting is a positive and and alleviates part of that refinancing risk relative to to if we were in a hire for longer backdrop the other side of the coin is that fundamentals for small caps have not improved and you know beginning of the Year everyone was expecting that by this earning season small cap earnings growth would already be outpacing large cap earnings growth and that hasn't happen that earnings recovery for small caps has continued to get pushed out so I think you know the FED is one positive but we also want to see an improvement in fundamentals Improvement in the revision and guidance trends for small caps that we just haven't really seen yet before getting more um bullish on the Russell 2000 overall all right guys that was the market what price did it in did you guys see this freaking in today's market Navigator we're focusing on gold Futures and the bullish case for this commodity which continue to make new highs Phil streel is Chief Market strategist Market stret welcome guys so did you guys see this Steve Jobs Apple one sells for how much guys 900k 940k and then we have Jack dorsey's tweet selling for $3 million Steve Jobs Apple 1 sells for 900k 945k guys and then we have Jack dorsey's first tweet selling for $2.9 million so this was when nfts were massive so like a digital tweet sold three times more than Steve Jobs's first computer that is insane what do you guys think about this and if you guys like covering the stock market like want to get like um H in into conversations about like stocks and crypto like And subscribe yeah let's let's look at this BL Futures and Phil uh Gold's run which is up 25% this year has caught many people's attention who are now wondering Allah Nvidia a year ago is it too late to get in oh I don't believe so at all I think that gold Futures you know being one of the best performing commodity classes this year it's got strong central bank buying and we expect this trend to continue it's a great hedge against geopolitical risk you know these occur unexpectedly and the net speculative fund buying is back near four-year highs so any correction we get should be shallow in nature as more participants come into the market the current economic environment is ideal for owning an asset class like gold the economy we have a soft Landing there's no apparent signs of recession inflation is trending towards the fed's 2% Target growth's declining but not crashing and Jerome pal said that time has come for the FED to adjust policy so gold is the asset Clash you want to own is there any risk that retail investors start piling in right at the moment that central banks purchasing declines we know that's been a huge source of demand for gold really over the past couple of years you know that that has happened and China's taken a step back on some of their Central Bank purchases but they tend to you know revamp and repurchase again we think that central banks broadly are going to continue to divest themselves from other currencies and focus on hard assets building those reserves so we think that this is more of a longer term Trend that's that'll take place what is the trading range if that you foresee if you wanted to get really super specific and tactical about this how exactly would you play it okay so if you look at since 19 80 historically gold Futures have rallied 6% on average within the first 30 days of an interest rate cut after the FED has transitioned from a hiking cycle to a cutting cycle secondly we do have seasonal strength where 13 out of the last 15 years gold Futures have rallied from September 30th and up to October 25th we really believe that any kind of pullback on the gold market should be shallow so we're looking at purchasing at 25.40 an ounce the stop loss would just be below the 50-day moving average at 24.90 and then we would Target 2750 by the year end so we prefer to have a stop loss right at the 50-day moving average just to simplify things which is a $60 range and it's two times the average range for volatility purposes all right so you think again the downside you kind of keep that tight maybe hope for more upside as you continue to ride this out into year end Phil thanks for joining us we appreciate your time today over the next few days we're going to zoom into each part of your home breaking down how down how inflation has impacted each particular section of the house and laying out the potential stocks to play today we look at some Furnishings companies like RH which used to be called Restoration Hardware William Sonoma Wayfair according to the CPI it reports that prices for bedroom and living room furniture are down 3 and 6% respectively compared with last year some disinflation or deflation there for a change Anthony chumba is managing director and Senior Analyst at loop capital markets Anthony I assume that this decline in prices is that housing turnover has slowed that is certainly a big part of it I mean housing turnover has been quite weak um we got a bit of a head fake at the beginning of this year we thought that numbers were going to get significantly better that has not happened the other thing that I think uh is reflecting those numbers is I think that the home furnishings retailers um got a little too I guess the word probably the right word is greedy um during the pandemic when you know they just couldn't keep items on the shelves and they um you know they probably raised prices a little bit too high and now they're you know they're having to kind of roll those back um as well um you know because demand has has has weakened so so much I I'm curious because it's come up in the in the context of the campaign this idea of price C gouging and and I'm frankly suspicious that that many companies literally engaged in price gouging but during the the pandemic you had two things happen Happ at once you had supply chain uh issues that were constricting the supply of goods on the one hand and you had money flowing into the economy in the form of stimulus packages and lower interest rates so more dollars chasing a restricted uh number of goods or constricted number of goods is a is an obvious uh uh re recipe for inflation and I guess companies just took advantage of that cover uh after years where they had no pricing power whatsoever really I think you're 100% right and my um you know uh freshman year economics professor would be very proud of what you just said I mean supply and demand U you know basically dictates price and so when Supply is constrained as it was and demand is elevated as it was prices are going to go up and I'm not sure I agree with you I'm not sure if that's necessarily gu that did come straight from Ken elzinga at the University of Virginia I Anthony I'm just envisioning Elizabeth Warren going after RH by because she said they raised Furniture prices you know 43% instead of 20% I mean when we're talking about something that's not a grocery item how do we know what the right price is I think they're still in the process of finding out and the answer can sometimes be that it depends I think that's 100% right and you know I mean you talked about specifically about will about uh RH I mean RH it's it's hard to gauge what the right price is because they don't really sell like commodity products that you can find at other at other retail so to some extent the right price is what someone's willing to pay for it and and AR specifically has talked about the fact they probably took too much price and they are in the process of bringing prices down because once again supply and demand um you know has kind of gone the other way there's there's plenty of Supply now demand not so much the AI boom is putting a big strain on the US power grid and the White House is tapping America's biggest AI players to discuss how to move forward meeting today with leaders from open AI anthropic Google Microsoft and even nvidia's Jensen Wong let's bring in dear jaosa with more details in Tech Che dearra hey Kelly so we know the government moves slow and AI is moving faster than anyone anticipated so big Tech has already done a bunch of deals in the energy space while also racing to build more efficient chips now Oracle making progress on a data center that will require over a gigawatt of electricity or enough to power roughly 750,000 homes Amazon earlier this year paid $650 million for nuclear power data center in Pennsylvania Microsoft has earmarked 10 billion to develop renewable energy capacity to help again power data centers alphabet and meta they're looking to solar Farms so big Tech is essentially scouring the country for electricity Supply and the White House has certainly taken note our Megan cassella stopped Nvidia CEO Jensen hang outside the meeting today he acknowledged the huge amounts of energy that is needed to continue to develop AI but he also talked about the solutions that AI could help Pioneer have a listen although artificial intelligence uh consumes a lot of energy to train it also saves a lot of energy when you consume it uh because ultimately it's not about training the model it's about using the model and uh whether it's in health care or uh climate uh climate technology or uh just running the power grid artificial intelligence has the opportunity to really save a ton of ton of energy and so so I think people are are grappling with uh the the scale of of the opportunity ahead and of course the scale of the challeng is ahead and so it's going to require public and private collaboration so here he's referring to this idea that the AI models are going to become so Advanced that they're going to actually provide Solutions they're going to make energy the way that we develop it the way that we use it generate it more efficient in the future he also mentioned that public private collaboration that is certainly going to be tricky Tech Giants are pushing forward with energy deals and new data centers that is straining the National Power grit and it's complicating their own emissions goals which could in turn complicate the administration's transition to clean energy certainly a positive development that they're going to be working together at least having these conversations but the hard work is going to be ahead it shows how top level the concern is dear J thanks we appreciate it wow so Nvidia ended off the market at $119 and they crashed after hours to $88 how is that possible guys Nvidia crashed to $88 and then it went back to like $118 so AI chip growth story intact for NVIDIA broadcom analysts so CEO of Jensen Hong everyone is counting on us literally all the tech companies are counting on Jensen hangs to like you know fix their Blackwell updates but like a lot of them said it's a it's a nothing burger and they're going to get it they're going to get the Blackwell updates like they're going to get past it they're going to be able to do do the chips AI is not just a tool it's a skill wow for the first time we're going to create skills that augment people interesting the infrastructure players like ourselves and the other cloud services providers put the infrastructure in the cloud so that developers can use these machines to train the models and fine-tune the models guard rail the models and return on that is just fantastic that's cool so yeah hopefully 100x more digital Engineers oh yeah that's why they want to create the AI chips Guys these AI chips are going to make their 32,000 employees 100 times more productive do do you realize that like so like AI is going to be very productive for some people and it's going to like take millions of jobs too in the future it's going to be good and bad so yeah that that's that's crazy so Nvidia stock pric is $119 and yeah that's it I'll see you guys tomorrow thank you guys for joining if you're new like And subscribe um I'm going to be live later we're going to talk about like some investment philosophies or something we'll talk about like wealth building or like crypto OR tech stocks I'll see I'll see what we'll do in a bit I'll I'll be live maybe like I'll see 30 minutes maybe