Latest / Bloomberg Intelligence / Wingstop Expanding Globally, Aims To Be A Top Ten Brand: CEO

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Wingstop Expanding Globally, Aims To Be A Top Ten Brand: CEO · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg P M L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Well,
• 0:32
  Speaker 1: if you wanted like to know how many chicken wings
• 0:35
  Speaker 1: are going to be consumed during the Super Bowl weekend,
• 0:37
  Speaker 1: look no further than the National Chicken Council's annual report.
• 0:41
  Speaker 1: Americans are set to eat one point three three billion
• 0:46
  Speaker 1: chicken wings and is actually up to from these numbers,
• 0:51
  Speaker 1: of course, for twenties seventeen. One point three billion chicken
• 0:55
  Speaker 1: wings is a lot of chicken. In Here to tell
• 0:57
  Speaker 1: us how it all happens is Charlie Morrison is the
• 1:00
  Speaker 1: chairman and the chief executive of wing Stop and also
• 1:03
  Speaker 1: joining us here in studio Stacy Peterson, the chief experience
• 1:06
  Speaker 1: officer for Wingstop, and they are in our New York
• 1:09
  Speaker 1: studios coming from Dallas. All right, Charlie, one point three
• 1:14
  Speaker 1: billion chicken wings that it's a little hard to comprehend, right, Now,
• 1:19
  Speaker 1: how did you get into this? You, I know have
• 1:22
  Speaker 1: done stints at Boston Market. Pizza was also in your past.
• 1:26
  Speaker 1: How did you combine all of this to bring it
• 1:29
  Speaker 1: to Wingstop? Well, I was honored with the opportunity to
• 1:34
  Speaker 1: lead this brand about six years ago when I started
• 1:37
  Speaker 1: with wing Stop, and it's a brand that's been around
• 1:39
  Speaker 1: since the mid nineties, was founded in the Dallas Fort
• 1:42
  Speaker 1: Worth area where we're headquartered, and we realized what a
• 1:46
  Speaker 1: great opportunity we had in front of us. We are
• 1:48
  Speaker 1: all about this. Capital came in this. This is right
• 1:51
  Speaker 1: when Capital came in and then you joined the because
• 1:55
  Speaker 1: they thought you would be good to do this. Yes,
• 1:57
  Speaker 1: well that's that they thought, and so far, so good.
• 2:00
  Speaker 1: Uh yeah. We so wings as a center of the
• 2:02
  Speaker 1: plate item where something was something that was really not
• 2:05
  Speaker 1: thought of many years ago. But now you look at
• 2:09
  Speaker 1: the success of this brand and the fact that people
• 2:10
  Speaker 1: are passionate about wings. It is great for the Super Bowl,
• 2:14
  Speaker 1: will sell probably fourteen to fifteen million wings just on
• 2:17
  Speaker 1: that day alone. But really it's an occasion item for
• 2:20
  Speaker 1: anybody for any eating occasion. What okay, you gave me
• 2:24
  Speaker 1: the number of of wings. Can you put that into
• 2:27
  Speaker 1: some context in terms of compared to a normal weekend
• 2:31
  Speaker 1: or other holidays, that may make that more popular. Sure,
• 2:34
  Speaker 1: in some cases we'll do as much business on that
• 2:37
  Speaker 1: day as we might do in an entire week on
• 2:40
  Speaker 1: average for the chain. So it is our biggest day
• 2:42
  Speaker 1: of the year, one of the very big days, uh
• 2:44
  Speaker 1: for Wingstop. Wings are the number one consumed item for
• 2:47
  Speaker 1: the Super Bowl, and UH we're one of the largest
• 2:51
  Speaker 1: chains out there that's providing access to those for our
• 2:53
  Speaker 1: for our fans. Stacy Peterson, come in for just a
• 2:57
  Speaker 1: second and tell us about the uh the new ways
• 3:00
  Speaker 1: in which people can consume their food. One of them
• 3:03
  Speaker 1: is using the Alexa voice ordering system. Tell us about
• 3:08
  Speaker 1: that venture and how you put that together. That's right.
• 3:12
  Speaker 1: Digital ordering has been a focus for us, and last
• 3:14
  Speaker 1: year we really tried to extend the convenience to our guests.
• 3:17
  Speaker 1: So instead of requiring them to download our app, which
• 3:20
  Speaker 1: they can do, we decided to bring ordering to them.
• 3:23
  Speaker 1: So if they're on Facebook, Messenger, Twitter, Messenger, Alexa, even
• 3:27
  Speaker 1: now GM, on Star Marketplace, they can order ring wings
• 3:31
  Speaker 1: directly from the apps or platforms that they choose to
• 3:33
  Speaker 1: be on. Okay, but I'm just curious, was there a
• 3:37
  Speaker 1: just a little insight into the negotiation, because you know,
• 3:39
  Speaker 1: people may be listening and thinking, gee, you know, I
• 3:41
  Speaker 1: have a product I'd like to figure out how to
• 3:44
  Speaker 1: get included in the Alexa artificial intelligence world. What were
• 3:49
  Speaker 1: those conversations like, what were some of the concerns and
• 3:52
  Speaker 1: what were some of the challenges. Well, for us, integration
• 3:56
  Speaker 1: as a challenge. We want our franchise operators when an
• 3:58
  Speaker 1: order comes through any digital channel to look the same,
• 4:01
  Speaker 1: feel the same. We don't want them to care where
• 4:03
  Speaker 1: it came from. And so integrating that into our point
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  Speaker 1: of sale where at the restaurant they have a consistent process,
• 4:10
  Speaker 1: was really key to us unleashing all of these platforms.
• 4:14
  Speaker 1: And is the data that is put together and and
• 4:17
  Speaker 1: stored about the customer? I mean, is that data the
• 4:20
  Speaker 1: thing can be used for ordering U you know, ordering
• 4:24
  Speaker 1: and as well as supply chain operation. That's right, there's
• 4:26
  Speaker 1: a lot that we can learn from our customers um
• 4:30
  Speaker 1: and understand more of their behavior so that we can
• 4:32
  Speaker 1: be more relevant to them. All right, Charlie, the menu
• 4:36
  Speaker 1: at the wing stop. I understand that many analysts say
• 4:39
  Speaker 1: the fact that it's simple is positive for the company.
• 4:42
  Speaker 1: Can you speak to that. I think that's a testament
• 4:45
  Speaker 1: to any great restaurant concept is to keep it simple,
• 4:48
  Speaker 1: especially in today's focused environment where you have menus that
• 4:50
  Speaker 1: are focused on certain products. That's what we love about Wingstop.
• 4:54
  Speaker 1: We have chicken wings, fries, and sides that makes up
• 4:59
  Speaker 1: what we sell. Since our founding in we started with
• 5:03
  Speaker 1: eight flavors and added three over the years. We we
• 5:05
  Speaker 1: really innovate, as Stacy talked about, through technology more so
• 5:09
  Speaker 1: than we do through flavors and products, and we think
• 5:12
  Speaker 1: that's the way restaurants are gonna be well positioned into
• 5:14
  Speaker 1: the future. You've also got an initiative outside the United
• 5:17
  Speaker 1: States franchising there. Tell us about that. Yeah, we operate
• 5:20
  Speaker 1: in nine countries around the world today with signed agreements
• 5:23
  Speaker 1: for thirteen total countries, a little over one hundred restaurants
• 5:27
  Speaker 1: and growing very rapidly. We believe that this will position
• 5:30
  Speaker 1: this brand to be a top ten global brand ultimately
• 5:34
  Speaker 1: one day in the future. Because chicken and chicken wings
• 5:37
  Speaker 1: are the most consumed protein all around the world. What
• 5:40
  Speaker 1: about the cost of the prices, They're pretty comparable now,
• 5:43
  Speaker 1: they're pretty comparable. Last year was a tough year in
• 5:45
  Speaker 1: the US for chicken wings, the commodity spiked, but outside
• 5:48
  Speaker 1: the US very similar economics to what we see here.
• 5:52
  Speaker 1: Are we going to get kiosks in more and more
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  Speaker 1: Wingstop restaurant location? Stacy, Quite possible. We would love to
• 6:01
  Speaker 1: um expedite and automate the pickup experience, so along with Chios,
• 6:04
  Speaker 1: we could envision a day where you order digitally, You
• 6:07
  Speaker 1: get a message sent to you that your order is ready,
• 6:09
  Speaker 1: and you pick it up from a locker, get a
• 6:11
  Speaker 1: code you scan in, you lock our opens, you take
• 6:14
  Speaker 1: your food and go. So we'd like to continue that
• 6:16
  Speaker 1: digital experience inside the restaurant. Thanks very much for being
• 6:19
  Speaker 1: with us. Stacy Peterson is a chief experience officer and
• 6:22
  Speaker 1: Charlie Morrison is the chairman and the chief executive of
• 6:25
  Speaker 1: Wingstop Oil. Oil prices down by about a half a
• 6:42
  Speaker 1: percent right now on the NI Max w t I
• 6:44
  Speaker 1: trades at sixty four dollars and thirteen cents of barrel.
• 6:47
  Speaker 1: You're to tell us more about the world of energy.
• 6:50
  Speaker 1: Is Javier Blass, our chief energy correspondent for Bloomberg Intelligence,
• 6:53
  Speaker 1: and he joins us from London, and you can follow
• 6:56
  Speaker 1: Javier on Twitter at Javier Blass two. All right, Javier
• 7:01
  Speaker 1: Blast too. Before we get to oil, I just want
• 7:03
  Speaker 1: you to maybe speak a little bit about a photo that,
• 7:06
  Speaker 1: courtesy of your handiwork, I was able to see on
• 7:10
  Speaker 1: Twitter having to do with Davos and the crowd that
• 7:15
  Speaker 1: was looking to get into the main hall where President
• 7:18
  Speaker 1: Donald Trump eventually gave his speech. Can you just tell
• 7:22
  Speaker 1: me a little bit about that. I was hoping that
• 7:24
  Speaker 1: you have forgotten about it, not at all. I thought
• 7:27
  Speaker 1: that was really something because the crush of people to
• 7:31
  Speaker 1: get in, as you described it, I think is sort
• 7:33
  Speaker 1: of like a rock concert. Yeah, it was about an
• 7:37
  Speaker 1: hour before President Trump was delivering in this speech that
• 7:39
  Speaker 1: the word gonna before in double Switzerland. And I have
• 7:44
  Speaker 1: been in many doubles meetings, and I have never seen
• 7:46
  Speaker 1: that lobby area in front of the Congress Hall where
• 7:49
  Speaker 1: all the biggest speeches happened. Uh so pack an hour
• 7:53
  Speaker 1: before I speech, and I have seen people like Macron Mercal,
• 7:58
  Speaker 1: you know, you don't see that. And and it kind
• 8:00
  Speaker 1: of felt almost like a few year backs, as would
• 8:04
  Speaker 1: say a couple of decades back, being a teenager and
• 8:07
  Speaker 1: going to a rock concert, and you know, all the
• 8:09
  Speaker 1: teenagers just being uh together, crashing into the doors. And
• 8:14
  Speaker 1: so I tweeted that, you know, it was quite extraordinary
• 8:17
  Speaker 1: and I felt like um teenagers going into a concert.
• 8:20
  Speaker 1: But the main difference is were CEOs and billionaires sort
• 8:22
  Speaker 1: of the most powerful men and woman on the planet
• 8:25
  Speaker 1: in the in the world of business. I'm fine, and
• 8:27
  Speaker 1: so that was quite something. And to my surprise, I
• 8:30
  Speaker 1: was actually sleeping overnight the President trauma. I supposed it
• 8:34
  Speaker 1: was on Air Force one. So the tweets somehow and retweeted,
• 8:39
  Speaker 1: and then I wake up with about twenty five notifications
• 8:42
  Speaker 1: on my Twitter timeline. To my shock, Well, all right,
• 8:46
  Speaker 1: so that that you become a sort of a Twitter
• 8:49
  Speaker 1: poster a child. You know, every utterance is going to
• 8:53
  Speaker 1: be picked over. So be careful here when we talk
• 8:56
  Speaker 1: about energy. And maybe we can kind of link this
• 8:58
  Speaker 1: to a President Arnold Trump, because one of his h signature,
• 9:03
  Speaker 1: uh sort of perspectives is to allow more drilling in
• 9:08
  Speaker 1: the Arctic National Wildlife Refuge, to push more drilling off
• 9:14
  Speaker 1: the coast of the United States, both the East and
• 9:17
  Speaker 1: the West coast. And also he's been a big cheerleader
• 9:21
  Speaker 1: for domestic oil production. What is the change in US
• 9:25
  Speaker 1: oil production doing to global investments? What what we have
• 9:29
  Speaker 1: seen is the US production almost at ten million bars
• 9:32
  Speaker 1: a day. That's the highest since nineteen seventy. Actually, US
• 9:36
  Speaker 1: production is just within a whisker of that level. It
• 9:39
  Speaker 1: was put today by the Energy Information Administration, that's the
• 9:43
  Speaker 1: statistical arm of the Department of Energy at nine point
• 9:47
  Speaker 1: nine two million bars a day. So it's just gonna
• 9:50
  Speaker 1: be ten million bars a day within the next two
• 9:52
  Speaker 1: or three weeks. And and that is what is being
• 9:56
  Speaker 1: UH distrolled by President Trump of Energy Dominance Act. Only
• 10:00
  Speaker 1: President Tim probably has done very little for for achieving
• 10:02
  Speaker 1: these ten million barrels a day. The stay is deregulating
• 10:05
  Speaker 1: the industry and is lower in taxes, but I would
• 10:07
  Speaker 1: not have an impact until probably a few months. For now,
• 10:12
  Speaker 1: with the taxation, probably we can see more investment, and
• 10:15
  Speaker 1: certainly the the regulation of the sector and allowing UM
• 10:19
  Speaker 1: drilling offshore of the United States. That's gonna takes if
• 10:23
  Speaker 1: not DKs to increase production of the country. But certainly
• 10:26
  Speaker 1: we have seen a big increase in UH production in
• 10:29
  Speaker 1: the United States, and that's one of the reasons that
• 10:31
  Speaker 1: despite all the efforts but opened by cutting production, we
• 10:34
  Speaker 1: still see oil prices really struggling to break new ground.
• 10:38
  Speaker 1: And we saw Bram prices that the European benchmark jumping
• 10:43
  Speaker 1: about seventy dollars, but that was really short lived because
• 10:45
  Speaker 1: people are starting to pay attention that while Opak is
• 10:49
  Speaker 1: cutting production on sale, producers in Texas and elsewhere in
• 10:52
  Speaker 1: the United States are really ramping output. All right, So
• 10:55
  Speaker 1: what does that tell you about a forecast? Is it
• 10:57
  Speaker 1: just difficult to predict what I mean? I'm it's always
• 11:00
  Speaker 1: difficult to predict with the future price of anything's gonna be.
• 11:03
  Speaker 1: But we're gonna get results from Royal Dutch Shell tomorrow
• 11:06
  Speaker 1: and we'll also get results from Chevron and Exxon for
• 11:10
  Speaker 1: the remainder of the week. What can you tell us
• 11:12
  Speaker 1: about the future oil prices? Well, I think that we're
• 11:14
  Speaker 1: going to have very good results for for the three
• 11:16
  Speaker 1: companies that you mentioned. We have Royal Dutch Shell reporting
• 11:20
  Speaker 1: before the opening of the market tomorrow morning here in London,
• 11:22
  Speaker 1: and we have Excellent and Chevron doing likewise before the
• 11:26
  Speaker 1: opening of the market in New York on Friday. Uh
• 11:29
  Speaker 1: Q force would be a good month for all the
• 11:31
  Speaker 1: oil companies. Prices where up. We have good production number
• 11:35
  Speaker 1: from everyone, so I'm expecting that probably where on a
• 11:38
  Speaker 1: quarterly basis, probably we're gonna see the strongest quarter since
• 11:42
  Speaker 1: at least meet two thousand and fourteen in terms of
• 11:45
  Speaker 1: oil prices. For two thousand and eighteen, clearly we're seeing
• 11:48
  Speaker 1: a big push towards the upside from opeque production cuts
• 11:52
  Speaker 1: led by Saudi Arabia with his cutting even more than
• 11:55
  Speaker 1: he said that he was gonna do. But at the
• 11:57
  Speaker 1: same time, we're gonna have a ceiling from the ushil
• 12:00
  Speaker 1: producers which they're gonna really pump a lot more oil
• 12:04
  Speaker 1: that probably the market was expecting only two or three
• 12:07
  Speaker 1: or four months ago. So probably what we're gonna see
• 12:09
  Speaker 1: prices in a in a very narrow range, probably with
• 12:12
  Speaker 1: a sixty dollar floor because of open production cards. But
• 12:16
  Speaker 1: any any time that we go about seventy maybe seventy
• 12:19
  Speaker 1: five dollars for brain, we're gonna see a huge incentive
• 12:22
  Speaker 1: for US producer producers to to to pump more, and
• 12:26
  Speaker 1: uncertainly the price will be capped there. Thank you very
• 12:28
  Speaker 1: much for being with us. Javier Blast is our chief
• 12:31
  Speaker 1: energy correspondent for Bloomberg Intelligence. You can follow him on
• 12:35
  Speaker 1: Twitter at Javier Blast two, and you can also check
• 12:38
  Speaker 1: out his photographs from his attendance at the Dollar's World
• 12:42
  Speaker 1: Economic form last week. Interesting photographs and some images of
• 12:48
  Speaker 1: the excitement that was generated by the arrival and the
• 12:51
  Speaker 1: speech of President Donald Trump. Well, if you're thinking about
• 13:10
  Speaker 1: purchasing an automobile or a vehicle, chances are you should
• 13:13
  Speaker 1: place a call to Scott Painter. He is the founder
• 13:16
  Speaker 1: of Fair, but he's also the former founder of True Car,
• 13:19
  Speaker 1: and he has a history in the automobile industry as
• 13:24
  Speaker 1: a disruptor, and he joins us now from Santa Monica. Scott,
• 13:28
  Speaker 1: thank you very much for being with us. Maybe just
• 13:30
  Speaker 1: give people a little bit of your the short bio,
• 13:33
  Speaker 1: because you've been doing this since you were in school. Well,
• 13:37
  Speaker 1: I've definitely been focused on trying to improve the way
• 13:42
  Speaker 1: that we all buy in Shop four and ultimately owned cars.
• 13:48
  Speaker 1: So what we've created, it Fair, is an app that
• 13:51
  Speaker 1: represents a totally new way to get a car. It's digital,
• 13:55
  Speaker 1: it's all on your phone, it's completely flexible, and that
• 13:58
  Speaker 1: customers can actually see the car they want and walk
• 14:01
  Speaker 1: away without a commitment to a long term purchase decision
• 14:05
  Speaker 1: or ownership contract, and it's designed to be simple. What
• 14:09
  Speaker 1: we offer is an all in monthly payment that provides
• 14:12
  Speaker 1: the car a warranty, roadside assistance, standard maintenance, and we
• 14:17
  Speaker 1: even now offer month to month auto insurance. So it's
• 14:21
  Speaker 1: designed to be sort of like an iTunes account for
• 14:23
  Speaker 1: your car. Is it similar to a long term rental
• 14:26
  Speaker 1: or even a short term rental for an automobile? Yeah,
• 14:29
  Speaker 1: it's not a rental agreement, it's not a lease. It
• 14:32
  Speaker 1: was created with a deep understanding of how both work.
• 14:35
  Speaker 1: It is an entirely new type of contract. It's really um.
• 14:39
  Speaker 1: It represents a new way to get access to mobility. Um.
• 14:45
  Speaker 1: It's clear that modern customers want simplicity, savings and flexibility, alright,
• 14:51
  Speaker 1: But having having that in mind, what can you walk
• 14:55
  Speaker 1: us through what exactly happens? Because you mentioned that are
• 14:58
  Speaker 1: you've got an app on your phone you'd like to
• 15:00
  Speaker 1: drive from where you are a Santa Monica. I don't
• 15:04
  Speaker 1: know to uh, San Diego? What happens when you pick
• 15:08
  Speaker 1: up your phone? Sure, the way that the app works
• 15:11
  Speaker 1: is as soon as you download the app, it does
• 15:13
  Speaker 1: ask you to scan your driver's license because you're going
• 15:16
  Speaker 1: to be driving our vehicle and you need to be
• 15:19
  Speaker 1: a registered legal driver, and so we're looking to actually
• 15:24
  Speaker 1: validate your driver's license. We're also looking for ability to repay,
• 15:28
  Speaker 1: So unlike a car loan or at lease where you
• 15:30
  Speaker 1: actually have to have good credit or a long payment history.
• 15:34
  Speaker 1: As long as we can detect that you have the
• 15:36
  Speaker 1: ability to repay or to afford the car, we go
• 15:40
  Speaker 1: ahead and digitally link you either to your bank account
• 15:43
  Speaker 1: or a credit card, and then you begin to subscribe
• 15:46
  Speaker 1: effectively to that car. And so you're shopping from cars
• 15:49
  Speaker 1: that are all for sale at local dealers, and we're
• 15:52
  Speaker 1: simply a better way to get that car. And we're
• 15:55
  Speaker 1: an alternative to traditional financing in the sense that we
• 15:58
  Speaker 1: are not lend you money. We're just giving you access
• 16:02
  Speaker 1: to the car that you want. Once you select the
• 16:04
  Speaker 1: vehicle inside the app, you can either have that vehicle
• 16:07
  Speaker 1: brought to you or you can pick it up at
• 16:09
  Speaker 1: your local dealership. But the entire process happens digitally in
• 16:13
  Speaker 1: the app. In fact, you even signed the agreement with
• 16:16
  Speaker 1: your finger. There's no negotiating with a dealer or no
• 16:19
  Speaker 1: back and forth or confrontation. We effectively buy the car
• 16:23
  Speaker 1: and simultaneously provided to you through that new agreement. What
• 16:28
  Speaker 1: is what is your venture with Uber? How is that
• 16:31
  Speaker 1: tied together? Well, what we're announcing today is that we
• 16:35
  Speaker 1: have completed the acquisition of Uber's exchange leasing portfolio and
• 16:41
  Speaker 1: entered into an exclusive partnership with Uber on a national basis.
• 16:44
  Speaker 1: And it turns out that Uber drivers are just like
• 16:47
  Speaker 1: modern consumers. They also want the same simplicity, savings and flexibility,
• 16:53
  Speaker 1: and so we provide Uber the technology so that if
• 16:56
  Speaker 1: you're an Uber driver and you download the Uber app
• 16:58
  Speaker 1: and you indicate that you don't have a vehicle, that's
• 17:01
  Speaker 1: when you'll be introduced to Fair going forward. But Uber
• 17:06
  Speaker 1: has a community of drivers that they have been supporting
• 17:08
  Speaker 1: for the last two or three years with a leasing
• 17:12
  Speaker 1: program that allows drivers to get into these vehicles, and
• 17:16
  Speaker 1: we have acquired that entire business from Uber and we're
• 17:18
  Speaker 1: now their go forward partner to provide those drivers with
• 17:22
  Speaker 1: that flexible option. And it really is about an extension
• 17:25
  Speaker 1: of their commitment to their driver community, and it allows
• 17:29
  Speaker 1: Uber to be focused on its core competency, which is
• 17:31
  Speaker 1: growing ridesharing, and it allows Fair and the expert on
• 17:36
  Speaker 1: our team to focus on our core competency, which is
• 17:38
  Speaker 1: really providing these kind of flexible ownership options through a
• 17:42
  Speaker 1: totally digital platform. Scott, how much does this cost? Well? Traditionally,
• 17:48
  Speaker 1: Uber drivers today are either renting or leasing vehicles. This
• 17:51
  Speaker 1: represents about a fifty savings over a traditional rental. Now
• 17:56
  Speaker 1: that's if you're if you're an uber driver. Well that
• 18:00
  Speaker 1: whether you're an Uber driver renting a car, or whether
• 18:03
  Speaker 1: you're a consumer renting a car. Okay, all right, I
• 18:05
  Speaker 1: just wanted to make it make that clear. So for example,
• 18:07
  Speaker 1: let's say you wanted to drive from Santa Santa Monica
• 18:09
  Speaker 1: down to San Diego. What does it cost to actually
• 18:13
  Speaker 1: complete this transaction just quickly? Well, so our cars are
• 18:17
  Speaker 1: really for longer term use. So we're really building the
• 18:21
  Speaker 1: product so that consumers can keep the car for as
• 18:23
  Speaker 1: long or as little bit. Okay, let's say you wanted
• 18:25
  Speaker 1: it four months. Just give me a figure. Yeah, so
• 18:28
  Speaker 1: it would be about half the cost of a rental.
• 18:30
  Speaker 1: So traditionally, if you were going to rent a car
• 18:32
  Speaker 1: for a month that you were going to use for
• 18:34
  Speaker 1: right sharing, there might be a hundred and fifty dollars
• 18:37
  Speaker 1: a week, so maybe four a month. This is going
• 18:40
  Speaker 1: to be half of that. And we got to leave
• 18:42
  Speaker 1: it there. We got to leave it there. Scott Painter,
• 18:45
  Speaker 1: thank you very much. He is the founder of Fair.
• 18:47
  Speaker 1: They're based in Santa Monica. Well, coming up today, we've
• 19:04
  Speaker 1: got the results from Facebook as well as Microsoft. Tomorrow
• 19:08
  Speaker 1: will be getting earnings from Apple and Alphabet as well
• 19:11
  Speaker 1: as Amazon. And here to help us understand what we
• 19:14
  Speaker 1: can expect is Michael Scanlon. He his portfolio manager for
• 19:17
  Speaker 1: Manu Life Asset Management. He's based in Boston, home to
• 19:21
  Speaker 1: Bloomberg one oh six one Boston, Newburyport and thirty in
• 19:24
  Speaker 1: Metro West and the South Shore. Michael, great to have
• 19:27
  Speaker 1: you with us. Let's begin with Facebook if we can.
• 19:30
  Speaker 1: This is a company that at least an annual terms,
• 19:33
  Speaker 1: is doing thirty six billion in revenue and putting fifteen
• 19:37
  Speaker 1: billion dollars in its pocket. That's the net income. Tell
• 19:41
  Speaker 1: us what you look for from Facebook? Well, good morning
• 19:45
  Speaker 1: and thanks for having me. I think with Facebook, you
• 19:47
  Speaker 1: know expectations that results are going to be strong again tonight.
• 19:50
  Speaker 1: I think probably more of the focus will actually be
• 19:53
  Speaker 1: on the commentary that's given on the call, just in
• 19:56
  Speaker 1: light of some of the announcements they made a couple
• 19:58
  Speaker 1: of weeks back in terms of de emphasizing third party
• 20:02
  Speaker 1: in more emphasizing people's personal network of posts. Well, this
• 20:06
  Speaker 1: will be what to get them to stay more frequently
• 20:09
  Speaker 1: is to have a longer period of time that they
• 20:11
  Speaker 1: would stay on Facebook, and also to blunt the criticism
• 20:15
  Speaker 1: having to do with news and information that is perhaps
• 20:19
  Speaker 1: not the real or is not backed by anyone who
• 20:23
  Speaker 1: actually knows anything about the topics they're they're posting about exactly. Yeah.
• 20:29
  Speaker 1: So you know, the argument here is if if you're
• 20:31
  Speaker 1: in the bull camp on Facebook, which we own the
• 20:33
  Speaker 1: stock and the John Hancock Balance Fund, is that the
• 20:37
  Speaker 1: any decline in terms of just adload that you're seeing
• 20:40
  Speaker 1: on there will be offset by positive pricing. And you know,
• 20:43
  Speaker 1: if they're reducing the amount of space that they have
• 20:45
  Speaker 1: available to advertisers, that ultimately the price of that advertising
• 20:48
  Speaker 1: should increase in opted any decline in terms of growth
• 20:51
  Speaker 1: and adlade. Okay, alright, so that's Facebook. Turn your attention
• 20:55
  Speaker 1: now to Microsoft. They were talking about a one billion
• 20:58
  Speaker 1: dollar revenue company. They do twenty six billion dollars in profit.
• 21:03
  Speaker 1: What are you looking for with Microsoft? With Microsoft, the
• 21:07
  Speaker 1: focus continues to be on this transition, which you know
• 21:10
  Speaker 1: really gains steam. One. Sofia Nadela came into power Microsoft,
• 21:15
  Speaker 1: taking over the ce role CEO role from Steve Balmer
• 21:18
  Speaker 1: uh in that you know, it's this whole transition of
• 21:21
  Speaker 1: the cloud. Right. Their commercial cloud business is outperformed every
• 21:24
  Speaker 1: metric that the company has laid out that the analyst
• 21:27
  Speaker 1: community was expecting, and it continues to be on a
• 21:30
  Speaker 1: really strong growth trajectory. So I think people will be
• 21:33
  Speaker 1: continued to focus on what the revenue growth trajectory looks
• 21:35
  Speaker 1: like there and just with a margin profile and the
• 21:37
  Speaker 1: commercial cloud business looks like. Do you think that there
• 21:40
  Speaker 1: will be any interest in an increase in the dividend.
• 21:43
  Speaker 1: The dividend now is about one Microsoft, so not as
• 21:48
  Speaker 1: much focused on the dividend, you know, with this tax
• 21:52
  Speaker 1: reform package that we're getting in, obviously, Microsoft and a
• 21:56
  Speaker 1: lot of the other big cap tech names which you
• 21:57
  Speaker 1: mentioned in the introduction are primary beneficiaries here where it's
• 22:01
  Speaker 1: going to free up a lot of cash that they
• 22:02
  Speaker 1: can put to work. So with Microsoft, there is some
• 22:05
  Speaker 1: expectation that they will increase the repurchase authorization or the
• 22:09
  Speaker 1: regular amount of buy back that they've been doing, which
• 22:12
  Speaker 1: will will be a nice incremental tail one for the stock.
• 22:14
  Speaker 1: All right, Well, the shares of Microsoft right now, they're
• 22:17
  Speaker 1: up at dollar four. The stock has gained nearly ten
• 22:20
  Speaker 1: so far this year, all right, look forward to tomorrow.
• 22:24
  Speaker 1: Would you like to begin with Apple, the iPhone maker,
• 22:26
  Speaker 1: because they'll be reporting their results tomorrow. So surprisingly, you know,
• 22:31
  Speaker 1: the last handful of weeks here, there have been some
• 22:33
  Speaker 1: negative supply chain data points that have been coming out
• 22:36
  Speaker 1: in commentaries around iPhone X builds. Apple's stock is underperformed
• 22:42
  Speaker 1: tech more recently. You know, it continues to be very
• 22:45
  Speaker 1: attractively valued. They they're obviously investing a lot with the
• 22:50
  Speaker 1: data that with the release they put out after the
• 22:53
  Speaker 1: tax reform package. But from a total return perspective, you know,
• 22:56
  Speaker 1: you're getting a very nice buy back in thirty five
• 22:59
  Speaker 1: plus billion a year plus the dividends, so you're kind
• 23:02
  Speaker 1: of getting a six percent type capital return before they
• 23:05
  Speaker 1: grow their net income or the multiple gets rerated higher.
• 23:08
  Speaker 1: So we still like Apple in the portfolio. Um, and
• 23:11
  Speaker 1: you know, again the commentary will be interesting with some
• 23:13
  Speaker 1: of these negative data points. Indeed, Apple shares down about
• 23:17
  Speaker 1: one percent in the month of January. And just to note,
• 23:20
  Speaker 1: here's the scale, right, two hundred and twenty nine billion
• 23:23
  Speaker 1: dollars in sales, and they may have a profit of
• 23:27
  Speaker 1: forty eight billion, and they sell hardware. That's a kind
• 23:31
  Speaker 1: of amazing as the Yeah, and not only that, you
• 23:34
  Speaker 1: look at the stock price or so the stocks at
• 23:36
  Speaker 1: about a hundred and sixty six dollars on a net
• 23:38
  Speaker 1: cash basis, they have just under thirty dollars per share
• 23:41
  Speaker 1: and net cash. So this stock trades at a you know,
• 23:44
  Speaker 1: four point five point discount to the S and P
• 23:47
  Speaker 1: five hundred uh and even more than that if you
• 23:49
  Speaker 1: were to adjust for the cash, which you know, more
• 23:51
  Speaker 1: and more that should be coming back to shareholders. Why
• 23:54
  Speaker 1: do you think that it trades at this discount? I mean,
• 23:56
  Speaker 1: is it always because there's the footnote or the asterisk
• 23:59
  Speaker 1: that says, you know, they rely so much on the
• 24:01
  Speaker 1: iPhone and YadA, YadA, YadA. It's exactly that. And there's
• 24:06
  Speaker 1: cycles within the iPhone. This iPhone XT cycle is expected
• 24:10
  Speaker 1: to be a very big refresh cycle. Uh So there's
• 24:14
  Speaker 1: a bit more not maybe boom bust isn't it the
• 24:17
  Speaker 1: right description for it. But from year to year, there
• 24:19
  Speaker 1: is a bit of a bump and drop in earnings,
• 24:22
  Speaker 1: uh at the net income level, just because of the
• 24:25
  Speaker 1: units that are sold. I mean, most people refresh their
• 24:27
  Speaker 1: phone and kind of a two year basis. Uh. Such,
• 24:30
  Speaker 1: just a little bit of an up and down, which
• 24:33
  Speaker 1: you know results on a lower multiple. Okay, let's turn
• 24:35
  Speaker 1: your attention to Alphabet. Now, Alphabet, of course the parent
• 24:39
  Speaker 1: company of Google, talking about a hundred billion dollar a
• 24:42
  Speaker 1: company that has about a quarter of that as profit,
• 24:46
  Speaker 1: twenty three billion dollars worth of profit on an annual basis.
• 24:49
  Speaker 1: What are you going to look for from Google? So
• 24:53
  Speaker 1: Google continues to be our largest position in the portfolio.
• 24:57
  Speaker 1: You know, when you look at this company, there just
• 24:59
  Speaker 1: seems to be be a very clear runway to north
• 25:02
  Speaker 1: of FX neutral revenue growth going forward. Uh, there's still
• 25:08
  Speaker 1: you know, broadly speaking, a tremendous amount of global advertising
• 25:11
  Speaker 1: that is still in traditional forms be a TV print
• 25:15
  Speaker 1: that needs to come digital, and you know, name like
• 25:18
  Speaker 1: Google is going to be a primary beneficiary there. Obviously
• 25:20
  Speaker 1: there'll be some others as well. Um, but for Google
• 25:23
  Speaker 1: to continue to grow on this north of a hundred
• 25:26
  Speaker 1: billion dollar base of revenues, it's just extraordinary. And when
• 25:30
  Speaker 1: you look at the multiple, it doesn't trade at all
• 25:32
  Speaker 1: that much of a premium to the market, especially when
• 25:35
  Speaker 1: you adjust for the nearly hundred and forty dollars a
• 25:37
  Speaker 1: share that they have in cash. All Right, I'll give
• 25:39
  Speaker 1: you a chance now for Amazon. Amazon a hundred and
• 25:42
  Speaker 1: sixty one billion dollars a year in revenue, But they're
• 25:45
  Speaker 1: not interested in profits, are they. Uh? That's always the
• 25:50
  Speaker 1: knock on the stock, right is that you know, Amazon
• 25:53
  Speaker 1: doesn't throw a whole lot to the bottom line with
• 25:55
  Speaker 1: this company when you look at it longer term and
• 25:57
  Speaker 1: you discount the potential cash flow, and if they ever
• 26:00
  Speaker 1: took their foot off the gas in terms of the investments,
• 26:02
  Speaker 1: there would be an extraordinary flow through. Now you're hard
• 26:06
  Speaker 1: pressed the fault them for the investments that they've made
• 26:08
  Speaker 1: because they have generated such extraordinary revenue growth. And I
• 26:12
  Speaker 1: think you're going to see that in this holiday season.
• 26:14
  Speaker 1: You know, they put out a release talking about prime
• 26:17
  Speaker 1: membership and new prime offerings that were adopted during the
• 26:20
  Speaker 1: holiday season, and all points everything points to a very
• 26:24
  Speaker 1: very robust holiday season for them, and then the AWS
• 26:28
  Speaker 1: business continues to be in a nice trajectory and generate
• 26:30
  Speaker 1: slots of cash flow for them. Thanks very much, Michael Scanlon,
• 26:33
  Speaker 1: as portfolio manager, Manu Life Asset Management, joining us from Boston.
• 26:41
  Speaker 1: Thanks for listening to the Bloomberg P and L podcast.
• 26:44
  Speaker 1: You can subscribe and listen to interviews at Apple podcasts, SoundCloud,
• 26:48
  Speaker 1: or whatever podcast platform you prefer. I'm pim Fox. I'm
• 26:52
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 26:55
  Speaker 1: Abramowits one before the podcast. You can always catch us
• 26:58
  Speaker 1: worldwide on Blue or Radio m