Latest / What the Flux / Flight Centre's jet-lagged profit | Harley-Davidson fails to rev its engine | Meta's AI surprises everyone

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Flight Centre's jet-lagged profit | Harley-Davidson fails to rev its engine | Meta's AI surprises everyone · What the Flux

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  Speaker 1: This is what the Flux I'm brand and I'm justin
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  Speaker 1: and it's Friday, the first of August.
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  Speaker 2: Jusey Boy.
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  Speaker 3: Timing is everything, and at Lassian's co founders clearly forgot
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  Speaker 3: to sink their calendars this week. On Wednesday, at Lassian
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  Speaker 3: CEO Mike Kennon Brooks announced plans to cut one hundred
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  Speaker 3: and fifty employees from the business. Next Minute is co
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  Speaker 3: founder hyped up publicly about the limitless potential of AI.
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  Speaker 3: Not exactly the PEP talk the remaining twelve thousand employees
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  Speaker 3: we're hoping for, not at all.
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  Speaker 1: Flux sam New month means brand new academy in the
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  Speaker 1: Flex app, and this time we are talking one of
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  Speaker 1: my favorites. Everything that you need to know about business reporting,
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  Speaker 1: everything from profit and losses, term margins, gross profit and
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  Speaker 1: cogs and every single thing that you need to interpret
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  Speaker 1: a financial report. It's the secret Flex Academy to help
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  Speaker 1: you become the smartest investor in the rooms. If you
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  Speaker 1: want to check it out, make sure to download the
• 0:52
  Speaker 1: Flux app.
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  Speaker 2: Three informative stories today.
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  Speaker 3: Juzzi Boy, let's do it for our first Flight Center
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  Speaker 3: has downgraded its profit guidance for the third time because
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  Speaker 3: of a slowdown in global travel.
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  Speaker 1: Is this just Flight Center's excuse the global travel slow down?
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  Speaker 1: Or is this legit? Be man tell me more.
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  Speaker 3: Okay, So Flight Center is one of Australia's biggest travel agencies.
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  Speaker 3: It was actually founded in nineteen eighty two and be man.
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  Speaker 1: Well, Flight Center used to use the lowest air fairs guaranteed.
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  Speaker 1: Has this slogan that shifted when the AH Triple C
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  Speaker 1: wasn't quite sure it lived up to its promises.
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  Speaker 3: So now it goes for the safer vega slogan of
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  Speaker 3: your center for travel?
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  Speaker 1: Does it?
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  Speaker 3: What? In November last year, Flight Center predicted an underlying
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  Speaker 3: profit before tax up to four hundred and five million bucks,
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  Speaker 3: and that was for FI twenty five.
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  Speaker 1: Then in April this year they cut that forecast to
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  Speaker 1: a maximum of three hundred and thirty five million dollars
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  Speaker 1: in profit before tax.
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  Speaker 3: But now they've worn that the net profit is expected
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  Speaker 3: to be between two hundred and eighty five and two
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  Speaker 3: hundred and ninety five million bucks, which, if I put.
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  Speaker 1: Up my calculator, is more than twenty seven percent less
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  Speaker 1: than their original profit forecast.
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  Speaker 2: So what do you reckon went wrong?
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  Speaker 1: Well, apparently Ozzie is sticking closer to home. That means
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  Speaker 1: traveling to Fiji, Japan, and New Zealand instead of Europe
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  Speaker 1: and the US.
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  Speaker 2: Not what my Instagram feed tells me or be managed.
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  Speaker 1: Flight Center says that some people are holding off on
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  Speaker 1: bookings all together. Next minute, flight Center shares dropped over
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  Speaker 1: eight percent.
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  Speaker 3: The good news for the flight center crew is that
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  Speaker 3: leisure bookings have actually increased over the year, but the.
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  Speaker 1: Bad news is that this increase was mainly driven by
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  Speaker 1: lower margin products.
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  Speaker 2: Okay, so what is the key learning here?
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  Speaker 1: Margin refers to how much profit you make from every
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  Speaker 1: dollar of sales.
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  Speaker 3: A high margin brand makes more profit per sale, and
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  Speaker 3: a low margin one, like budget travel, they bring in
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  Speaker 3: less per sale. So even if total bookings go up,
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  Speaker 3: profits can fall if the mix shifts towards lower margin
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  Speaker 3: products or services and the man.
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  Speaker 1: That's exactly what's happened with flight Center and a Man.
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  Speaker 1: If that wasn't bad enough, trips to places like the US,
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  Speaker 1: which often has juicier margins, were cut by Aussie travelers.
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  Speaker 3: In fact, the US was the only travel market that
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  Speaker 3: saw international visitor spending decline.
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  Speaker 1: Out of one hundred and eighty four markets.
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  Speaker 3: So Chazy Boy Flight Center needs to find a way
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  Speaker 3: to bring back its high margin travel customers or.
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  Speaker 1: Risk continually downgrading its profit guidance.
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  Speaker 3: For our second story, Harley Davidson has just a key
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  Speaker 3: part of the engine that keeps its business humming after
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  Speaker 3: its sales keep falling year after year after year.
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  Speaker 1: Stuff, you're a black leather jacket b man, you little
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  Speaker 1: repell me more, all right?
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  Speaker 3: So, Harley Davidson is the motorcycle company that's been deafening
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  Speaker 3: neighborhoods since nineteen oh three. But Josey Boy, over the
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  Speaker 3: past few years, Harley Davidson has struggled with declining revenue.
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  Speaker 3: In fact, this quarter, Harley Davidson reported a thirty five
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  Speaker 3: and a half percent year on year revenue decline.
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  Speaker 1: And the man, things got so bad that Harley Davidson
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  Speaker 1: withdrew its twenty twenty five guidance. So they mean, despite
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  Speaker 1: all of this, Harley Davidson share price rose sixteen percent.
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  Speaker 2: How does that work?
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  Speaker 1: Well, it turns out that Harley's secret weapon hasn't been
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  Speaker 1: the bikes. It's been the loans associated with the bikes.
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  Speaker 3: You'd be talking Harley Davidson Financial Services HDFS, which is
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  Speaker 3: their in house lender.
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  Speaker 1: Yeah, this is the company that offers loans to Harley
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  Speaker 1: Davidson customers who can't afford to purchase the motorcycles outright.
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  Speaker 3: But now Harley Davidson announced plans to sell off five
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  Speaker 3: billion million dollars worth of loans to financial firms KKR
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  Speaker 3: and PIMCO.
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  Speaker 1: Nothing like a captive finance arm of a business. Yes,
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  Speaker 1: so what's the key learning here? Captive finance arms allow
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  Speaker 1: parent company to offer loans directly to customers that enables
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  Speaker 1: them to purchase their product.
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  Speaker 2: Yeah, it's interesting, Jazzi boy.
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  Speaker 3: These loans help providers control the entire customer experience from
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  Speaker 3: sale to financing to loyalty program.
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  Speaker 1: And they We see this type of captive finance in
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  Speaker 1: car or manufacturing industries very often.
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  Speaker 3: Yes, we do, think Toyota Financial Services or Forward Motor
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  Speaker 3: Credit Company.
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  Speaker 1: And these arms can be very, very lucrative, sometimes even
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  Speaker 1: more lucrative than the product business itself.
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  Speaker 3: In fact, loan business accounts for roughly twenty percent of
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  Speaker 3: Harley Davidson's revenue, and.
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  Speaker 1: It's believed that Harley Davidson will earn close to one
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  Speaker 1: point twenty five billion US dollars for the sale of
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  Speaker 1: its existing loan book.
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  Speaker 3: But for Harley d, selling off a stake in its
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  Speaker 3: captive finance business is a way to raise cash without
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  Speaker 3: needing to sell its core assets.
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  Speaker 1: For our third and final story, Meta share prices jump
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  Speaker 1: nine percent after its quarterly earnings smashed past investment expectations.
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  Speaker 1: The spenderthon is continuing.
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  Speaker 3: Not only zuck bulking right now, but metas profits are too.
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  Speaker 2: Tell me more.
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  Speaker 1: Do you know Meta, the company behind Facebook which started
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  Speaker 1: in the Harvard dorm back in two thousand and four.
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  Speaker 2: Since then it acquired Instagram and WhatsApp.
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  Speaker 1: And be man. We know that the part man, part cyborg,
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  Speaker 1: Mark Zuckerberger loves to chase the next big thing.
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  Speaker 2: For a hot minute, it was creating a digital currency
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  Speaker 2: called Libra.
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  Speaker 1: And there was the hot a minute when it was
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  Speaker 1: creating the metaverse.
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  Speaker 3: And now the hottest minute with Meta focusing on competing
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  Speaker 3: against Open Ai, Google and Anthropic for AI dominance.
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  Speaker 1: But now Mark cyborg Berg has the revenue of forty
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  Speaker 1: seven and a half billion US dollars for Meta's last
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  Speaker 1: quarter up.
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  Speaker 3: To twenty two percent. Year on you next minute, share
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  Speaker 3: price up more than nine percent, and.
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  Speaker 1: The man Meta says that AI is becoming a real
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  Speaker 1: revenue driver for the business. While investors clearly like the vision,
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  Speaker 1: they also like the projected dollars coming through. But Jose
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  Speaker 1: boit growth in revenue means next to nothing if it's
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  Speaker 1: not coupled with a growth in earnings as well. So
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  Speaker 1: what is the key learning here?
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  Speaker 3: Well, revenue tells you how much company made. Earnings tell
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  Speaker 3: you whether they actually kept any of it.
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  Speaker 1: For example, Meta earned forty seven and a half billion
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  Speaker 1: dollars in revenue this quarter.
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  Speaker 3: Earnings, also known as profit or net income, is what's
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  Speaker 3: left after the bills are paid.
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  Speaker 1: I think staff wages, AD spend, R and D and yes,
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  Speaker 1: those billion dollar data centers as well.
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  Speaker 2: And does a boy for investors. Both metrics matter a lot.
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  Speaker 1: But be man, In this quarter, Meta didn't just go
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  Speaker 1: a revenue It also grew its earnings per share by
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  Speaker 1: thirty eight.
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  Speaker 2: Percent, and that was well above expectations.
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  Speaker 1: So yes, Meta's AI dreams are expensive, but this quarter
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  Speaker 1: at least, it looks like they're starting to pay off.
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  Speaker 3: And for shareholders who were worried that AI was becoming
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  Speaker 3: a money pit, it's a reassuring sign because it means the.
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  Speaker 1: AI arms race might actually deliver financial returns Bluck Sam.
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  Speaker 1: This month's Academy, we're covering all the terms that you
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  Speaker 1: need to know while working in a business, profits to
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  Speaker 1: margins to assets and not only will this help you
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  Speaker 1: in your job, but also when you're looking to invest
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  Speaker 1: in a company. So if you want to learn more,
• 6:50
  Speaker 1: make sure to download the Flex app and check it out.
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  Speaker 2: Thanks for listening, and we'll see you on Monday.