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Super Micro Falls on $7 Billion Offering to Fund AI · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 2: One of the stories that we've been talk about today
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  Speaker 2: is super Microcomputer. There's a company started the day with
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  Speaker 2: like twenty five billion a market cap and they announced
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  Speaker 2: a seven billion dollar equity raise.
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  Speaker 3: Kids. I don't know how you do the math, but
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  Speaker 3: that's diluted.
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  Speaker 2: I don't know by how much, but in the stocks
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  Speaker 2: down seventeen eighteen percent today.
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  Speaker 3: You just don't see that very often, would you know?
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  Speaker 2: Joins us here senior technology channels for Bloomberg Intelligence, which
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  Speaker 2: I've been doing.
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  Speaker 3: This Wall Street thing a long time.
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  Speaker 2: That's a monster follow on equity offering given the market
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  Speaker 2: cap size.
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  Speaker 3: What's the math tell you?
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  Speaker 4: The math quite frankly tells me at face value. What
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  Speaker 4: we wrote was twenty percent plus diluted to shareholders. I
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  Speaker 4: think there's another sale sider who said it's up to
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  Speaker 4: twenty seven percent.
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  Speaker 5: Deluded to shareholders.
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  Speaker 4: So yeah, investors aren't happy, about it. But but quite frankly,
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  Speaker 4: like Christina said earlier on a recap, short term pain
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  Speaker 4: mainly to long term gain.
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  Speaker 6: Okay, they're going to use the money for what? And
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  Speaker 6: when does it pay off? Two big questions?
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  Speaker 4: Yeah, yeah, hey, hey Charlie so so hey John, sorry
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  Speaker 4: about that mehe so really really straightforward. Look, seven billion
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  Speaker 4: dollars in equity financing, and you you try to back
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  Speaker 4: that with the thirty nine billion dollars in orders. Most
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  Speaker 4: of those orders are coming in fiscal twenty twenty seven,
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  Speaker 4: which is starts in July. And you know, the way
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  Speaker 4: I'm factoring it in is like thirty let's just say
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  Speaker 4: thirty billion of that comes in the second half of
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  Speaker 4: this year, specifically orders for what AAI servers? Okay, right,
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  Speaker 4: and these deals are really really expensive. So if you
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  Speaker 4: think about it from from this standpoint, a typical AI
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  Speaker 4: server deal can range anywhere between a billion to five
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  Speaker 4: billion dollar each billion dollars each. So we're talking about
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  Speaker 4: a handful of deals that they're trying to fulfill. And look,
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  Speaker 4: they only had a billion dollars in gross cash, and
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  Speaker 4: they really needed the cash to buy the GPUs to
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  Speaker 4: fill those orders.
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  Speaker 2: So I go to the FA screen for super microcomputer,
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  Speaker 2: and I'm looking at kind of their growth rates and
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  Speaker 2: profit margins. I'm surprised to see a profit margin on
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  Speaker 2: the net income line of kind of like.
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  Speaker 3: Four or five percent.
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  Speaker 2: That's not the usually seeing a lot fatter margins for
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  Speaker 2: tech companies. Talk to us about just kind of the
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  Speaker 2: business here.
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  Speaker 4: Yeah, look, Hardward margins are pretty awful, and and AI
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  Speaker 4: server margins are probably one of the worst in the industry,
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  Speaker 4: primarily because you're selling in a large scale and you
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  Speaker 4: have very little control in terms of the GPU pricing.
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  Speaker 4: I will tell you, and I'm gonna get a little
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  Speaker 4: nerdy here, is that there is part of the sales
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  Speaker 4: include something that they sell called.
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  Speaker 5: Uh uh what is it?
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  Speaker 4: Dc bb S, right, And that's a margin. That's a
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  Speaker 4: margin creative business. Now, Consensus has gross margin around eight
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  Speaker 4: point two eight point three percent for the next next year.
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  Speaker 4: If they can get a half of you know, fifty
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  Speaker 4: BIPs on gross margin improvement, we're talking about a dollar
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  Speaker 4: dollar EPs secretion if they were able to get sixty
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  Speaker 4: billion dollarsand sales instet of fifty billion dollars in sales
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  Speaker 4: for next year. So look, this is why I think
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  Speaker 4: This could be ultimately positive over the long term, even
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  Speaker 4: though shareholders are hurting right now.
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  Speaker 6: Who's their big competition, like every building?
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  Speaker 4: No, no, no, Look, we've been joking around on this
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  Speaker 4: program quite a few times. You got to get a Dell, right,
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  Speaker 4: and Michael Dell has just been killing it on the
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  Speaker 4: AI server side. Sixty billion dollars in AI servers on
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  Speaker 4: tractive for this year, and I think consensus has about
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  Speaker 4: seventy five billion dollars in next year. And that's one
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  Speaker 4: of the reasons why that super Ma. I'm kind of
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  Speaker 4: positive on the demand side for super Micro because they're
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  Speaker 4: only one of two of these providers in the US
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  Speaker 4: that can provide that level of scale for AI servers.
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  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
• 4:37
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: get your podcasts, or watch us live on YouTube.
• 4:51
  Speaker 3: Got a big IPO pricing tomorrow.
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  Speaker 2: We Do, We Do, We Do, And it's spaceships, it's Mars,
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  Speaker 2: it's AI, and it's el On.
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  Speaker 3: So it's about everything. It's got something for somebody everybody else.
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  Speaker 2: It's got a lot of promises, yes, and we need
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  Speaker 2: some clear reporting on that.
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  Speaker 3: So we turned to Caroline Hide, she is a betech
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  Speaker 3: co anchor.
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  Speaker 6: Here.
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  Speaker 3: What are we hearing about the road show, Caroline? I mean,
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  Speaker 3: there's one.
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  Speaker 8: An extraordinary road show.
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  Speaker 3: What an extraordinary I saw the.
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  Speaker 9: Jammy Diamonds hosting the bro Love that went on.
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  Speaker 7: That was very cool.
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  Speaker 3: I saw the video look pretty cool. I mean, there's
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  Speaker 3: seeming like something for everyone out there. But boy, you
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  Speaker 3: really have to just hit your wagon too, Eli.
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  Speaker 6: I goett to just say for that road show. The
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  Speaker 6: next day, I was reporting on it for the morning
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  Speaker 6: and I was trying to pull a cut of Elon. Yeah.
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  Speaker 6: I couldn't use anything. Now, I don't know what the
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  Speaker 6: hell he was talking about.
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  Speaker 9: You had to be there as a JP Morgan client
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  Speaker 9: listening inherently, and then Morgan Stanley's been doing it too. Look,
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  Speaker 9: all of this is as the hype around this IPO
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  Speaker 9: is extraordinary. It's done everything slightly differently. Like we know
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  Speaker 9: the price that they're raiming for even though they're so
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  Speaker 9: called technical pricing. Tomorrow it's gonna be one hundred and
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  Speaker 9: thirty five dollars. We understand, of course it's we be
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  Speaker 9: raising up to one point eight trillion dollars of market
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  Speaker 9: valuation and so many five billion dollars of new equity.
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  Speaker 9: But this is going to be thirty percent outlocated to
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  Speaker 9: the retail community.
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  Speaker 8: They're still going to get all tomorrow.
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  Speaker 9: What's interesting is, of course, depending who you get allocation
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  Speaker 9: through is how quickly you're allowed to flip it. Now
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  Speaker 9: a lot of these retail offerings, if you go and
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  Speaker 9: buy it through fidelity, they're going to punish you if
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  Speaker 9: you try and sell her on the day, so you're
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  Speaker 9: going to be like contained for fifteen days. But there's
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  Speaker 9: a lot of volatility that's going to go into this,
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  Speaker 9: and many think that the price is going to be
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  Speaker 9: pushed higher by the amount of passive funds they're going
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  Speaker 9: to rush in to buy SpaceX because there's been this
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  Speaker 9: fast tracking of entry into a lot of the main
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  Speaker 9: indices like then as that for example of SpaceX shares,
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  Speaker 9: and so suddenly if you're a passive fund and you
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  Speaker 9: need allocation, there's going to be the sort of fuel
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  Speaker 9: and frenzy behind it.
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  Speaker 8: But all of this is to say that demand is
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  Speaker 8: clear two hundred and.
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  Speaker 9: Fifty billion dollars worth is what's been reported by Reuters,
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  Speaker 9: and we understand from our sources that that is similar
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  Speaker 9: in terms of level of demand.
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  Speaker 7: Some big fund.
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  Speaker 9: Managers are coming in asking for up to ten billion
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  Speaker 9: dollars worth of SpaceX shares because of course they've got
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  Speaker 9: so many funds they've got to distribute it within. And
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  Speaker 9: then you're looking at which particular areas in geographically the
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  Speaker 9: Middle East, in investors who have been very long the
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  Speaker 9: Ai trade very much puning into Xai, Open Ai Andthropic. Well,
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  Speaker 9: we know the Kuwaiti Investment Fund has been asking for
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  Speaker 9: about five billion dollars worth. We know that there's been
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  Speaker 9: big demand coming from the other players as well. So
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  Speaker 9: clearly the hype cycles there. I mean, we just got
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  Speaker 9: two more days to white knuckle this.
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  Speaker 6: Yeah, like Prince aloied Bin Tallala, he was one of
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  Speaker 6: the early backers of Elon Musk. He's going to get
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  Speaker 6: a big pay day, it looks like, right, And it's.
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  Speaker 9: Going to be interesting as to whether people hold on
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  Speaker 9: to their allocation, whether it's paper money, whether they want
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  Speaker 9: to sell more broadly in the future. And look, this
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  Speaker 9: is why there was that great reporting yesterday, wasn't there
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  Speaker 9: showing the truest data that if you look back at
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  Speaker 9: the thirty biggest tech IPOs in the last fifteen years,
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  Speaker 9: generally they all a majority of them will sink in
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  Speaker 9: their first twelve months of trade. That's because lockups expire
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  Speaker 9: CEOs and people want to be able to make some profits.
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  Speaker 9: Liquidity wanted from some of the people that work at
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  Speaker 9: these companies, so there is some sort of pressure. But
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  Speaker 9: more broadly, this looks as though a lot of people
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  Speaker 9: are going to be not only holding it in their
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  Speaker 9: private funds, but maybe you wanted to even buy it
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  Speaker 9: in their public funds.
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  Speaker 8: Too, maybe want even more skin in the game.
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  Speaker 3: All right, I'm going to put on my analyst hat
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  Speaker 3: here valuation.
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  Speaker 2: Bloomberg Television had a great graphic they ran yesterday just
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  Speaker 2: looking at IPOs, big tech ipeos multiples of revenue and
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  Speaker 2: fifteen here twenty times there. Crazy stuff we never talked
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  Speaker 2: about back in the day. This one SpaceX ninety five
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  Speaker 2: times revenue.
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  Speaker 6: It's Tesla right, Yeah, well I could possibly go wrong.
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  Speaker 2: Is there any pushback we've heard from the marketplace from
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  Speaker 2: some of these meetings on vaguation?
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  Speaker 3: I haven't really seen any.
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  Speaker 9: I think it's all about whether you believe in a
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  Speaker 9: the cultivly La masque, whether you believe in the idea
• 8:54
  Speaker 9: of getting orbital data centers. They've started to at least
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  Speaker 9: show demonstrations pictures if you like, of how that might work,
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  Speaker 9: So that's been a key focus. But really, in the
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  Speaker 9: same way that Tesla does not trade on fundamentals of
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  Speaker 9: electric vehicles, nor does SpaceX. It's bigger than the sum
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  Speaker 9: of its parts when you're putting all the business together,
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  Speaker 9: because it is the idea of Mars, it is the
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  Speaker 9: idea of the Moon. It is the idea though that
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  Speaker 9: this currently is almost a monopoly.
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  Speaker 8: Look who else.
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  Speaker 9: Has been making these reusable rockets, the cadence and the
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  Speaker 9: reliability that we've seen with a Falcon nine, now with
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  Speaker 9: Starship managing to demonstrate such feats of science.
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  Speaker 8: I think for many it's just.
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  Speaker 9: Like, well, I've been burned if I if I've been
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  Speaker 9: against him in the past.
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  Speaker 6: But there has been some pushback, particularly New York and
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  Speaker 6: California pensions controllers, and the concern there by the controllers
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  Speaker 6: seems to be Elon has too much.
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  Speaker 9: Control governance, and in fact, funnily enough, Shot Carr who's
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  Speaker 9: weighed into this as well is Elizabeth Warren Is sending
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  Speaker 9: a last minute ditch attempt to the SEC Paul Atkins, saying, look,
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  Speaker 9: you've got to stop this IPO process because I'm worried
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  Speaker 9: about governance and I'm worried about that the safety of
• 10:04
  Speaker 9: retail investors as you are seeing the fast tracking of
• 10:06
  Speaker 9: shares going into these some of these big indices. Look,
• 10:09
  Speaker 9: whether you like it or not, you're probably going to
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  Speaker 9: have exposure to SpaceX because it's going to be in
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  Speaker 9: your four oh one k It's going to be in
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  Speaker 9: some of these as you say, the funds that are
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  Speaker 9: managed by the New York City, by New York State,
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  Speaker 9: they're pension funds, right, and they're saying, look, we're not
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  Speaker 9: so averse to this that we're going to rule out
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  Speaker 9: them in our in our funds, but we are going
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  Speaker 9: to keep trying to chew Elon's ear, trying to get
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  Speaker 9: letters to him, which he thus far hasn't responded to.
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  Speaker 8: Saying we're worried about this.
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  Speaker 9: We worried about your eighty percent voting rights, We're worried
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  Speaker 9: about the overall governance structure of the business.
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  Speaker 8: Like for many investors, they want a founder mindset.
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  Speaker 9: They want the ability of Elon must to be able
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  Speaker 9: to drive forward with the big decisions.
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  Speaker 8: And for many long term betters on him in the
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  Speaker 8: private markets. They kind of love that.
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  Speaker 9: In fact, that's why they think eventually SpaceX and Tesla
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  Speaker 9: should merge.
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  Speaker 7: Stay with us. More from Umoric Intelligence coming up after this.
• 11:02
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 11:06
  Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
• 11:09
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 11:13
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 11:16
  Speaker 2: We got the SpaceX IPO. That is the big news.
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  Speaker 2: But kind of like a corollary to that is what
• 11:22
  Speaker 2: is Elon musking to do with the rest of his
• 11:23
  Speaker 2: stuff that he owns and most notably Tesla and all
• 11:26
  Speaker 2: the stuff that's in Tesla.
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  Speaker 3: What does he do with that? I don't know.
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  Speaker 2: A lot of folks, I think are suspecting that at
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  Speaker 2: some point, if nothing else, he'll just kind of roll
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  Speaker 2: it up into one big company there under SpaceX.
• 11:36
  Speaker 3: Steve Man, he covers Tesla.
• 11:37
  Speaker 2: He's global Autos and Industrials analysts for Bloomberg Intelligence. Hey, Steve,
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  Speaker 2: when you talk to Tesla investors. Is there an expectation
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  Speaker 2: that at some point Elon, Musk and SpaceX will buy
• 11:49
  Speaker 2: in Tesla.
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  Speaker 10: It really depends on the timeline you're talking about. I mean,
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  Speaker 10: you can speculate there's a lot of synergies probably many
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  Speaker 10: years away from now that for example, uh, you know,
• 12:05
  Speaker 10: the Tesla vehicles could be could be riding on or
• 12:09
  Speaker 10: driving on uh you know the surface of the Mars,
• 12:12
  Speaker 10: or the boring company is you know, drilling tunnels in
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  Speaker 10: Mars for colonization. But you know, that's that's very very
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  Speaker 10: far away. You know, we published a piece of research today,
• 12:24
  Speaker 10: you know, and we looked at it and really the
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  Speaker 10: only thing that you know, Tesla is really contributing in
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  Speaker 10: a consistent, consistent, meaningful way is actually the battery source
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  Speaker 10: storage business. And even that, it's it's a small chunk
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  Speaker 10: of you know, Tesla's profits. So we don't really see uh,
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  Speaker 10: you know, imminent or near term synergies for a merger.
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  Speaker 6: Okay, So if there were to be a merger, roll
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  Speaker 6: up or whatever you want to call it, is that
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  Speaker 6: an admission that one company is not really performing that
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  Speaker 6: it would need the other to help prop it up.
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  Speaker 10: I wouldn't necessarily say that. I think Elon really has
• 13:05
  Speaker 10: a long term view on what he wants to do,
• 13:08
  Speaker 10: so specifically in space exploration, and that's where you know,
• 13:13
  Speaker 10: Tesla could really contribute. Like I was saying earlier, you know,
• 13:17
  Speaker 10: you can have you know, cars, automated cars driving on
• 13:22
  Speaker 10: you know, another planet, or you can have uh, you know,
• 13:26
  Speaker 10: uh compute or satellites and communications through their uh you
• 13:32
  Speaker 10: know satellite system that communicates between you know, inner innercontent,
• 13:37
  Speaker 10: interplanetary communication. I mean, you can see all the possibilities
• 13:43
  Speaker 10: in both energy and and vehicle, but you know, I
• 13:46
  Speaker 10: think you know a lot of those a lot of things,
• 13:49
  Speaker 10: those things need to be proven out first, and I
• 13:51
  Speaker 10: think that's what they're trying to do, uh in in
• 13:55
  Speaker 10: on Earth first. And secondly, Tesla really the focus is
• 13:59
  Speaker 10: really on autonomy, the robotaxi, and I don't think you know,
• 14:04
  Speaker 10: combining the two company is a good time at the moment,
• 14:08
  Speaker 10: it's it serves as a distraction.
• 14:09
  Speaker 5: Really.
• 14:10
  Speaker 2: Bloomberg News has got some reporting out on the autonomous vehicle.
• 14:14
  Speaker 2: Tesla has just not fifty nine vehicles in its robotaxi
• 14:17
  Speaker 2: fleet as of Tuesday, limited to three Texas cities. After
• 14:21
  Speaker 2: Elon Musky Company would have an autonomous right haling in
• 14:24
  Speaker 2: about half the population of the US at the end
• 14:27
  Speaker 2: of twenty twenty five. Talk to us about that part
• 14:28
  Speaker 2: of the business and where we are and maybe where
• 14:30
  Speaker 2: the company's falling short.
• 14:32
  Speaker 10: Yeah, I think, I think, I think for most some investors,
• 14:37
  Speaker 10: it is falling behind. They were hoping the rollot's a
• 14:40
  Speaker 10: little bit faster, but they you know, the company did
• 14:43
  Speaker 10: tell us in the first quarter earnings that you know,
• 14:46
  Speaker 10: a bulk of this rollout is in.
• 14:47
  Speaker 5: The second half.
• 14:49
  Speaker 10: I wouldn't be surprised that, you know, they're you know,
• 14:52
  Speaker 10: they're waiting for that. You know, the steering wheel lists
• 14:55
  Speaker 10: the break pedalists cybercap to be ready before they you know, uh,
• 15:02
  Speaker 10: you know ramp up that you know, up ramp up
• 15:05
  Speaker 10: that service in more cities around around the country.
• 15:09
  Speaker 5: So you know, let's let's wait and see.
• 15:12
  Speaker 10: Uh maybe the cyber cap you know, build out and
• 15:16
  Speaker 10: and uh and and roll out.
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  Speaker 5: Will be will be at the turning point.
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  Speaker 6: All right, did elon over I'm trying to get you
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  Speaker 6: in trouble here, did the over promise?
• 15:26
  Speaker 5: Well, you know how he is right. I think he
• 15:29
  Speaker 5: has grand plans.
• 15:31
  Speaker 10: He has grand plans It's not a bad thing, you know,
• 15:33
  Speaker 10: stretch targets, you want to call it that, but you know,
• 15:37
  Speaker 10: like the reality is, you know, these technologies do need time, uh,
• 15:42
  Speaker 10: to to to to play out and to do you know,
• 15:46
  Speaker 10: to be invented, to be discovered, to be developed, and
• 15:50
  Speaker 10: to make it commercially viable.
• 15:52
  Speaker 5: So you know, these things do take time.
• 15:54
  Speaker 2: Steve, one of the concerns from Tesla investors when Elon
• 15:57
  Speaker 2: Musk was in the US government running the Doge campaign
• 16:02
  Speaker 2: was that he wasn't paying enough attention to Tesla. Is
• 16:05
  Speaker 2: there a concern now with SpaceX that once again his
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  Speaker 2: attention will be diverted away from Tesla.
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  Speaker 5: It's it's it's very interesting.
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  Speaker 10: You know, he was very visible within the government early
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  Speaker 10: in the year, uh, kind of quiet down, but now
• 16:20
  Speaker 10: we're seeing him, you know, on Air Force one from
• 16:24
  Speaker 10: time to time. I'm sure he's he's got one foot
• 16:29
  Speaker 10: in and and then he needs to write a lot
• 16:32
  Speaker 10: of these businesses require regulatory approvals, and you know, I
• 16:36
  Speaker 10: wouldn't be surprised that you know, he's working on on
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  Speaker 10: all those fronts to you know, make sure his business
• 16:44
  Speaker 10: you know, runs well and and and gains you know,
• 16:48
  Speaker 10: gains business new.
• 16:49
  Speaker 6: Businesses is is Tesla becoming more of this one thing
• 16:53
  Speaker 6: that does excite me, Paul, more of a battery company
• 16:56
  Speaker 6: where I can you know, load up on batteries at
• 16:59
  Speaker 6: my house and draw from the grid at night when
• 17:02
  Speaker 6: electricity prices are much lower, you know that sort of thing.
• 17:05
  Speaker 10: Yeah, that's a that's a great question, because, uh, battery
• 17:11
  Speaker 10: business is becoming, uh you know, a bigger part of
• 17:16
  Speaker 10: the Tesla. You know, it's thirteen percent revenue, but if
• 17:19
  Speaker 10: you look at the you know, the gross profit line,
• 17:21
  Speaker 10: you're you're looking at a quarter to a third of contribution,
• 17:26
  Speaker 10: and battery sales are becoming more important, especially during.
• 17:30
  Speaker 5: This in this AI you know build out phase.
• 17:34
  Speaker 10: A lot of these data center actually requires you know,
• 17:38
  Speaker 10: their own power systems to to to to run the chips,
• 17:43
  Speaker 10: and part of that is really having battery backup to
• 17:46
  Speaker 10: make sure these AI data.
• 17:48
  Speaker 5: Center is running twenty four to seven.
• 17:50
  Speaker 10: So you know, you saw a Ford Motor Company getting
• 17:53
  Speaker 10: into that business, you know, and and Ford's been doing
• 17:56
  Speaker 10: the Yeah.
• 17:56
  Speaker 6: I think GM is doing the same thing too.
• 17:59
  Speaker 2: Yeah.
• 17:59
  Speaker 10: GM is is also doing the same thing, you know,
• 18:01
  Speaker 10: repurpose those battery plans that we use for evs into
• 18:05
  Speaker 10: battery storage. I think there's a demand for that.
• 18:08
  Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:16
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• 18:19
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• 18:22
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• 18:26
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• 18:30
  Speaker 2: All right, let's go to some some earnings here at Chewy.
• 18:33
  Speaker 2: For those dog lovers out there and pet owners out there,
• 18:36
  Speaker 2: Shares drop as much as six and a half percent
• 18:38
  Speaker 2: after management gave additional guidance metrics on the conference call,
• 18:41
  Speaker 2: including cautious comments on customer editions.
• 18:46
  Speaker 3: It's all about the poochat there.
• 18:47
  Speaker 2: Diana reset Opina, consumer Staples analysts for Bloomberg Intelligence strengths
• 18:51
  Speaker 2: here house business at Chewy because we got a lot
• 18:54
  Speaker 2: of viewers and listeners that are big fans and consumers
• 18:57
  Speaker 2: of Chewy.
• 18:58
  Speaker 3: Yeah.
• 18:58
  Speaker 11: Well, I mean they were cautious even though results were
• 19:03
  Speaker 11: were good. Uh, they lower revenue guidance and that was
• 19:07
  Speaker 11: pretty much because they don't necessarily expect a lot of
• 19:11
  Speaker 11: discretionary spending going forward. They're you know, they're seeing that
• 19:16
  Speaker 11: consumers are being strategic. It's something that we have seen
• 19:19
  Speaker 11: across across our consumer staples worlds, so we're not that surprised.
• 19:24
  Speaker 6: But still I don't know if given a choice between
• 19:27
  Speaker 6: cutting back the pets and cutting back on the kids,
• 19:32
  Speaker 6: I got to.
• 19:33
  Speaker 7: Be honest, sorry, I agree.
• 19:35
  Speaker 11: I think it's more onlike the discretionary spending of it.
• 19:39
  Speaker 6: They may not food, but like the big fluffy whatever.
• 19:43
  Speaker 11: Screech, yeah, toys and the like. Obviously there's some stabilization
• 19:47
  Speaker 11: on the pet population, so that is also a headwind
• 19:51
  Speaker 11: to discretionary so you're not going to likelation. There's there's
• 19:55
  Speaker 11: a fewer well, it's it's been, it's stabilized. In the
• 20:00
  Speaker 11: past couple of years. There's been some surrendering more than
• 20:03
  Speaker 11: adoptions because people that adopted pets during the pandemic they
• 20:08
  Speaker 11: had to get rid of them, so that obviously diminished
• 20:13
  Speaker 11: the population in the United States. So now it seems
• 20:17
  Speaker 11: to stabilize, which is not necessarily a good omen for
• 20:21
  Speaker 11: discretionary spending in terms of creates and new like leashes
• 20:26
  Speaker 11: and stuff like that.
• 20:28
  Speaker 3: Is Chewy a global company or the US only US only.
• 20:32
  Speaker 11: They're having some operations in Canada and the like. They're
• 20:35
  Speaker 11: exploring that, but it's mostly US.
• 20:37
  Speaker 2: So you're modeling out this company in the revenue, do
• 20:42
  Speaker 2: you do it by dog like is it dog population
• 20:44
  Speaker 2: increasing or is it just a function of like GDP
• 20:47
  Speaker 2: kind of growthro I mean, because it seems like we
• 20:49
  Speaker 2: did as you mentioned, people are probably peaked in their
• 20:52
  Speaker 2: dog adoption and so on during the pandemic and then
• 20:53
  Speaker 2: it's been winding down since.
• 20:55
  Speaker 7: Yeah. So there's two metrics that are important for Chewing.
• 20:59
  Speaker 11: It's the active consumer growth, so people going into the
• 21:03
  Speaker 11: platform and being acquired in the platform, like you know,
• 21:08
  Speaker 11: in you know, becoming.
• 21:10
  Speaker 3: Customers of Chewy.
• 21:11
  Speaker 7: And also how much they're spending, and.
• 21:14
  Speaker 11: Right now they're getting closer to usually the typical consumer
• 21:18
  Speaker 11: is spending about.
• 21:19
  Speaker 7: Six hundred dollars a year on Chewy.
• 21:23
  Speaker 11: That has increased and that is the biggest metric that
• 21:25
  Speaker 11: they say that they're probably going to see softness in
• 21:28
  Speaker 11: twenty twenty six.
• 21:29
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• 21:38
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• 21:46
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• 21:49
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