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Bloomberg Intelligence: Nvidia Surges, Reddit U.S IPO · Bloomberg Intelligence

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Speaker 2: The story again today is Nvidio stock trading up on
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Speaker 2: the back of that really good earnings we had earlier
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Speaker 2: in the week, and obviously had that big surge yesterday,
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Speaker 2: but it's up a few percent here today. I'm looking
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Speaker 2: at this stock again, trailing twelve months, up over two
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Speaker 2: hundred and forty up sixty percent, just a year to
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Speaker 2: date two point zero two trillion dollars. Let's check in
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Speaker 2: with man Deep Singh. He's a senior technology analyst for
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Speaker 2: Bloomberg Intelligence and he knows all about this kind of stuff. So,
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Speaker 2: Man Deep, you know, I think we've broken down the quarter.
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Speaker 2: We know that business is good. We had gene Monster
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Speaker 2: on in the last hour for a couple segments there.
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Speaker 2: He remains uber uber bullish here and he says that
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Speaker 2: this AI is just below electricity in terms of how
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Speaker 2: it's going to impact our lives and well above the Internet. Man.
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Speaker 2: That's bullish. Do you have any sobering thoughts as it
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Speaker 2: relates to AI and in video Here I.
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Speaker 3: Concur with him. I think this is, you know, something
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Speaker 3: transformational multi year. The only thing that as an investor
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Speaker 3: you have to be cognizant of is clearly and video
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Speaker 3: is compounding, you know, at fifty percent, and because it's
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Speaker 3: a multi year trend, they can do that. What is
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Speaker 3: the price you pay for getting in this dock? And
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Speaker 3: what is a multiple that you know discounts for the
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Speaker 3: growth going far out beyond you know three to four quarters,
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Speaker 3: which I think they have great visibility on And so
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Speaker 3: that's where you know there there is always a price
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Speaker 3: for you know, even a high quality stock like in
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Speaker 3: VideA where the fundamentals are great, but it's not infinity.
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Speaker 3: And so that's the I think part where clearly you
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Speaker 3: know they're writing the momentum. It's it's great, I mean,
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Speaker 3: they had a blockbuster earning Siattra game, but it's we
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Speaker 3: know it's not forever.
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Speaker 4: And the price.
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Speaker 3: That's why we look at prices, multiples and you know, valuation,
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Speaker 3: and I think that's the part that market still is
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Speaker 3: figuring out what is the right multiple for stock like
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Speaker 3: in Video.
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Speaker 5: Mande, let's just come back for a second to what
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Speaker 5: in Video's technology actually is. It says here that they
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Speaker 5: dominate the market for graphics chips designed for complex computing
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Speaker 5: tasks needed to power AI applications. So in plain speak,
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Speaker 5: how does somebody like me make use of that?
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Speaker 3: Well, so think of you know, all the processing that
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Speaker 3: was done in the last thirty thirty five years. It
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Speaker 3: was used a CPU central processing unit, and CPU works
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Speaker 3: in a certain way in terms of the instructions you
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Speaker 3: pass through the processor, the way it does the processing,
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Speaker 3: and the way results are split out. That was the
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Speaker 3: same even with data centers, even though the CPU and
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Speaker 3: data centers is a lot more powerful within media because
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Speaker 3: they've focused on graphics and gaming related processing, that's a
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Speaker 3: different type of chip altogether. And now they've been able
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Speaker 3: to bring that to AI computation, which is all matrix space.
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Speaker 3: So we're talking about you know, vectors and matrix multiplication
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Speaker 3: and you know, billions of dimensions in terms of the
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Speaker 3: data that you're dealing with, and that's a very different
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Speaker 3: operation than what CPU is designed to handle. That's why
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Speaker 3: they've had such a great headstart because they've been doing
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Speaker 3: this for you know, twenty five plus years in terms
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Speaker 3: of that gaming processor that is being used for AI,
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Speaker 3: and that's why I think others are finding it hard
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Speaker 3: to catch up. But at the end of the day,
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Speaker 3: it's still a hardware company that makes chips, so it's
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Speaker 3: not a recurring revenue and that's something to be mindful
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Speaker 3: of that others are trying to build the capabilities that
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Speaker 3: they have.
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Speaker 2: All right, Mandy, let's switch gears a little bit. We've
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Speaker 2: i think beaten that one to death in Nvidia, but
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Speaker 2: certainly it's certainly worth talking about. But we've actually had
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Speaker 2: another piece of news that really caught my attention. Reddit
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Speaker 2: is looking to go public. They foiled their IPO. Can
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Speaker 2: you tell us, for those of us that don't use
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Speaker 2: Reddit exclusively, tell us kind of what Reddit is, kind
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Speaker 2: of what their business model is, and kind of how
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Speaker 2: you think this might be received by the market.
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Speaker 3: Yeah, so it's an online network. I mean, I would
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Speaker 3: lump it with the social media network companies, even though
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Speaker 3: it's more community based and interest based. And look, they've
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Speaker 3: got seventy three million daily active users. Think of you know,
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Speaker 3: all the large angled models. What are they trained on?
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Speaker 3: They're trained on user generated content and in reddits case,
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Speaker 3: it's all text content. The parallel that I have on
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Speaker 3: the video side is YouTube has a lot of user
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Speaker 3: generated video content, TikTok has a lot of user generated
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Speaker 3: video content. Reddit is your text repository for user generated content,
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Speaker 3: and that's what large angreid models are using to train
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Speaker 3: these models so that they can generate you know, right
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Speaker 3: kind of text because they have so much context from
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Speaker 3: these Reddit posts. I mean, we're talking about one billion
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Speaker 3: posts you know that Reddit generates in a year. So
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Speaker 3: clearly Reddit has the scale. They have created a niche
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Speaker 3: within this large social network community where Meta dominates with
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Speaker 3: three billion daily active users, but Reddit has seventy three million,
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Speaker 3: and these are pretty engaged users. I mean, the business
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Speaker 3: model isn't fleshed out because even though it's ads driven,
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Speaker 3: we're talking about a billion dollar run rate. And now
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Speaker 3: they're opening another line data licensing that all these large
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Speaker 3: and A model companies are going to pay for. So
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Speaker 3: that's going to be probably a mid to high single
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Speaker 3: digit revenue contributors this year. I think that's the part
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Speaker 3: that's going to accelerate because you need to retrain these
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Speaker 3: models every few months, and Reddit is the best data
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Speaker 3: that you can train on.
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Speaker 5: So Reddit's really like a forum for a lot of
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Speaker 5: communities to gather. You know, they're like these different threads
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Speaker 5: on there, and people get like really hyped on different ideas. Obviously,
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Speaker 5: the meme stock rally really just originated so much from
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Speaker 5: these different Reddit communities. Can you just explain mandeep, like
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Speaker 5: where the value is going to come in generating you know,
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Speaker 5: investor you know value from some of these different threads.
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Speaker 5: I guess, like I'm just having a hard time imagining
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Speaker 5: where that value proposition comes from.
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Speaker 3: Yeah, so these threads are all user interaction, and that's
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Speaker 3: quite powerful. How do you train the machines to behave
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Speaker 3: like users? You train it on actual user data and
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Speaker 3: this is you know, communities coming together who share similar interests,
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Speaker 3: and that's what you use to train the machines. The
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Speaker 3: one problem I have found with Reddit's business model is
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Speaker 3: advertisers are leary of putting their ads on a platform
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Speaker 3: where there is hate or you know, other kind of
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Speaker 3: stuff because they are brand conscious. You know, they don't
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Speaker 3: want to show their ads next to something that is
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Speaker 3: paid or something like that. And that's where they haven't
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Speaker 3: had a lot of traction. I mean it sounds to
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Speaker 3: be very similar to Twitter. Twitter is a great platform
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Speaker 3: for engagement, but they haven't been able to monetize it
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Speaker 3: because of all these aspects. So brand safety is huge
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Speaker 3: that Reddit needs to solve for if they want to
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Speaker 3: scale on the ad side. But as I said before,
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Speaker 3: you know, on the data licensing side, this is the
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Speaker 3: data set that every foundational, large angrege model company wants
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Speaker 3: to train their models on. Because this is all user generated.
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Speaker 2: Content, it sounds like, I mean, you know, from an
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Speaker 2: advertising perspective, it's you know, it's Meta, it's you know,
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Speaker 2: it's Google, it's Amazon now maybe even you know some others.
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Speaker 2: But I mean, this is too small to be a
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Speaker 2: player in the advertising space. So in order for me
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Speaker 2: to buy this IPO, I have to buy off that
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Speaker 2: it's also a I guess AI play as well, don't I?
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Speaker 3: It absolutely is, and look, ads can be fixed. I mean,
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Speaker 3: I compare it to Pinterest. So Pinterest has got twenty
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Speaker 3: three million daily active users in the US. Reddit has
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Speaker 3: got thirty seven million daily active users in the US,
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Speaker 3: so it actually has higher daily active users question and
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Speaker 3: Pinterest is four times the size of Reddit in terms
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Speaker 3: of revenue run rate, So Pinterest is close to four billion,
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Speaker 3: Reddit is a billion. So in terms of runway, clearly,
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Speaker 3: you know, Reddit is under monetizing the engagement. But the
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Speaker 3: reason for that is advertisers still don't feel like spending
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Speaker 3: you know, five ten billion dollars on the platform because
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Speaker 3: of brand safety issues and all the type of post
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Speaker 3: or discussions they have on Reddit. So they need to
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Speaker 3: clean up that part. I'm sure the advertisers that you know,
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Speaker 3: they're advertising dollars of well spend, offer measurement, etc. But
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Speaker 3: this is fixable. I mean, we've seen Beta do so
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Speaker 3: much in terms of ad measurement and ad targeting and
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Speaker 3: look at what they have done this year. So clearly
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Speaker 3: there is a long runway for Reddit, and the data
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Speaker 3: licensing part has a lot of upside because of all
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Speaker 3: the generatord ai interests.
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Speaker 2: All right, Mandy, thanks so much for joining us. A
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Speaker 2: man deep seeing he's a senior technology analyst Bloomberg Intelligence
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Speaker 2: joining us via zoom there. So again, Reddit, it's interesting,
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Speaker 2: it's it's an ipo. We like to see more of
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Speaker 2: those hitting the market. It's a good signed for the market,
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Speaker 2: so the IPO buyers will be happy, and it's another
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Speaker 2: kind of social media play. But as Mandeep was saying,
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Speaker 2: it's got this AI angle to it as well.
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Speaker 5: I feel like every time we have a topic here
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Speaker 5: on the radio where we're talking about AI, I have
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Speaker 5: to ask, like, how is this like somebody like me
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Speaker 5: going to use these tools? Because, like, you know, we
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Speaker 5: talk about the impact, and sometimes it's hard to imagine
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Speaker 5: something that's really going to impact your life more than
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Speaker 5: the Internet or a cell phone, and like, is this
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Speaker 5: really accessible to the mass market?
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Speaker 2: Exactly so, But I mean you'd listen to every company
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Speaker 2: in s and P five hundred saying AI is can
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Speaker 2: to impact our business. You're going to go up to
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Speaker 2: a drive through and it's going to be a different experience,
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Speaker 2: of better experience thanks to the technology. And so we'll see,
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Speaker 2: you know, but that's clearly what we're a lot of
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Speaker 2: the bulls are banking on.
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Speaker 2: You know, I don't know what to do with this market, Moley,
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Speaker 2: Maybe I just is it just all in Nvidia all the.
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Speaker 6: Time, all teams like all Ta AI or nothing.
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Speaker 2: Al Tech exactly AI or nothing. But let's talk about
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Speaker 2: this market a more broad sense. Lauren Gilbert can help
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Speaker 2: us do that. She's a seat of wealth Wise Financial,
10:57
Speaker 2: joining us via zoom from I believe Houston, Texas on
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Speaker 2: behalf of Houston, Texas. I'll call out WTI cud oil
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Speaker 2: is off about two percent today, seventy seven dollars. I
11:05
Speaker 2: think that people in Houston care about that stuff.
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Speaker 6: I think they do a little bit.
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Speaker 2: Lauren, thanks much for joining us here. What do you
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Speaker 2: make of what we've experienced over the past few days,
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Speaker 2: in a few weeks as it relates to AI and
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Speaker 2: in Vidia and what it means for the tech space
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Speaker 2: and the market overall. I haven't seen anything like this
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Speaker 2: in a long time.
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Speaker 7: Right, Well, we are in the age of AI, which
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Speaker 7: is similar to the age of the Internet when it
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Speaker 7: came to be. Although this is going to transform really
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Speaker 7: every sector in every business, and so it is a
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Speaker 7: huge story. It is the catalyst of the market and
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Speaker 7: will continue to be in The good news from Nvidia
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Speaker 7: yesterday really was that it spread across the semiconductor space
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Speaker 7: as all of these different companies are looking to get
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Speaker 7: some market share. And so while we still don't know
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Speaker 7: who the winner is right now, certainly in Vidia has been,
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Speaker 7: but we like the whole space, so semiconductors and also
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Speaker 7: what it's going to do to other sectors as well,
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Speaker 7: So that is the catalyst.
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Speaker 6: How are you feeling right now about earnings in general?
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Speaker 5: Loreen, And I mean, obviously there's a lot of positives
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Speaker 5: to take from these AI stocks, but what about elsewhere?
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Speaker 7: Yeah, So with over eighty percent of the SMP having reported,
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Speaker 7: we're having a good earning season. We've clearly come out
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Speaker 7: of an earnings recession with year over year growth over
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Speaker 7: five percent. So we're in pretty good space there with earnings,
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Speaker 7: and we do see opportunities in other areas of the market.
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Speaker 7: Communications services is one that we like quite a bit
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Speaker 7: as well as healthcare is another sector that we like.
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Speaker 7: Just with inflation continuing to come down, and so the
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Speaker 7: story is that the backdrop is there with inflation coming down,
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Speaker 7: with the FED that's going to make a move sometime
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Speaker 7: this year. We're still holding on to the idea of
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Speaker 7: May maybe the first rate cut, even though probability has
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Speaker 7: come down to twenty one percent now for a May
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Speaker 7: rate cut, we still think, you know, it's sooner than
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Speaker 7: later with a rate cut, which is going to help
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Speaker 7: the many items, especially even housing and home builders for
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Speaker 7: the second half of the year. So we do see
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Speaker 7: a lot of optimism in areas of the market.
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Speaker 2: Laurie and I to see that you like preferred stock,
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Speaker 2: and we don't talk about preferred stock preferred stock market
13:18
Speaker 2: opportunities with preferred stock. Why in some markets it's a
13:22
Speaker 2: real advantageous vehicle. How do you think about preferred stock.
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Speaker 7: Yeah, the way that we're thinking about right now is
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Speaker 7: the yield is good and it helps us mitigate duration
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Speaker 7: risk on fixed income, and so it's a nice play
13:36
Speaker 7: between the stock and the bond and looking at preferred
13:39
Speaker 7: stock as a way to capture some yield and mitigate
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Speaker 7: some risk.
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Speaker 5: Well, how are you thinking about the broader fixed income
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Speaker 5: space right now? You know you just said that your
13:48
Speaker 5: that is sooner rather than later for a FED rate cut,
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Speaker 5: which seems like is not what a lot of FED
13:54
Speaker 5: officials are saying these days.
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Speaker 7: Right, And there's always what is being said and what
14:00
Speaker 7: will ultimately be done. But you know, so having some
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Speaker 7: duration is good, but not extending too far. We're you know,
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Speaker 7: just right pretty close to the benchmark as far as
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Speaker 7: duration is concerned. On fixed income, we do like fixed income,
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Speaker 7: and we do think that fixed income is going to
14:18
Speaker 7: be a good part of a portfolio this year as
14:22
Speaker 7: we don't see necessarily a straight line in the equity markets,
14:26
Speaker 7: and so having some fixed income there will be good
14:29
Speaker 7: to moderate risk on the equity side. We're also looking
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Speaker 7: at the earning zeald on stocks right now is not
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Speaker 7: that attractive, you know, compared to ten year treasury, so
14:39
Speaker 7: you know, looking at that idea. So once again, blended
14:43
Speaker 7: portfolio we think is going to be a good story
14:45
Speaker 7: this year. And of course, just depending on somebody's risk tolerance,
14:49
Speaker 7: where will that blend be. But not being all equity
14:52
Speaker 7: or not all fixed income, but having a blend, we
14:55
Speaker 7: think it's going to be provide some some decent returns
14:58
Speaker 7: this year.
14:59
Speaker 2: Hitherin you hear from your clients about their interest in
15:03
Speaker 2: I guess alternatives, whether it's private equity, private credit, maybe
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Speaker 2: hedge funds. What's the interest level there and kind of
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Speaker 2: how do you steer them?
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Speaker 7: Yeah, we like alternative investments. We hold alternative investment in
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Speaker 7: the spaces you know, you've mentioned a number of them,
15:21
Speaker 7: and there's liquid alternatives and there's non liquid alternatives, and
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Speaker 7: that's really the conversation to have with investors is you know,
15:28
Speaker 7: how much liquidity do you need? And certainly what the
15:31
Speaker 7: public markets offer us is liquidity, and that's important. And
15:35
Speaker 7: then there are ways to drive more alpha, more excess
15:39
Speaker 7: returns versus what might be expected, and that those are
15:44
Speaker 7: some of those non liquid alternatives. So I think a
15:47
Speaker 7: combination of both is important, and once again looking at
15:50
Speaker 7: investors to see what kind of liquidity they actually need.
15:53
Speaker 6: So it sounds like tech's a good place to be
15:55
Speaker 6: right now.
15:56
Speaker 5: You've mentioned you also like some communications stocks. Where else
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Speaker 5: are you looking in terms of the industry breakdown?
16:04
Speaker 7: Like I was mentioning in healthcare, we like biotech as well,
16:08
Speaker 7: just because that is an area that as inflation wanes,
16:12
Speaker 7: tends to be positive for that area of the market.
16:16
Speaker 7: Those also tend to be oftentimes smaller companies, and while
16:20
Speaker 7: we're still seeing a dominance of the large cap space,
16:23
Speaker 7: we think there will be a reversal to that trend
16:26
Speaker 7: this year and we'll see benefits from smaller cap companies
16:29
Speaker 7: as rates start to come down. So that's another area
16:32
Speaker 7: that we like.
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Speaker 2: All Right, Lurene, thank you so much for joining us.
16:34
Speaker 2: Really appreciate getting a few minutes of your time with
16:36
Speaker 2: Loreen Gilbert, CEO of wealth Wise Financial, joining us via
16:39
Speaker 2: zoom from Houston, Texas.
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16:57
Speaker 2: Or news coming out of Washington as it relates to
17:00
Speaker 2: Ukraine in Russia, the US today unveils its biggest sankets
17:03
Speaker 2: package on Russia since the war began. A drone maker
17:07
Speaker 2: and a payment system company are among targets of penalties.
17:11
Speaker 2: Secretary Yellens as Russia's economy is showing quote signs of weakness.
17:16
Speaker 2: Let's break it down with Dan flat Lake, national security
17:18
Speaker 2: reporter for Bloomberg News, joins is to via zoom from Washington, DC. Dan,
17:23
Speaker 2: what's in this sanctions package?
17:27
Speaker 4: Well, there's a lot of stuff in it.
17:30
Speaker 8: We're talking about, you know, all told about six hundred
17:33
Speaker 8: or so targets, but a lot of them aren't really
17:35
Speaker 8: household names, so you're looking at primarily Russian companies with
17:40
Speaker 8: or individuals no ties to the US financial system. But
17:44
Speaker 8: they are getting shipments and they're getting some goods in
17:48
Speaker 8: from third countries that are helping kind of keep the
17:51
Speaker 8: war machine going. So the idea here is basically to
17:54
Speaker 8: kind of ratchet up some pressure on the Russian economy,
17:56
Speaker 8: kind of clamp down on some of the places where
17:59
Speaker 8: things are still getting through, and then really kind of
18:03
Speaker 8: you know, look forward to potentially some other measures that
18:07
Speaker 8: may be taken, you know, in the next few months.
18:10
Speaker 5: Dan tell us how effective, if at all, the sanctions
18:13
Speaker 5: up to date have been, because you know, the IMF
18:16
Speaker 5: and your story said that Russia's economy is actually on
18:18
Speaker 5: track to grow almost three percent this year and it's
18:21
Speaker 5: really seems to be holding up pretty well by and large.
18:26
Speaker 4: Yeah, there's no question that, you know, as far as
18:28
Speaker 4: the strategic goal of.
18:29
Speaker 8: Getting putin to you know, give up the invasion and
18:32
Speaker 8: withdraw from Ukraine, that obviously hasn't happened, and we're now
18:35
Speaker 8: two years into this conflict. There have been some effects,
18:39
Speaker 8: you know, on the Russian economy. Growth is a little
18:42
Speaker 8: bit slower, at least it was initially. Now, as you mentioned,
18:44
Speaker 8: the IMF projects that it will be close to two
18:47
Speaker 8: point six or three pert, you know, up to three
18:49
Speaker 8: percent this year. So it's it's blowing the economy, uh,
18:55
Speaker 8: you know, not as much as the US would have hoped,
18:57
Speaker 8: but it has forced Putin to sort of turn economy
19:00
Speaker 8: into a wartime economy, to basically kind of turn his
19:05
Speaker 8: entire manufacturing sector over to producing stuff for the war,
19:09
Speaker 8: and the hope is obviously over. Of course, that doesn't
19:17
Speaker 8: really help Ukraine now, and that's where we get into
19:19
Speaker 8: some of the funding battles that are happening here in Congress.
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Speaker 2: Oh, thank you very much, Hey Dan. We had Deputy
19:26
Speaker 2: US Treasury Secretary Wally Adayamo on Bloomberg Surveillance television this morning,
19:30
Speaker 2: and Jonathan Farrow asked him about India because Indian India
19:34
Speaker 2: has been one of those countries that it's kind of
19:36
Speaker 2: been a little bit loose with its relationship with Russia.
19:40
Speaker 2: How does the administration think about India and its placed
19:43
Speaker 2: kind of geopolitics and how it may be interacting with
19:45
Speaker 2: Russia maybe against some of these sanctions.
19:49
Speaker 8: Yeah, it's a huge, huge problem some of our colleagues
19:52
Speaker 8: from Bloomberg Economics have done a great analysis on sort
19:55
Speaker 8: of the ten Lessons from the Russia Ukraine War that
19:58
Speaker 8: was out yesterday, and you know, they look at sort
20:01
Speaker 8: of the rise of this block of countries that are
20:05
Speaker 8: really rivaling the US and its allies, not necessarily in
20:08
Speaker 8: terms of size of economic weight or power in terms
20:12
Speaker 8: of global GDP, but certainly as an alternative to the
20:16
Speaker 8: US led kind of financial system.
20:18
Speaker 4: And that's India, and that's China, and when it.
20:21
Speaker 8: Comes to Russia, those countries are really keeping Russia propped
20:25
Speaker 8: up to a large extent.
20:26
Speaker 4: India is buying Russian.
20:27
Speaker 8: Oil, China is buying Russian oil, China is sending technology
20:32
Speaker 8: and other goods onto Russia. Russia is also getting weapons
20:36
Speaker 8: from Iran and North Korea and other places. So there's
20:39
Speaker 8: kind of a whole rival faction that has cropped up
20:44
Speaker 8: that is going to be very hard to counteract, especially
20:46
Speaker 8: when you're talking about India, which is an ally the
20:49
Speaker 8: US in so many other ways.
20:51
Speaker 5: Yeah, Dan, you know, you and I had talked about
20:53
Speaker 5: this a bit time ago last year. The idea of
20:56
Speaker 5: export controls is that what we're alluding to here, Like basically,
21:00
Speaker 5: when you know, some of these countries that you know,
21:02
Speaker 5: like India maybe in this case that aren't being directly
21:06
Speaker 5: sanctioned by the US, but can still you know, kind
21:09
Speaker 5: of work with Russia behind the scenes and help get
21:12
Speaker 5: around these sanctions and maybe a bit more of an
21:14
Speaker 5: indirect way.
21:16
Speaker 8: Yeah, I mean, it's a really it's a huge issue
21:18
Speaker 8: right now, just from a policy perspective. If you think
21:20
Speaker 8: about sanctions and the history of sanctions, the way sanctions work,
21:23
Speaker 8: they really leverage the financial system.
21:25
Speaker 4: Which you know it works. It's technology, so you can
21:29
Speaker 4: see payments moving through the system.
21:31
Speaker 8: It's very easy for banks to know that they you know,
21:35
Speaker 8: if they violate sanctions, they're going to get hit with
21:37
Speaker 8: big fines. Export controls is a totally different game because
21:41
Speaker 8: you're talking about boxes and microchips and things that are
21:45
Speaker 8: moving through sometimes a more informal economy, and it's harder
21:50
Speaker 8: to track that sort of thing. And I've talked to
21:52
Speaker 8: folks in the last week or so that say, you know,
21:54
Speaker 8: once that stuff hits Hong Kong, once it hits Turkey,
21:57
Speaker 8: or once it hits some of these certain countries, we
21:59
Speaker 8: lose all all visibility of them. We don't really know
22:02
Speaker 8: where it's going, so how do you stop that from happening.
22:05
Speaker 8: It's just not as well developed as sanctions.
22:08
Speaker 2: So Dan, we had Admiral Sturritis on earlier today, the
22:11
Speaker 2: former NATO Supreme Commander, four star admiral retired US Navy.
22:16
Speaker 2: He was saying, boy, they need the weapons now, the
22:19
Speaker 2: Ukrainians now, And you know, it's really at a critical
22:23
Speaker 2: time here. You get a feeling within DC that there's
22:27
Speaker 2: a belief that that this is a critical time or
22:29
Speaker 2: is this simply a political game at this point?
22:34
Speaker 4: You know, it's a good question. It's hard to say exactly.
22:37
Speaker 8: I think that there are some folks on Capitol Hill who.
22:41
Speaker 4: Do feel the urgency.
22:43
Speaker 8: Senator Schumer, the Senate majority leader, is in Kiev today
22:48
Speaker 8: as we speak, visiting with Ukrainian leadership.
22:51
Speaker 4: Republicans have gone as well. In the past.
22:53
Speaker 8: Mitch McConnell has certainly been pushing for Ukraine a The
22:56
Speaker 8: Senate did pass a package that will provide Ukraine with
23:00
Speaker 8: weapons and other financial support, but it's.
23:02
Speaker 4: Stuck in the House.
23:03
Speaker 8: And that's where it gets into a much stricier political
23:07
Speaker 8: situation because you have the former President Donald Trump really
23:11
Speaker 8: pushing against this kind of package. You have some isolationists
23:16
Speaker 8: in the Republican Party who say, you know, why are
23:18
Speaker 8: we spending all this money in Europe when we should
23:20
Speaker 8: be spending it on the southern border. There's a lot
23:22
Speaker 8: of things that are happening there in an election year
23:25
Speaker 8: that makes it very hard for something that ordinarily would
23:28
Speaker 8: get you know, a majority support and really probably would
23:32
Speaker 8: and put it on the floor of the House, makes
23:34
Speaker 8: it much harder to get done.
23:36
Speaker 4: So that's that's a real sticking point right now.
23:39
Speaker 5: When we're talking about sanctions, though, Dan, is that something
23:41
Speaker 5: that would be subject to the same kind of approval
23:44
Speaker 5: process as Ukraine aimed, would be as going through Congress
23:47
Speaker 5: in that same kind of way.
23:49
Speaker 4: Well, I think this is one of the things.
23:50
Speaker 8: One of the reasons why sanctions, the use of sanctions
23:52
Speaker 8: is up like one thousand percent over the last two
23:55
Speaker 8: decades or two and a half decades, is because you
23:57
Speaker 8: don't have to spend a ton of money to wield them,
24:01
Speaker 8: don't necessarily need.
24:02
Speaker 4: Approval from Congress.
24:03
Speaker 8: Every time you want to levy su sanctions, you do
24:06
Speaker 8: you want to spend you know, fifty sixty seventy billion
24:10
Speaker 8: dollars if you want to reinvigorate the Defense Industrial Base.
24:13
Speaker 8: If you want to do all these things that actually
24:16
Speaker 8: matter on the battlefield, you need Congress, you need the
24:19
Speaker 8: purse strings, and you know, so that's a much harder sell.
24:23
Speaker 8: But sanctions, you know, I won't say they're easier to
24:26
Speaker 8: wield necessarily, but they are more efficient in the sense
24:29
Speaker 8: that the administration can do it on its own without
24:32
Speaker 8: having to go to Congress for authorization.
24:34
Speaker 2: All right, Dan, thanks so much for joining us. Really
24:36
Speaker 2: appreciate getting your thoughts and analysis there. Dan Flatley, a
24:40
Speaker 2: national security reporter for Bloomberg News, joining us via zoom
24:44
Speaker 2: from Washington, DC.
24:47
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
24:51
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24:55
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24:57
Speaker 1: live on Amazon Alexa from our Flag New York station
25:01
Speaker 1: just say Alexa playing Bloomberg eleven th.
25:05
Speaker 2: Our c SUEE conversation today. Kevin Butler Joints, and he's
25:07
Speaker 2: the CEA of Excellent ex C is a ticker to
25:11
Speaker 2: put into your Bloomberg terminal here at Utility Company. But
25:14
Speaker 2: I want you to tell us just start off, Calvin,
25:15
Speaker 2: thanks so much for joining us, but tell us about
25:17
Speaker 2: your company, what you guys are doing, and don't get
25:19
Speaker 2: into kind of the meat of it.
25:20
Speaker 9: Absolutely, and good morning and thank you for having me so.
25:23
Speaker 9: Excellent is the largest transmission and distribution utility in the country.
25:28
Speaker 9: We have the privileged and responsibility to serve approximately ten
25:32
Speaker 9: point five million customers across some of the most diverse
25:35
Speaker 9: and largest cities in the United States through our utilities
25:38
Speaker 9: Commonwealth Edison in Chicago, Baltimore Gas and Electric and of
25:42
Speaker 9: course Baltimore Pico out of Philadelphia, Pepco Holdings, which is
25:47
Speaker 9: sitting in our nation's capital, VC del Marble Power and
25:51
Speaker 9: Light in Wilmington, Delaware, and Atlantic City Electric. So when
25:54
Speaker 9: you look at that scale and size, Excellent is positioned
25:58
Speaker 9: well to lead this energy transfer and that's who we
26:01
Speaker 9: are and how we show up for our customers.
26:02
Speaker 5: So you guys just had earnings a couple of days ago, right, Yeah,
26:06
Speaker 5: So tell us about the latest quarters, some of the highlights,
26:09
Speaker 5: and what you're looking forward to in the year or.
26:12
Speaker 6: So to come.
26:12
Speaker 9: No, thank you for asking, as Wednesday was a good day,
26:16
Speaker 9: and I say that because we beat our fourth quarter
26:19
Speaker 9: expectations and we exceeded expectations for the twenty twenty three,
26:24
Speaker 9: and I was just so proud of the team that
26:27
Speaker 9: we were able to deliver on our commitments that we
26:30
Speaker 9: made in twenty twenty three despite all the challenges, and
26:33
Speaker 9: when I say challenges, when you look at in Pennsylvania
26:36
Speaker 9: had one of the warmest winters that had in the
26:38
Speaker 9: last fifty years, and being a distribution company the gas
26:42
Speaker 9: company that we do there, we continue we overcame those
26:45
Speaker 9: headwinds and still met the number. And in addition to that,
26:49
Speaker 9: despite the challenges in our regulatory environment, because of our skill,
26:53
Speaker 9: we will continued to able to shift capital around our
26:56
Speaker 9: platform to invest in the things that are most important
26:59
Speaker 9: to our custos.
27:00
Speaker 4: So it was a good day, all right.
27:01
Speaker 2: My analyst of Bloomberg Intelligence that covers your stocks, she writes,
27:04
Speaker 2: since she says, ask them about Illinois, so talk about
27:07
Speaker 2: some regulatory headwinds. It seems like Illinois in the news
27:10
Speaker 2: and not always for the right reasons, but anyway, talks
27:12
Speaker 2: about doing business in Illinois.
27:14
Speaker 9: You know, KMET is the largest hutility in Illinois, having
27:16
Speaker 9: the privilege of serving Chicago, and your analyst is right on,
27:20
Speaker 9: Illinois is a difficult jurisdiction for us, right Now, we
27:24
Speaker 9: had a ruling on December fourteenth, and that ruling set
27:28
Speaker 9: I think their efforts to decarbonize and to move forward
27:33
Speaker 9: on transportational electrification that they were on. But we are
27:37
Speaker 9: committed to working with all of our stakeholders, including the Commission,
27:41
Speaker 9: to get to where we have a shared vision to
27:44
Speaker 9: move Illinois forward. But it was it was a December
27:47
Speaker 9: fourteenth I remember it well. It was a tough day.
27:49
Speaker 9: But what you've seen now is we've reduced about one
27:53
Speaker 9: point four billion dollars in capital in Illinois.
27:56
Speaker 2: But more importantly because of this, this.
27:59
Speaker 9: Cost of decision, and what really hurts is that the
28:03
Speaker 9: sitence of Illinois, their transition to a clean energy stacking
28:08
Speaker 9: is going to slow down. And we had to lay
28:10
Speaker 9: off nine hundred contractors that's direct contractors, and impacted by
28:15
Speaker 9: that was roughly two thousand indirect jobs. Now that's just us,
28:19
Speaker 9: so you could imagine the other utilities, the other electric
28:21
Speaker 9: utilities and gas utilities had to do the exact same thing.
28:25
Speaker 9: But we have a path forward and we continue to
28:29
Speaker 9: work with the Commission to right.
28:32
Speaker 5: Size this and obviously you guys are looking to do
28:35
Speaker 5: you know, switch over to clean energy and other markets
28:38
Speaker 5: as well. So how does Illinois maybe give you a
28:41
Speaker 5: bit of a blueprint for how to approach these other markets.
28:44
Speaker 9: Well, I would tell you that the same day, although
28:47
Speaker 9: there was a bad outcome in Illinois, we had a
28:49
Speaker 9: solid outcome in Maryland exact same day. So it just
28:52
Speaker 9: goes to show you when you have a shared vision
28:54
Speaker 9: of how to get there. We don't expect the commissions
28:57
Speaker 9: to give us everything we're asking for, but if we
28:59
Speaker 9: have a shared vision and a mutual understand the mutual benefits,
29:03
Speaker 9: you can do it. And I always say, in my
29:05
Speaker 9: golf parlance, you know, Maryland, you know we hit it.
29:08
Speaker 9: It was a part, it wasn't a party, and we're
29:12
Speaker 9: working on that. So it is a shared vision across
29:14
Speaker 9: and each jurisdiction is different because you can imagine in
29:18
Speaker 9: Illinois they're saying we're going all electric sooner rather than later,
29:21
Speaker 9: Maryland doing the exact same thing. Pennsylvania we like our gas,
29:25
Speaker 9: you know, we're saying gas is going to be part
29:28
Speaker 9: of that portfolio in Pennsylvania, and it's up to us
29:30
Speaker 9: to understand what those jurisdictions want and determine how to
29:33
Speaker 9: get there with those mutual benefits.
29:35
Speaker 2: So that's how I was going to ask you, how
29:36
Speaker 2: do we to the extent that we move this economy
29:39
Speaker 2: to a more greener fashion, including on any energy grid.
29:43
Speaker 2: Who drives the bus? Is that you guys saying this
29:45
Speaker 2: is how we're going to invest our capital in our plant.
29:48
Speaker 2: Or is it more of the municipality saying we want
29:50
Speaker 2: to go this way, we want to stay gas, we
29:52
Speaker 2: want to go green, or is it kind of a
29:54
Speaker 2: I guess partnership.
29:55
Speaker 9: It has to be a partnership. So you know, by
29:58
Speaker 9: us not owning generation, what I can tell you is
30:02
Speaker 9: we are brought to the table more often than not
30:04
Speaker 9: now because they don't few I have a vested interest.
30:07
Speaker 9: By me not owning, no longer owning nuclear, wind or solar,
30:11
Speaker 9: my job is delivered to you. So once they understand
30:14
Speaker 9: that and really get it, I'm now a trusted partner.
30:17
Speaker 9: Now having said that, what I can tell them is
30:19
Speaker 9: that here's the cost to achieve what you're trying to achieve.
30:23
Speaker 9: Give you an example. In Maryland, we had a jurisdiction
30:26
Speaker 9: that wanted to go all electric, and we said, look,
30:30
Speaker 9: I'm an electric and gas I'm going to benefit. I
30:33
Speaker 9: can do that for you sooner rather than later. But
30:35
Speaker 9: this is what it's going to cost the average customer
30:38
Speaker 9: in your city if you do that. And when you
30:40
Speaker 9: put those costs in front of them, they're like, Okay,
30:42
Speaker 9: let's slow it down a little bit, let's be more
30:44
Speaker 9: pragmatic about it, and let's do a balanced approach. And
30:47
Speaker 9: that's what we're finding.
30:48
Speaker 6: Well, that's what I was going to come to you
30:50
Speaker 6: next about is that.
30:51
Speaker 5: I'm sure a lot of people would you know, if
30:52
Speaker 5: given the choice, would probably say, yeah, cleaner energy, let's
30:56
Speaker 5: do it.
30:56
Speaker 6: But then what does it cost?
30:57
Speaker 5: And so are you saying then that this is like
31:00
Speaker 5: is it markedly more expensive than gas? And is that
31:02
Speaker 5: just because it's a new technology it's going to take
31:05
Speaker 5: some time or even once it's further developed, this is
31:08
Speaker 5: still a more expensive energy alternative.
31:11
Speaker 9: It will be more cast you know, it will be
31:13
Speaker 9: more costly in the short run. Why because the infrastructure
31:17
Speaker 9: to handle when solar and increased renewables, you have to
31:21
Speaker 9: build this infrastructure to do that. So that substation that's
31:25
Speaker 9: in your right around the corner from your home, it's
31:27
Speaker 9: not equipped to handle that amount of load if you
31:30
Speaker 9: were to convert directly to electricity sooner rather than later,
31:34
Speaker 9: so you have to build up that infrastructure. But I
31:36
Speaker 9: do believe technology is going to catch up and balance
31:39
Speaker 9: out the costs. And my responsibility as the CEO is
31:44
Speaker 9: to ensure that this transition is done equably. Those of
31:47
Speaker 9: us who can afford it, you know, they're not going
31:49
Speaker 9: to miss a beat. But what about those communities that
31:53
Speaker 9: are struggling to pay their bill today? When you start
31:56
Speaker 9: going down this path quicker, they're going to be the
31:59
Speaker 9: ones most impacted.
32:01
Speaker 2: How do you your company Excellent? Do you grow via acquisition?
32:06
Speaker 2: And if so, how do you think about acquisition related growth?
32:09
Speaker 9: Yes, so when you think of Excellent, Excellent was formed
32:11
Speaker 9: in two thousand with the combination of Commonwealth Edison out
32:15
Speaker 9: of Chicago and Pico out of Philadelphia. So Excellent formed
32:18
Speaker 9: via acquisition. In twenty twelve, we bought Constellation Energy, which
32:23
Speaker 9: was Baltimore Gas and Electric. In twenty sixteen we bought
32:27
Speaker 9: Pepco Holdings, which was Pepco, d C, del Marva and
32:30
Speaker 9: Atlantic City. So we're conglomeration. I think the industry will
32:34
Speaker 9: continue to move that way because scale matters when you
32:37
Speaker 9: go to costs and affordability. For us, at this point,
32:41
Speaker 9: that is not a priority because we're investing over thirty
32:44
Speaker 9: five billion dollars over the next few years. That has
32:47
Speaker 9: to be our priority right now.
32:48
Speaker 2: How do you think about it? I'm sorry, I'm just
32:50
Speaker 2: looking at the FA function, my financial analysis function, free
32:54
Speaker 2: cash flow. Is it all go to the dividend? And
32:57
Speaker 2: or do you say, yeah, you have a four percent
33:00
Speaker 2: dividend field a little bit high than a four percent
33:02
Speaker 2: dividend yield. How do you balance the dividend versus maybe
33:04
Speaker 2: using cash for acquisitions.
33:06
Speaker 9: Yeah, we have a rule of thumb that we try
33:08
Speaker 9: to target sixty percent dividend payout with earnings. So we
33:12
Speaker 9: target that and we look at issuing equity as well
33:16
Speaker 9: to our capital investment. Our equity plan is forty percent
33:20
Speaker 9: of our capital investment. That's what we rolled out on
33:23
Speaker 9: our earnings call. So we're going to issue about one
33:25
Speaker 9: point two billion dollars of equity over our LRP to
33:28
Speaker 9: fund that dually a long range plan. I'm sorry, Yes,
33:31
Speaker 9: So twenty twenty four through twenty twenty seven, we're going
33:34
Speaker 9: to invest thirty five billion, and that's about three point
33:37
Speaker 9: seven million in new capital, and we're going to fund
33:40
Speaker 9: that forty percent with new equity. So we balance that
33:43
Speaker 9: and also the earnings. You know, our debt ratio is
33:47
Speaker 9: on the lowest in the industry, our CFO to debts,
33:50
Speaker 9: So those are all the things we look to to
33:52
Speaker 9: fund opportunities.
33:54
Speaker 5: Yeah, it looks like you guys just had a bond
33:55
Speaker 5: offering earlier this week almost two billion dollars, so that helps,
34:00
Speaker 5: but that's mostly refinancing data.
34:02
Speaker 9: Looks like it was and it was the best spreads
34:05
Speaker 9: we've received in the past fifteen years. So people understand
34:08
Speaker 9: the value proposition of Excellon.
34:10
Speaker 2: Okay, real quick, thirty seconds. You're based in Chicago, right, Yes,
34:14
Speaker 2: Chicago today?
34:15
Speaker 9: How Chicago today? Chicago. It's a city that's struggling, like
34:19
Speaker 9: many urban cities. But I always tell people it's one
34:22
Speaker 9: of the greatest cities from June to October. But it is.
34:27
Speaker 9: It's a wonderful city and it's vibrant and that's that.
34:30
Speaker 9: And I tell you, you know, when we get to
34:31
Speaker 9: serve some of the best cities in the nation and
34:34
Speaker 9: we are community partner.
34:36
Speaker 2: So all right, Calvin, thank you so much for Jordan's
34:38
Speaker 2: really appreciate it. Calvin Butler, here's the CEO of Excellon.
34:41
Speaker 2: E XCA is a ticcker to put into your Bloomberg
34:43
Speaker 2: terminal there, joining us here in a Bloomberg Interactive broker studio.
34:46
Speaker 2: They recently reported some earnings. They were in the market,
34:49
Speaker 2: as Molly was saying, with a bond offering this week.
34:52
Speaker 2: So busy times for the good folks at Excellent based
34:55
Speaker 2: in Chicago, one of my all time favorite cities.
34:59
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
35:03
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
35:06
Speaker 1: Auto with the Bloomberg Business App. You can also listen
35:09
Speaker 1: live on Amazon Alexa from our flagship New York station.
35:12
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
35:17
Speaker 2: So let's get the ethera wrong, Aanathan, because she is
35:19
Speaker 2: the media analyst and there's a lot going on in
35:21
Speaker 2: the media space. Warner Brothers Discoveries is one of those
35:24
Speaker 2: companies that was put together by Warner Brothers merger with
35:27
Speaker 2: Discovery Communications. Everybody felt like, Okay, now this company's got
35:32
Speaker 2: some scale, some size, and they could make that transition
35:35
Speaker 2: into streaming. Well, their latest results came out and it's
35:38
Speaker 2: just kind of confirming not so fast it stocks down
35:41
Speaker 2: eleven percent today, down twenty five percent year to date,
35:44
Speaker 2: down forty six percent on a trailing twelve month basis
35:47
Speaker 2: really really tough out there for the traditional media companies. KEITHA.
35:50
Speaker 2: Rong Anathan joins us. She's a media anols for Bloomberg Intelligence. ETHA.
35:53
Speaker 2: What you take away or what does the market not
35:56
Speaker 2: like about what they heard from their conference call?
36:00
Speaker 10: Yeah, really really tough, Paul. I mean it's it's lower
36:03
Speaker 10: earnings and you know, earnings pressure that's kind of dominating
36:06
Speaker 10: the whole narrative for Warner Brothers Discovery. So you know,
36:10
Speaker 10: their EBITDA for twenty twenty three came in way below guidance.
36:14
Speaker 10: They had guided to somewhere between ten and a half
36:16
Speaker 10: to eleven billion dollars in EBITDA. It actually came in
36:18
Speaker 10: at ten point two billion. And I think what's worse
36:21
Speaker 10: and what kind of really spooked investors was there was
36:24
Speaker 10: absolutely no guidance whatsoever for twenty twenty four, a kind
36:28
Speaker 10: of you know suggesting, I mean, consensus had twenty twenty
36:31
Speaker 10: four estimates at about ten and a half billion. I
36:32
Speaker 10: think it's going to be way below ten billion. And
36:35
Speaker 10: if you just kind of look at the commentary for
36:37
Speaker 10: the TV networks business, remember more than fifty percent of
36:40
Speaker 10: their revenue comes from their TV networks business, you know,
36:42
Speaker 10: networks like TNTTBS. Again, advertising is really in the doll drums,
36:48
Speaker 10: So you know, nothing to really cheer about right now.
36:52
Speaker 5: How much of this GITA is really just coming out
36:55
Speaker 5: of those Hollywood strikes last year, just you know, it's
36:57
Speaker 5: going to take a little bit of time or there's
36:59
Speaker 5: really more of a longer term issue at play here.
37:03
Speaker 10: The Hollywood strikes, Molly definitely had a huge impact and
37:06
Speaker 10: they weighed that. Those strikes definitely weighed on ebitdah. So
37:09
Speaker 10: so the numbers that we kind of talked about, the
37:11
Speaker 10: ten point two billion versus eleven billion, a lot of
37:13
Speaker 10: that was from the Hollywood strikes. The flip side was
37:16
Speaker 10: the Hollywood strikes did have a positive effect on free
37:19
Speaker 10: cash flow, so you know, the free casual numbers of
37:22
Speaker 10: this company throughout were obviously huge. But again that's going
37:25
Speaker 10: to reverse once content production restarts. But I think you know,
37:29
Speaker 10: it's not just the content pipeline, right We're looking at
37:32
Speaker 10: a business model that is very, very challenged right now
37:35
Speaker 10: because of cord cutting. You know, you look at a
37:38
Speaker 10: PATV ecosystem that has lost about thirty percent of its
37:41
Speaker 10: base and that is really having some huge ramifications for
37:45
Speaker 10: this company. So, you know, we spoke about fifty percent
37:48
Speaker 10: of its revenue coming from the TV networks, ninety percent
37:50
Speaker 10: of its EBITDAH comes from that TV network's business. So
37:54
Speaker 10: we're seeing a steady ten to fifteen percent decline every
37:57
Speaker 10: year because of cord cutting, because of pressures, and that's
38:01
Speaker 10: not going to go away.
38:02
Speaker 2: All right, Keitha. We're looking waiting for the President. Biden
38:05
Speaker 2: is about to speak in Washington, DC, so we may
38:08
Speaker 2: have to cut away from that. So Keitha, say, we
38:12
Speaker 2: have President Bond walking up to the lectern, I believe,
38:15
Speaker 2: So we'll have to see how this plays up down
38:17
Speaker 2: in Washington, DC, some comments from the President, So we'll
38:20
Speaker 2: have to wait and see how that plays out. KEITHA,
38:22
Speaker 2: Real quick is a merger between Warner Brothers Discovery and
38:25
Speaker 2: Paramount something that could happen, should happen. It seems like
38:28
Speaker 2: two relatively weak companies, two relatively levered balance sheets.
38:33
Speaker 10: Yeah, Paul, I mean there is a lot of strategic rationale,
38:36
Speaker 10: you know, and Warner Brothers Discovery has been really good
38:38
Speaker 10: at extracting synergies. They got out almost four and a
38:41
Speaker 10: half five billion dollars from just that combination of Warner
38:43
Speaker 10: and Discovery, so they obviously could do that again with Paramount.
38:46
Speaker 10: The thing is, I just don't think the market has
38:48
Speaker 10: any appetite for more debt. I mean, we have Warner
38:50
Speaker 10: Brothers with forty five billion dollars in dead we have
38:53
Speaker 10: Paramount with about sixteen billion. I don't think investors will
38:56
Speaker 10: like it.
38:57
Speaker 6: And let's look at it.
38:58
Speaker 5: I mean, let the subscriber here looks like those actually
39:01
Speaker 5: came in above analyst estimates. But I mean, is that
39:05
Speaker 5: I feel like that's normally something that would drive a
39:07
Speaker 5: bit more optimism here. But Lake, you said, everything else
39:09
Speaker 5: across the board is just like really just so negative.
39:13
Speaker 10: Yeah, I mean streaming subscribers. Yes, that used to be
39:16
Speaker 10: a metric that investors used to kind of get excited about.
39:19
Speaker 10: Not any more. We're really looking more for profitability. And
39:22
Speaker 10: at the end of the day, yeah, they could add
39:24
Speaker 10: you know, a million, two million, even three million subscribers,
39:26
Speaker 10: but it's really not going to move the needle. I mean, yes,
39:29
Speaker 10: you have them at about ninety seven million subscribers for
39:31
Speaker 10: their max platform, but it's still a very far cry
39:34
Speaker 10: from Netflix, which has two hundred and sixty million from
39:36
Speaker 10: Amazon Prime, which again has maybe about two hundred million,
39:39
Speaker 10: from Disney, which has one hundred and fifty million. So
39:40
Speaker 10: they will always kind of be that tier two player.
39:44
Speaker 10: And so then it's going to come down to, Okay,
39:46
Speaker 10: what is their place going to be in this new
39:48
Speaker 10: streaming world? And we're still kind of uncertain about that.
39:52
Speaker 2: Hey, keith it Tom Keene asked me a good question
39:54
Speaker 2: this morning. He noted, reminded me that John Malone is
39:57
Speaker 2: a big, big owner of Warner Brothers Discovery, and he
40:01
Speaker 2: doesn't have a whole lot of patients. What do you
40:03
Speaker 2: think his intentions are with Warner Brothers Discovery? Is David
40:07
Speaker 2: Zaslov the CEO? Is his job in jeopardy? Do you
40:09
Speaker 2: expect John Malone to exert some pressure on this company
40:12
Speaker 2: to enhance shareholder value? How do you think that dynamic
40:15
Speaker 2: might play out?
40:17
Speaker 10: I think twenty twenty four Paul is definitely going to
40:20
Speaker 10: be a difficulty or for media all across the board.
40:22
Speaker 10: That's it. They do have certain things in place. So
40:25
Speaker 10: they do have this new Skinny sports app that they're
40:28
Speaker 10: working with both Disney and Fox that's going to come
40:31
Speaker 10: out in the fall. So you know, that's a positive.
40:34
Speaker 10: I really don't know what kind of impact it's going
40:37
Speaker 10: to have on earnings just yet, but they are definitely
40:38
Speaker 10: trying to hedge their bets. But going into twenty twenty five,
40:42
Speaker 10: I mean they're still talking about you know, streaming profitability
40:44
Speaker 10: and things like that. Again, I'm not sure whether it's
40:48
Speaker 10: enough to kind of offset the linear TV pressures. So
40:52
Speaker 10: I'm not sure what kind of pressure John Malone is
40:55
Speaker 10: going to be exerting on them. But I don't necessarily
40:57
Speaker 10: see anything major happening at least in twenty two twenty
41:00
Speaker 10: four from both an m and A perspective or from
41:02
Speaker 10: a financial perspective. Right now, it's all about you know,
41:05
Speaker 10: organic opportunities for WBT, So it's there's really no major
41:09
Speaker 10: catalyst as far as I can see.
41:11
Speaker 2: Yeah, Well, my good friend Laura Martin, she's meeting anost
41:13
Speaker 2: over and need him and company, and she's one of
41:15
Speaker 2: the top adamsts out there, a lot of experience. She's
41:18
Speaker 2: keeping her hold on this company. She says, you know,
41:20
Speaker 2: twenty twenty four is an investment year, not a free
41:22
Speaker 2: cash flow growth year, so she's waiting for revenue growth
41:26
Speaker 2: to come, which might be might be next year, So
41:28
Speaker 2: she's staying on the sidelines at least.
41:31
Speaker 5: You know, when I see an earnings report like this, Githa,
41:34
Speaker 5: when you see like something that's like free cash flow
41:37
Speaker 5: was like so overwhelmingly positive and everything else not so great,
41:41
Speaker 5: I feel like this is like case in point of
41:43
Speaker 5: like why bondholders and shareholders care about different things. So
41:47
Speaker 5: is there gonna is this maybe something where if you're
41:50
Speaker 5: a debt holder of Warner Bros. Discovery today, you're just like,
41:53
Speaker 5: praise be, They're gonna pray down, They're gonna pay down debt.
41:56
Speaker 5: This is a great deal leveraging story, or like you
41:58
Speaker 5: can't even take.
41:59
Speaker 6: That kind of an angle.
42:00
Speaker 10: Well, it is a good deal leveraging story, and they've
42:02
Speaker 10: done a great job. I mean, they paid down more
42:04
Speaker 10: than five billion dollars in debt Molley through twenty twenty three.
42:07
Speaker 10: But then you know, they had some pretty ambitious leverage targets.
42:10
Speaker 10: So we ended twenty twenty three at three three point
42:13
Speaker 10: nine x. You know, their goal was to get to
42:15
Speaker 10: a two and a half to three times leverage ratio
42:17
Speaker 10: by the end of twenty twenty four. They're obviously not
42:20
Speaker 10: going to get there. I think, you know the way
42:22
Speaker 10: that bondholders are going to look at. This is obviously
42:24
Speaker 10: the EBITDA guidance or the lack of guidance kind of
42:26
Speaker 10: speaks volumes at this point. You know, the earnings pressure
42:29
Speaker 10: is just tremendous right now for this company. I think
42:32
Speaker 10: once we get to below three times a leverage ratio,
42:35
Speaker 10: I think that's when the stock will really kind of
42:37
Speaker 10: start to work, both on the equity side as well
42:39
Speaker 10: as on the credit side.
42:41
Speaker 2: All Right, gith thanks so much for joining us. Well,
42:43
Speaker 2: we appreciate it. Eithan wrong Andothan. She covers all the
42:45
Speaker 2: media industry, all the companies there for Bloomberg Intelligence really
42:49
Speaker 2: leads our effort there, and we appreciate getting a few
42:51
Speaker 2: minutes over time, just a real time of transition in
42:54
Speaker 2: the media space here as the industry tries to transition
42:58
Speaker 2: from what was the traditional media model where you bundled
43:00
Speaker 2: everything up in a cable package and you paid your
43:02
Speaker 2: eighty year one hundred bucks a month and everybody made
43:04
Speaker 2: money all throughout the ecosystem. That was a very very
43:07
Speaker 2: good business for shareholders and for bondholders. Now let's transition
43:11
Speaker 2: to streaming. The economics are uncertain at best, and investors
43:15
Speaker 2: are just saying I'm going to wait on the sidelines
43:16
Speaker 2: before we get back.
43:17
Speaker 6: Well maybe you know, NASA shoot my own horn.
43:19
Speaker 5: But I did just get cable for the first time
43:21
Speaker 5: in my life really in my new apartment. It's part
43:24
Speaker 5: of our maintenance fees that we get a deal with RCN.
43:26
Speaker 6: So maybe I'll be helping them in why because you're
43:29
Speaker 6: a what spectrum cable just like millennial? Yeah that's the label.
43:34
Speaker 2: Yes, okay, so wow, I mean A'm millennial getting into
43:37
Speaker 2: the pad ecosyst that that is a It's a story
43:40
Speaker 2: in and of itself.
43:41
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