Weekend Update #99
Welcome to Blue Room's Weekend Update. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
All major indices finished negative this week as a result of mixed earnings calls withmany company’s reporting beats on Q3 financials, but providing negative earnings expectations for Q4 and 2023.
Investors also paid close attention to the Fed, as the central bank raised interest rates 75 basis points for the fourth consecutive meeting. Markets were initially optimistic with the new language in the Fed’s statement which was interpreted as potentially softening monetary policy. Fed Chair Powell clarified the central bank’s stance that it will remain restrictive for the foreseeable future and that incoming economic data actually suggests the terminal interest rate will be higher than originally anticipated. Headline inflation and Core CPI remain elevated and there has not been clear evidence that they are coming down, while the labor market remains strong.
The U.S. jobs report came in mixed as payrolls grew by 261,000 in October, much better than the 205,000 estimate, while the unemployment rate also rose, now at 3.7%. However, the overheated job market may show signs of cooling as many companies look to cut operating expenses. Lyft and Square each laid off 13% and 14% of their workforces, respectively, while Elon Musk’s new Twitter is reportedly laying off between 25% and 50% of employees. There are also reports that Apple and Amazon have implemented hiring freezes for the remainder of the year.
CPI data will be reported next week, along with midterm elections for Congress, which could influence the direction and expectations for the rate hike decision in December
Unemployment / Labor participation
S&P 500: -3.35%
Nasdaq: -5.65%
Dow Jones: -1.40%
Thank you Blue Room Analyst NICK PEART
FOMC Statement
Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.
Russia’s war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3-3/4 to 4 percent. The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.
In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.
— Tracey Ford —
Good afternoon. Thank you for joining Chegg's third quarter 2022 conference call. On today's call are Dan Rosensweig, Co-Chairperson and CEO; and Andy Brown, Chief Financial Officer.
A copy of our earnings press release, along with our investor presentation, is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our media center website at chegg.com/mediacenter. We encourage you to make use of these resources.
FY 2022 Guidance
Revenue $27.5 B (Street Estimate — $27.86 B)
down from previous guidance of $27.85 B
Adjusted EPS $4.07 (Street Estimate — $3.93)
up from previous guidance of $3.87 to $3.97
Total Payment Volumes +8.5% (Street Estimate — +11.3%)
down from previous guidance of +12%
Active Customer Accounts Added 8 million to 10 million (Street Estimate — 10 million)
Earnings Summary
In their latest earnings release, PayPal announced it will be entering into a partnership with Apple whereby PayPal and Venmo debit cards will be accepted inside the Apple Wallet, meaning consumers will be able to use them anywhere Apple Pay is accepted. PayPal will also add Apple Pay as an option in the company's checkout offerings. PayPal will also use Apple's new Tap-to-Pay technology, meaning its merchant customers will no longer need a special dongle to be able to accept debit and credit cards and will instead be able to use PayPal or Venmo App. Overall, third quarter results topped analyst estimates as cost-cutting moves kicked in, but the stock fell post-release as payment volume missed expectations and revenue guidance came in below street estimates.
Highlights
Beat Street estimates on all fronts, demonstrating disciplined financial management as the company progresses along to the Phase 3 trials of their COMP360 drug candidate
George Goldsmith will be transitioning from his role as Executive Chairman and de facto Chief Executive Officer and “handing off the baton” to Kabir Nath, the newly-appointed CEO
High level, they are focused on building an overall data set which will form the cornerstone of their new drug application with the FDA
They are also looking beyond the approval to launch as well by generating the evidence that they believe will support reimbursement for this novel treatment at scale
The two pivotal Phase III trials are designed to answer two important clinical questions:
Can we replicate and reconfirm the compelling treatment response exhibited in our Phase IIb trial?
What is the impact of an additional dose on the number of responders and the quality of the response seen in the Phase IIb trial?
Top-line data for COMP 005 is expected at the end of 2024; COMP 006 are expected mid-2025
FY 2022 Guidance
Net Revenue $1.19 billion to $1.20 billion (Street Estimate — $1.2 billion)
narrowed previous guidance of $1.18 billion to $1.20 billion
Adjusted EBITDA $265 million to $275 million (Street Estimate — $277.4 million)
narrowed previous guidance of $265 million to $285 million
Earnings Summary
In its Third Quarter 2022 Earnings Release, Yelp indicated it would be spending more time on scenario planning to gauge the effect of a potential recession on the business by looking at how small- and medium-sized businesses, which comprise the majority of its business, react differently to the slowing economy than large, national advertisers. The online platform expects to see a "more muted" holiday season and less spending from multi-location advertisers. Although paying advertising locations increased 7% year-over-year, total ad clicks fell 15% from last year. CFO David Schwarzbach noted the company had a particularly strong quarter in home services. However, late in the quarter, the company began seeing increased caution from national and midmarket restaurant and retail accounts, given the tougher economic conditions. The company authorized a $250 million stock buyback program, which is approximately 8.2 million shares, and would reduce the share count to 62.1 million.
REGENERON REPORTS THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS
Third quarter 2022 revenues decreased 15% to $2.94 billion versus third quarter 2021 (consensus predicted -15.67% y/y);
Excluding REGEN-COV sales from last year, revenues increased 11%
Third quarter 2022 EYLEA U.S. net sales increased 11% versus third quarter 2021 to a record $1.63 billion (EYLEA grew 11.0% while the anti-VEGF market grew only 4.0% - EYLEA has reached an all-time high market share in the branded/unbranded category this quarter)
Third quarter 2022 Dupixent global net sales (recorded by Sanofi) increased 40% to $2.33 billion versus third quarter 2021
Third quarter 2022 GAAP diluted EPS of $11.66; non-GAAP diluted EPS of $11.14 (Beating market estimates of $7.58)
Positive results reported in aflibercept 8 mg pivotal trials for diabetic macular edema (DME) and neovascular age-related macular degeneration (wet AMD)
EYLEA granted additional six months of pediatric exclusivity by the FDA
FDA approved Dupixent for prurigo nodularis
Inmazeb won 2022 Prix Galien USA "Best Biotechnology Product" Award
“We were thrilled to see positive results from the aflibercept 8mg pivotal trials which demonstrated the potential to reduce the treatment burden for patients with diabetic macular edema (DME) and neovascular age-related macular degeneration (wet AMD),” said Leonard S. Schleifer, M.D., P.D.., President and CEO of Regeneron.
“Global Dupixent sales and U.S. EYLEA sales once again achieved new quarterly records, with U.S. sales of EYLEA achieving double digit year-over-year percentage growth and Dupixent was bolstered by progress on launches in pediatric atopic dermatitis, eosinophilic esophagitis, and prurigo nodularis. Our oncology portfolio was further strengthened by positive data updates for our growing investigational oncology pipeline.”
QUALCOMM REPORTS FOURTH QUARTER AND FULL YEAR 2022 EARNINGS
Fourth Quarter 2022 Highlights:
Revenues: $44.2 billion
Fiscal 2022 EPS: $11.37 (GAAP), $12.53 (Non-GAAP)
Record fiscal year revenues and EPS
QCT Diversification: Combined fiscal year IoT and automotive revenues grew +38.0% y/y
QCT delivered strong fiscal year EBT growth: +65.0% y/y
“We are pleased to report another strong year, despite the macroeconomic challenges, as we continue to execute our strategy of transforming Qualcomm from a wireless communications company for the mobile industry to a connected processor company for the intelligent edge,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. “While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged.”
Semiconductor companies generally shared a weaker fourth quarter outlook that is thought to last until the second half of calendar year 2023. It has become wholly apparent that we are in the midst of a semiconductor down cycle. That being said, the SOXX ETF fell only 1.0% over the month of October suggesting negative sentiment may already be priced in.
Brian Chesky — Co-Founder and Chief Executive Officer
Alright, well, thank you, Ellie, and good afternoon, everyone. Thanks for joining. Q3 was another record quarter despite macroeconomic headwinds. We had nearly 100 million Nights and Experiences Booked, which is up 25% year-over-year. Gross booking value was $15.6 billion, this is up 31% year-over-year. Revenue grew 29% year-over-year to $2.9 billion, our highest-ever. And when you exclude foreign exchange, our revenue increased 36% year-over-year. Now, we also had our most profitable quarter ever. Net income was $1.2 billion, and this is up $400 million from a year-ago. Now, this represents a 42% net income margin. Adjusted EBITDA was $1.5 billion, also our highest-ever. And we generated $960 million of free cash flow. In fact, over the last 12 months, we generated $3.3 billion in free cash flow. What our Q3 results demonstrate is that Airbnb continues to drive growth and profitability at scale.
Operator
Hello, thank you for standing by, and welcome to the Third Quarter 2022 Roku Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference may be recorded. I would now like to hand the conference over to your speaker today, Conrad Grodd, Vice President of Investor Relations. Please go ahead.
Conrad Grodd — Vice President, Investor Relations
Thank you, operator. Good afternoon, and welcome to Roku's third-quarter 2022 earnings call. I'm joined today by Anthony Wood, Roku's Founder and CEO; and Steve Louden, our CFO. Full details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations website at roku.com/investor. Our comments and responses to your questions on this call reflect management's view as of today only, and we disclaim any obligation to update this information. On this call, we'll be making forward-looking statements, which are predictions, projections, or other statements about future events such as statements regarding our financial outlook, our investments, our operating expenses, our business strategy, future market conditions, and macro-environment headwinds such as economic uncertainty and inflationary pressures.
Anil Gupta — Vice President of Investor Relations
Good afternoon, and welcome to the Coinbase third quarter 2022 earnings call. Joining me on today's call are Brian Armstrong, Co-Founder and CEO; Emilie Choi, President and COO; and Alesia Haas, CFO. I hope you've all had the opportunity to read our shareholder letter, which is published on our Investor Relations website earlier today.
Before we get started, I'd like to remind you that, during today's call, we may make forward-looking statements. Actual results may vary materially from today's statements, information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measure are provided in our shareholder letter on our IR website. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures.
Anil Gupta — Vice President of Investor Relations
Good afternoon, and welcome to the Coinbase third quarter 2022 earnings call. Joining me on today's call are Brian Armstrong, Co-Founder and CEO; Emilie Choi, President and COO; and Alesia Haas, CFO. I hope you've all had the opportunity to read our shareholder letter, which is published on our Investor Relations website earlier today.
Before we get started, I'd like to remind you that, during today's call, we may make forward-looking statements. Actual results may vary materially from today's statements, information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include references to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measure are provided in our shareholder letter on our IR website. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures.
FY 2022 Guidance:
Revenue: $2,025-2,042 million (increased from $1,980-2,022 million)
Screening Revenue: $1,375-1,382 million (increased from $1,350-1,372 million)
Including $40-42 million from PreventionGenetics
Precision Oncology Revenue: $595-600 million (increased from $580-590 million)
COVID-19 Testing Revenue: $55-60 million (increased from $50-60 million)
Kevin Conroy — Chief Executive Officer, President & Chairman of the Board
Exact’s Q3 results demonstrate the strength of the business and the unique platform
They are working to help fewer people turn into cancer patients and get better care to those who do
Q3 had record revenue of $523 million, up 20% YoY excluding COVID-19 testing
Exact is raising the revenue guidance by $30 million while decreasing expense guidance by $113 million
They are also pulling adjusted EBITDA profitability to Q3 2023, from the previous target of 2024
Exact is building an unstoppable engine
The differentiated approach starts with world-class scientists
These tests are immediately supported by the sales and marketing teams with broad reach and deep relationships
Well known tests, sophisticated patient navigation, electronic order and results platform, expansive lab capabilities, and deep payor relationships will support new cancer tests with modest incremental investment
This fuels revenue growth and profit generation
They will invest that in better cancer tests and solutions
As they quickly approach profitability, the engine is set to gain momentum with each new test
Ramy Farid — President & Chief Executive Officer
Schrödinger developed a computational platform that’s changing the way molecules are discover
Each aspect of the business has a favorable risk/reward profile
Software licensing continues to be a source of revenue
They are also going through an inflection in drug discovery revenue
They have a pipeline of candidates with first-in-class or best-in-class potential
Today, Schrödinger reported $37 million in total revenue for Q3, up 24% YoY
Driven by strong Drug Discovery revenue of $12 million
Q3 Software Revenue was $24.7 million
They’ve tightened the financial guidance and are pleased to remain in the original range, even in a challenging economic environment
Schrödinger is also continuing to make progress across programs
Today, they announced the study of MALT1, SGR-1505, is open for enrollment
In December, they will report new preclinical data for the CDC7 inhibitor, SGR-2921, at ASH in December
They are continuing to expand the drug discovery portfolio
Recently, Schrödinger announced a collaboration with Eli Lilly for an undisclosed small molecule compound
Under the agreement, Schrödinger received an upfront payment and is eligible up to $425 million in discovery, development, and commercial milestones
They are pleased with the progress in a tough macroeconomic environment
Schrödinger is continuing to focus on executing on all aspects of the business
Q1 FY’23 Outlook:
If you ever had a goal you were serious about achieving, you most likely had a strategy for achieving it. And if you had a strategy, you also had a timeline.
For the last nine months, my goal has been to turn around Peloton and position it for sustained growth and scale. I thought it would take a year. We are beating that timeline.
To revisit last quarter’s analogy, and to ensure absolute clarity, the ship is turning. For that, I am deeply grateful to our Members, our team, as well as our former team members.
Here’s how we’ve gotten there. We executed on the strategies we’ve already announced, supported by a talented leadership team and Peloton’s strengths in content and Connected Fitness hardware and software.
“Turnaround” means a stable underlying business with the green shoots of growth beginning to emerge. It means a financially sustainable business, which means breakeven or better free cash flow. It means engaged Members with high net promoter scores. It means a growing subscriber base, continued low churn, and improved customer acquisition costs.
Helmy Eltoukhy — Co-Chief Executive Officer
Clinical test volume reached 32,400, up 11% QoQ
They saw growth in ordering oncologists and tests per customer
Importantly, Guardant achieved results despite staffing shortages and access challenges, which they expected to resolve sooner
Reveal is a crucial option, and they’re excited to expand the offering
Following the expansion, they saw an uptick in the rate of ordering
They also made great progress with the buildout of Epic
Biopharma reached 6,750 samples, a record number, up 40% YoY
Infinity accounted for more than 10% of volumes, just months after launch
They’re very pleased with this uptake and excited for its potential
Guardant received approval for 360 CDx for ENHERTU in NSCLC patients with HER2 mutations
Infinity:
In 2014, Guardant launched 360, a test that was the first of its kind and part of the standard of care today
Now, we’re entering the new age of the epigenome
This has been largely dark and underexplored for a variety of reasons
Infinity gives 100x greater breadth than 360 CDx, with higher sensitivity, at moderate cost
There are countless applications: tumortissue of origin, enhanced therapy selection, predictive and prognositc biomarkers, and protein and RNA surrogacy
Recent Press Releases and Business Updates
November 1, 2022 – Moderna today announced that it has received approval from the Ministry of Health, Labor and Welfare (MHLW) in Japan for a partial change to a new drug application for its Omicron-targeting bivalent COVID-19 booster, mRNA1273.222 (Spikevax Bivalent Original/Omicron BA.4-5) in adults 18 years and older.
October 27, 2022 – Moderna today announced that it will host its first virtual ESG day for analysts and investors at 9:00 am EDT on Thursday, November 10.
October 27, 2022 – Moderna today announced it was ranked one of the top employers in the global biopharmaceutical industry by Science and Science Careers’ 2022 Top Employers Survey for the eighth consecutive year.
October 19, 2022 – Moderna today announced that the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) has adopted a positive opinion recommending marketing authorization for mRNA-1273.222 (Spikevax bivalent Original/Omicron BA.4-5) as a booster dose for active immunization to prevent COVID-19 caused by SARS-CoV-2 in individuals 12 years of age and older, who have previously received at least a primary vaccination course against COVID-19.
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