Earnings Season Recap #11

Look back at selected quotes of the most noteworthy earnings calls from last week, January 23-27. 
We have collected and timestamped quotes from LVMH, AmEx, Visa, Mastercard, Tesla, and Microsoft. Enjoy!

Q4 2022 Y/Y Δ
Revenue +17%
*Wines & Spirits +11%
*Fashion & Leather Goods +20%
*Perfumes & Cosmetics +10%
*Watches & Jewelry +12%
*Selective Retailing +17%
EBIT +23%
*margin 26.6% (26.7)
EPS +17%

-> The story of skepticism when acquiring Louis Vuitton in 1989: We have various stores, different size stores and increasingly, we have stores that are reserved for the customers who require greater individuality of quality and we've managed, although the brand does indeed track hugely. We've managed to improve the desirability that key criteria, the brand desirability every quarter, and that desirability in no way suffers from the size of saying, society is will it become exclusive? Is it not too big? I mean, I've heard since I was appointed CEO of LVMH. It was back in 1989, 13th of January. And one of my close friends, who was a leading Belgian financier, said “But are you really sure that you want to start this business - to buy it? because I was offered Vuitton products, and they're spread so widely that I didn't want it. Are you sure? Vuitton, in euros, generate less than 500 million in revenue. Don't be overly impressed by size. What counts above all is quality today, products selling incredibly well while it's been difficult to find if today, if you want a yellow cruise summer bag on des Champs-Élysées, well, it's quite simply out of stock, and I'm not at all worried about that. – 00:45:09. Bernard Arnault, Chairman & CEO

-> LVMH is not focusing on the secondhand market and interesting fact about Rolex: We're focusing on firsthand. We haven't reached yet the second or indeed the third. So we haven't really given any thoughts. I mean, I think the potential is such for our brands that the secondhand, well, that might be of interest and perhaps be a kind of a derivative for certain brands, but for the time being, we don't really need it. We don't really need to intervene or indeed consider what we're, of course, trying to do is to avoid. And here, we have a major effort with our product traffic to avoid the secondhand items because that's the problem we're facing sell products of our brands that are faced. And that happens more than you think and then we see the people who bought these products secondhand products, but they're not all secondhand, they're fakes. They come and that you have to be very diplomatic to solve that with the people who come to Vuitton and say, we're very sorry, Madam, but we can't repair your bags because it's a fake. But we don't do what Rolex is doing because Rolex in that case, you know what they do. A customer arrives and says, my watch is no longer working, needs to be repaired. Very good, madam, sir, we'll take your watch. And if it's a fake watch, they never return it. We could try that. – 01:08:23. Bernard Arnault, Chairman & CEO

-> Every year, LVMH opens "many manufacturing facilities for Louis Vuitton: In 2022, we recruited worldwide close to 40,000 young people. In France alone, we recruited over 15,000 people, makes the group the leading recruiter in France in 2022 we invested over EUR 200 million for the training of its employees. In France, a job created by LVMH, generates 4 in our -- with our partners or suppliers. So we carry some 160,000 people in France who work directly or indirectly for LVMH. The group has worked on its building new workshops and it stores over 5 million in -- over 500 stores and 100 craftsmanship manufacturing sites are in France. LVMH opens every year, many manufacturing facilities notably for Louis Vuitton in France, and we need -- the group, of course, we generate profits. We pay a lot of tax. We paid EUR 5 billion in corporate tax in -- throughout the world, half in France, whereas 80%, close to 90% of our products are sold abroad. Over EUR 1 billion invested in France every year on average over the past years, the total tax footprint. Well, when we -- the total corporation tax, taxes and social benefits of LVMH is of over EUR 4.5 billion a year. – 00:06:47. Bernard Arnault, Chairman & CEO

-> Tiffany's earnings have doubled since LVMH acquired the company in 2021: Tiffany, for the first time, will exceed the EUR 1 billion in profit, profit from recurring operations. We were barely at half that when we acquired the business, everyone said to me, why are you buying this business at that price, it's far too much? Well, if today, the business were to be listed. Well, you never know, but I mean it wasn't perhaps managed in the most dynamic way. I won't dwell on that at the time. But if it were listed today, we would be probably worth twice as much. I don't know what Alexander thinks about that. But the group, the shareholders, I hope there are shareholders here not -- not just commentators. It's a very good investment, continues to work very successfully. I'm not going to plug for the Patek Philippe that everyone's clamoring for I get requests every week to agree to sell Patek Philippe watches. The problem is that they sold. I mean the market price was about $40,000. When it was sold, one model was sold at an auction. It generated almost 10x as much. So very strong demand, a whole string of products arrive products that are currently being launched and we also have high jewelry collections that are doing very well. – 00:15:40. Bernard Arnault, Chairman & CEO

-> LVMH sold a cask of its 1975 vintage Ardbeg whiskey for €19 million, a new world-record: Cognac, Hennessy is up with a strategy aimed at increasing its price, very dynamic strategy, the U.S. where somewhat impact earlier in the year through the logistic constraints, but the partnership of Hennessy has been strengthened with the NBA and strong progress of our whiskeys. Glenmorangie and Ardbeg, Ardbeg is viewed today as possibly the finest whiskey in the world, and we sold a cask of Ardbeg, that's actually the equivalent of 144 and this cask was sold at a world record of EUR 19 million and the quality was vintage dating back to 1975. Moving to Perfumes & Cosmetics. Great success of Perfume, the Dior perfume, in particular, with Sauvage is a leader in perfume sales. Sauvage great perfume, the world's leading men's or women's fragrance, we launched less than 10 years ago, achieving remarkable success, driven by the image of Johnny Depp. – 00:11:07, Bernard Arnault. Chairman & CEO

-> China has come back very strongly: What we can say about China is China needs economic growth. It's no secret. I think everyone would agree that China for its people for the success of the country needs economic growth is the growth has slowed I'm quite confident that the Chinese leadership being very astute. They will no doubt and almost certainly use the to reboot Chinese growth. If that's the case, in fact, it started in January. We have every reason to confident indeed optimistic on the Chinese market. In Macau, where the Chinese can now travel to the change is quite spectacular stores are full, it's really come back very strong pace. So are they going to travel? I mean you're afraid of that coming to when will they travel? I mean estimates would be as of the summer, if they resume their travels and they'll head for the countries that attract them and probably come to France. – 00:42:25. Bernard Arnault, Chairman & CEO

-> So far, 2023 looks to be a very strong year for LVMH: I think that 2023 -- if the early part of the year is confirmed, if the opening up of China is confirmed, it's a bit short, but January, but a very start. We'll see. We can't guarantee it's going to continue like that. We can't guarantee that something might not happen. We hadn't expected the Ukraine problem 2 years ago if it continues as it is, it will be an excellent year, and we'll be able to continue to develop our investments gain market share because even when the situation is somewhat more challenging as can happen for 1 month next, we continue to invest, whereas some of our peers may have tighter financial constraints. They stop investing or they invest less. And so things are more difficult after as we continue to invest in for the ,it's been quite successful for us during the difficult times when we – whether the health crisis, that's all I wish to say at this stage. – 00:22:51. Bernard Arnault, Chairman & CEO

-> During difficult times, the strong gets stronger: I won't say once again at the risk of tiring you, record results for the group LVMH. You saw the chart that was published. We achieved just over EUR 79 billion in revenue over -- just over EUR 21 billion for profit from recurring operations, an increase 23% net income above EUR 14 billion free cash flow, just over EUR 10 billion. So financial performance that's quite remarkable, really the consequence of the great work put in by our teams in the various Maisons in terms of the quality, the desirability of our products and our presence throughout the world that is both dynamic and outstanding and has allowed us during these difficult years marked by the economic crisis in part and above all by the health crisis to increase our market share, as I say on several occasions, in difficult times in terms of the macroeconomy or political difficulties. LVMH is gaining market share and making progress, and this has been the case since 2019. – 00:00:01. Bernard Arnault, Chairman & CEO

-> CFO Jean-Jacques Guiony explaining the Inventory dynamics of 2021/2022: A few words about cash flow. Cash flow is always a complicated topic. You may remember that back in 2021, we had high cash flow levels, but that was to do with nonrecurring effects, especially as we emerge from the crisis, we paid relatively little tax because in the cash flow statements, you have the tax installments, which were based the previous year where the previous year, the numbers were rather low. And this year, we have more in tax installments. You have variation in inventory last year, we were running out of inventory. So we -- the stocks came down. But this year, it was the other way around. We had large inventory, but December was challenging in China. And so we had a surplus of inventory. So last year's level, last year, we had a favorable effect. This year, it's unfavorable. – 00:36:31. Jean-Jacques Guiony, Chief Financial Officer

-> Important for human organizations to evolve and stay away from a "routine mindset: Well, in a large company, as in any human organization 1 needs to evolve. It's not a good thing to keep a form of organization that leads to routine mindset. And in the group, apart from I, who've been here for quite a long time, but we follow the business from afar. But I think we need to push innovation that the executives up a certain while give them time to prove their quality to succeed, but they must use their management skills by changing, mustn't get used [to] things. But of course, we need duration. I mean, it's not like in a government change every 2 years or even more here, it's the opposite. – 00:49:50. Bernard Arnault, Chairman & CEO

Q4 2022 Y/Y Δ
Tot Network Vol +12%
Revenue +17%
Net income -9%
*margin 11%  (14)
EPS -5%

-> Exceeding full-year guidance despite macro-related headwinds: As I go through our results, I'll tell you why they strengthen my confidence in our plan to generate strong growth over the long term. A year ago, we introduced our growth plan, which provided a road map for delivering annual growth rates for revenue and earnings per share at levels that are higher than the strong growth rates we were delivering before the pandemic. Our results over the last 4 quarters demonstrate that our strategy is clearly working. We exceeded the full year guidance we laid out in our growth plan for both revenues and EPS, and we did so against the mixed economic environment. Revenues, which reached all time highs for both the quarter and the year were up 25% for the full year, exceeding the 18% to 20% guidance we started the year with. An earnings per share of $9.85 was well above our guidance of $9.25 to $9.65. The momentum we saw through the year in Card Member spending, engagement and retention continued in the fourth quarter. Fourth quarter billed business reached a record quarterly high of $357 billion and was up 25% for the full year demonstrating our continued ability to acquire, engage and retain high-spending premium card members. – 00:01:52. Stephen Squeri, Chairman & CEO

-> Largest growth drivers: For the full year, new card acquisitions reached a record level, growing to 12.5 million and nearly 70% of our new accounts acquired are on our fee-based products. Millennial and Gen Z customers continue to be the largest drivers of our growth, representing over 60% of proprietary consumer card acquisitions in the quarter and for the full year. Credit metrics remained strong, supported by the premium nature of our customer base, our exceptional risk management capabilities and the thoughtful risk actions we've taken for the year. Looking ahead to 2023 and beyond, let me tell you why these results increase my confidence that we're positioned to deliver on our growth plan aspirations. – 00:03:27 - Stephen Squeri, Chairman & CEO

-> Competitive advantages as a catalyst for long growth runway: We're in a great business. We operate in the most attractive segments and geographies of the fast-growing payment space. As highlighted by our leadership positions with premium consumers, including Millennials and Gen Zers, small- and medium-sized businesses, as well as serving the largest corporations in the world. We bring to this space a number of advantages that are very difficult for our competitors to replicate. These include our brand, our unique membership model, a premium global customer base and an integrated payments model. Forming the foundation of these advantages is our talented, dedicated colleagues who deliver unparalleled service to our customers. Put together, the marketplace opportunities we see and the competitive advantages we can leverage create a long runway for growth. We intend to capture these opportunities and build on our momentum by continuing to invest at high levels in several key areas, continuously innovating our consumer and SME products, refining our powerful marketing and risk management engines and capturing our fair share of lending. – 00:04:57. Stephen Squeri, Chairman & CEO

-> The AmEx virtuous cycle explained: Growing merchant acceptance with a particular focus outside the U.S. and expanding partnerships to drive customer value across the enterprise, continuing to introduce new digital capabilities that deliver seamless, intuitive customer experiences in their channels of choice, and expanding into adjacencies that reinforce our core, such as new lifestyle and financial services for consumers and SMEs, which adds more value to our membership model. All this investment happens while continually focused on gaining efficiencies in our marketing and operating expenses. As we've demonstrated consistently over the past 2 years, executing this investment strategy builds scale, which fuels a virtuous cycle of growth that starts with a high spending, highly engaged premium customer base. These premium customers attract a growing network of merchants and partners who add more value to our membership model, which in turn enables us to attract more premium customers who attract more merchants and partners, which creates more scale. This scale enables us to generate more investment and operating efficiencies in our membership model making it more difficult for our competitors to catch up. – 00:05:40. Stephen Squeri, Chairman & CEO

-> Buybacks and 2023 outlook: We returned $4.9 billion in capital to our shareholders in 2022, including $1 billion in the fourth quarter with $639 million of common stock repurchases and $389 million in common stock dividends, all on the back of strong earnings generation. We ended the year with our CET1 ratio at 10.3% within our target range of 10% to 11%. In Q1 '23, as Steve discussed, we do expect to increase our dividend by 15%, to $0.60 per quarter, consistent with our approach of growing our dividend in line with earnings and our 20% to 25% target payout ratio. We'll continue to return to shareholders the excess capital we generate while supporting our balance sheet growth going forward. That then brings me to our growth plan and 2023 guidance on Slide 19. 2022 was a strong year, where we exceeded our full year guidance that we laid out in our growth plan last January for both the revenues and EPS. These results have strengthened our confidence in our 2023 guidance. First and most importantly, we expect the strategies that Steve laid out earlier to deliver continued high levels of revenue growth, leading to our revenue growth guidance for 2023 of 15% to 17% and setting us up well for 2024 and beyond. – 00:22:55. Jeffrey Campbell, Vice Chairman & CFO

-> The CEO on the above-expected guidance: We can only run the business and forecast the business on what we're seeing. And what we're seeing is high consumer growth. We're seeing high consumer growth in international. We talked about some moderation in small business. Corporate spending still has not come back. Jeff talked about T&E. But I think when you think about the model, I think what you have to get an appreciation for is, we're a small segment of the overall U.S. population, and it's a premium customer base. And that premium customer base, while not immune to economic downturn, certainly, right now is spending on through. And so the other thing that we've been doing is, we're constantly tightening up the card members that we're acquiring. I mean, look, the card member base we have today is, from a credit perspective, better than the card member base that we had pre-pandemic. And card members we're acquiring today are reaching a higher hurdle rate than ones we acquired just a year ago. – 00:27:28. Stephen Squeri, Chairman & CEO

-> No impact from layoffs: As far as overall white collar unemployment, what I would say is, yes, you've seen some headlines of individual companies that are going through layoffs. But the one thing that I would say is, I think it's really important to look at where these companies were pre-pandemic. And they're probably still at employment levels that are much higher than what they were pre-pandemic. And so there's a rightsizing a little bit. But even with that rightsizing, we still have unemployment rates under 4%. We look at unemployment, but it has not, at this particular point in time, had any impact on our card member base. I mean, again, keeping our write-offs at 0.8% and 0.6% is sort of not sustainable and we are at 1.1%, as Jeff said, it shows on the slides. And that will tick up a little bit over time. But that's just normal for the business. So I think what you have to really -- you have to look at is this is a premium card member base that appreciates premium products and is spending. – 00:28:46. Stephen Squeri, Chairman & CEO

-> Building and reinforcing competitive advantages is a constant goal: We continually look to raise the bar. And I think that there's a lot of great competitors out there. We've got JPMorgan and Bank of America and Wells Fargo and U.S. Bank and Capital One. And they're all strong. And they -- I mean they all had pretty strong results from a growth perspective. But as I said in my remarks, the more value we continue to add, the more we get our flywheel working, the harder it is to catch up. And we're not resting on our laurels. And that's why we continue to invest. We continue to invest in value propositions. We continue to invest in capabilities. We continue to invest in service. And so are we increasing the distance between us and our competitors? I don't know how you measure that, but our goal is to constantly make it hard for them to catch up. And our goal is to make sure that we're trying to be 1 step, 2 steps or 3 steps ahead of them. And it's flattering actually that they're coming after the segments that we're in. But competition is there, and it is fierce. – 01:03:15. Stephen Squeri, Chairman & CEO

Q1 2023 Y/Y Δ
Revenue +12%
*Payments Volume +7%
*Cross-Border Volume Total +22%
*Processed Transactions +10%
EBIT +6.6%
*margin 64% (67)
Net income +6%
*margin 53% (56)
EPS +8%

-> Payment volume and processed transaction growth: Visa's performance in the first quarter of 2023 reflects stable domestic volumes and transactions and a continued recovery of cross-border travel. Total Q1 payments volume was up 7% year-over-year or 135% versus three years ago, flat with Q4. Excluding Russia and China, payments volume was up 12% or 146% from 2019. U.S Q1 payments volume was up 9% year-over-year or 144% from 2019, down 1 point from Q4. International volume, excluding Russia and China, was up 15% or 147% from 2019, up 1 point from Q4. Q1 cross-border volumes, excluding intra-Europe, grew 31% year-over-year and 132% versus three years ago, up 5 points from Q4. Excluding Russia, cross-border year-over-year growth was higher by 4 points. Travel-related cross-border volumes rose 6 points from 112% of 2019 in Q4 to 118% in Q1, driven by Asia Pacific, helped by China lifting restrictions, continued modest improvements inbound into the United States and CEMEA benefiting from the FIFA World Cup. Processed transactions were up 10% year-over-year or 139% versus 2019, and we processed 571 million transactions a day during the quarter. Although first quarter net revenues grew -- altogether, I should say, first quarter net revenues grew 12% year-over-year and non-GAAP EPS was $2.18, up 21%. In each of our growth levers, consumer payments, new flows and value-added services, we saw strong revenue growth. In our consumer payments business, we made significant progress this quarter through large deals with traditional issuers and co-brands. – 00:01:43. Al Kelly, Chairman and CEO

-> Performance of Visa’s three growth engines: For the year, we expect to renew about 20% of our payments volume with a good amount already completed in the first quarter. Revenue growth was robust across our three growth engines. Consumer payments growth was led by the recovery in cross-border volumes, high currency volatility and continued strong domestic volumes and transactions. New flows revenue growth was over 20% in constant dollars. Commercial card volumes grew 15% year-over-year and are up 45% versus 2019. Excluding Russia, Visa Direct transactions grew 39%. Value-added services revenue was also up over 20% in constant dollars, driven by higher volume, increased client penetration and select pricing actions. Currencycloud and Tink added about 0.5 point to revenue growth. – 00:29:50. Vasant Prabhu, Vice Chair and CFO

-> Consumer spending outlook: On the last call for the full year, and we told you we had assumed no recession. As you can see, business trends have been remarkably stable. The spend levels just around the world, they've indexed in the mid-140s for almost four quarters right now, and there's no evidence of a change in trend. That's reflected in our second quarter outlook. At this point, we're not changing any expectations for the second half. I mean, clearly, the dollar has weakened a bit so that will change the exchange rate impact in the second half, but we're not changing any of our views in the second half. I mean, they are planning assumptions. And if there is a slowdown, then we will react accordingly. – 00:39:33. Vasant Prabhu, Vice Chair and CFO

-> There are still trillions of dollar spent on cash and check: I would say that I believe deeply that there is tremendous opportunity in the traditional card world, both in the consumer space as well as in the B2B space. There are still hundreds and hundreds of millions of people to bring into the financial mainstream. There are still trillions of dollars spent on cash and check. And when you look in the B2B space, we see a total addressable market of about $120 billion across carded opportunities, cross-border and payables and receivables, where I talked a bunch about a number of examples that we have worked on over the course of the last quarter. RTP systems are helping to digitize money movement. That's a good thing. If you look at the disruption caused by monetization in India, it ended up being extraordinarily positive in terms of what it's done in terms of growth in card credentials as well as acceptance, which by the way, I also should have said in the traditional world, there's still a tremendous opportunity to grow our acceptance footprint from the level that it's at today. These RTP systems are also helping us and we're leaning into them. They're helping us extend the reach of Visa Direct as we utilize them as part of our network-of-network strategies. – 00:52:18. Al Kelly, Chairman and CEO

-> Focusing on the rapidly digitally adapting Latin America: One of the great ways to continue to grow our business is to grow our acceptance footprint, which still requires a lot of growth around the world. One of the places we've concentrated on in the last 1.5 years is Latin America. And if you look at the ratio of spending in Latin America that moved from cash to PV in the last couple of years. Back in full year 2020, only 46% of Latin America's volume was PV, with 54% being cash. This past quarter, 59% was PV, so there was a 13-point swing in the Latin America region in the last not even quite three years. And that's a combination of winning with traditional FIs, winning with fintechs, having a localized market-by-market approach with a lot of good -- really good progress in countries that's out in Latin America like Brazil and Chile. – 00:57:52. Al Kelly, Chairman and CEO

Q4 2022 Y/Y Δ
Revenue +12%
*Gross dollar vol +8% ($2.1 trillion)
*Cross-border vol  +31%
*Switched txn +8%
EBIT +13%
*margin 55% (54)
Net income +6%
*margin 43% (46)
EPS +9%


-> Consumer spending: Let's get right into it. So starting with the big picture. Consumer spending has remained resilient, and we are very well positioned to capitalize on the growth opportunities ahead. We closed out the year with strong financial results and several notable wins. Quarter 4 net revenues were up 17% and adjusted operating income up 19%, both versus a year ago, as always, on a non-GAAP currency-neutral basis excluding special items. While the macroeconomic and geopolitical environment remains uncertain, we are keeping a close eye on a variety of positive and negative factors. The broadly resilient labor market with low unemployment and rising wages, coupled with elevated consumer savings levels, are key drivers of consumer spending. We're also tracking efforts by the central banks to curb inflation, along with moderating energy prices and the reopening of China. So still lots of moving pieces. From an overall consumer spending standpoint, we expect the consumer to be relatively resilient. Spending patterns have largely normalized relative to the effects of the pandemic with the notable exception of China. In terms of switched volumes, domestic volumes in the fourth quarter remained steady relative to 2019 levels with some slight moderation in the U.S. related to lower gas prices recently. – 00:01:52. Michael Miebach, CEO, President & Director

-> Financial performance and buybacks: Turning now to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments. Net revenue was up 17%, supported by a resilient consumer spending and the continued recovery of cross-border travel relative to 2019 levels. Acquisitions contributed 1 ppt to this growth. Operating expenses increased 13%, including a 3 ppt increase from acquisitions. Operating income was up 19%, which includes a 1 ppt decrease related to acquisitions. Net income was up 16%, which includes a 2 ppt decrease related to acquisitions. EPS was up 19% year-over-year to $2.65, which includes a $0.06 contribution from share repurchases. During the quarter, we repurchased $2.4 billion worth of stock and an additional $590 million through January '23 -- 2023. – 00:14:35. Sachin Mehra, CFO

-> Card growth and total issued cards globally: Switched transactions grew 8% year-over-year in Q4. Excluding Russia from the prior year, switched transactions grew 18% year-over-year in Q4. Card-present and card-not-present growth rates remain strong. Card-present growth was aided in part by increases in contactless penetration in all regions when excluding Russia. Contactless now represents 56% of all in-person switched purchase transactions. In addition, card growth was 5% or 9% if we exclude cards issued by Russian banks from the prior year card count. Globally, there are 3.1 billion Mastercard- and Maestro-branded cards issued. – 00:16:33. Sachin Mehra, CFO

-> More on consumer spending and outlook for 2023: What we've generally assumed in our base assumptions that I mentioned when I was delivering my prepared remarks is resilient consumer spending through 2023. I mean we see a resilient consumer today, and we're seeing a generally resilient consumer spending pattern going forward in our base case. The other thing which we've contemplated, as we mentioned, from a cross-border standpoint and particularly cross-border travel standpoint, the vast majority of the regions have now reached that state where they are kind of growing and growing at a healthy pace, but they're not growing at an accelerating pace. So they've reached that level of stability. So let me give you a little bit of color here. You'll remember as we are coming out of COVID, right, intra-Europe came back first cross-border standpoint. After that, we saw several inter-markets come back from a cross-border standpoint, U.S., U.K., Canada, Latin America, all of those. All of those are growing at a healthy pace, and we're assuming they'll continue to grow at a healthy pace but not at an accelerating pace. – 00:28:38. Sachin Mehra, CFO

-> B2B point of sale and virtual card opportunities: The opportunity here lies really in taking our existing set of tools, namely from the card ecosystem, very specifically the virtual card capability, which came through an acquisition many, many years ago that we've now built out ourselves into the leader here. So this existing set of tools and a huge opportunity in terms of flows to be addressed and make them more efficient, we're looking at $14 trillion from an opportunity perspective. If you recall what we laid out across the 4 flows, new flows, this is the -- one of the large ones here that we quoted. And the way to go about this is really to say, all right, who are the different players that we already have in our ecosystem. We bring VCNs into. There's a lot of deals with financial institutions, but there's also a lot of deals with partners out in the travel space, and the travel space is really the one that's been most promising for us, and that is coming back right now. So this is a near-term opportunity. – 00:32:04. Michael Miebach, CEO & President

-> Long-term thinking and focusing on operating leverage: The reality is we've always operated with the philosophy of delivering positive operating leverage over the long term. We look at the top line. We look at how our expenses up also against that top line. We have, in the past, demonstrated our capability to modulate our expenses to the extent we start to see adverse impacts take place on the top line and vice versa. And the reality is what we don't want to do is impact the long-term growth potential of our business. We will continue to invest in our business with our eye on the long term. We will be prudent about not going into spaces from an OpEx standpoint, which are not in demand. Obviously, I'm kind of stating the obvious here. But the reality is the philosophy remains unchanged. We will look to deliver positive operating leverage as a company. And we have the tools and the ability to actually modulate expenses if we feel like the top line growth is going to get impacted over the long term. – 00:36:38. Sachin Mehra, CFO

-> Short summary of the Quartr from the CEO: So thanks for your questions. Thanks for your trust. Rayna, we will figure out your questions off-line. We can't get to those, unfortunately. The day will come when there's a call where there's more questions for me than for Sachin. I'm still hopeful we will get there at some point. The story has been resilient consumer, and we still see some opportunity in cross-border for Asia. That's the base. We're winning. That feels good as we look ahead into 2023. And we have 28,000 excited people at Mastercard that are going to deliver on that opportunity. With that, thank you very much and speak to you next quarter. – 00:59:09. Michael Miebach, CEO & President

Q4 2022 Y/Y Δ
Revenue +37%
*Automotive +33%
*Regulatory credits +49%
Gross Profit +19%
*margin 23.8% (27.4%)
EBIT +49%
*margin 16.0% (14.7%)
Adj. EBITDA +32%
*margin 22.2% (23.1%)
Adj. EPS +40%
FCF -49%

-> Record on every level, including year-to-date orders: It was a fantastic year for Tesla. It was our best year ever on every level. Team did an amazing job. It's an honor, of course, to work with such an incredibly talented group of people. So in 2022, we delivered over 1.3 million cars and achieved a 17% operating margin, the highest among any volume carmaker, I think maybe among any carmaker. While doing so, we generated $12.5 billion in net income and $7.5 billion in free cash flow. Importantly, the Tesla team achieved these records while -- despite the fact that 2022 was an incredibly challenging year due to forced shutdowns, very high interest rates and many delivery challenges. So it's worth noting that all these records were in the face of massive difficulties. Credit to the team for achieving that. The most common question we've been getting from investors is about demand. Thus far -- so I want to put that concern to rest. Thus far in January, we've seen the strongest orders year-to-date than ever in our history. We currently are seeing orders at almost twice the rate of production. So I mean that -- it's hard to say whether that will continue twice the rate of production, but the orders are high. – 00:00:51. Elon Musk, Technoking of Tesla, CEO & Director

-> Huge milestone for Full Self-Driving (FSD): We're also making very good progress on cost control. And we're seeing the cost production in Berlin and Austin drop commensurate with the growth in production, as you'd expect, so yes. With respect to Autopilot, as of now, we deployed Full Self-Driving Beta for city streets to roughly 400,000 customers in North America. This is a huge milestone for autonomy as FSD Beta is the only way any consumer can actually test the latest AI-powered autonomy. And we're currently at about 100 million miles of FSD outside of highways. And our published data shows that improvement in safety, safety statistics, it's very clear. So we would not have released the FSD Beta if the safety statistics were not excellent. – 00:02:40. Elon Musk, Technoking of Tesla, CEO & Director

-> Energy storage and the three pillars for a sustainable future: Our long-term goal is to get to well in excess of 1,000 gigawatt-hours of cells produced internally and continue to use the self cell providers. So to be clear, we will continue to use other cell providers. Just that the demand for lithium ion batteries is quasi-infinite and will be for quite some time. So we feel we can scale a lot faster using both suppliers and internally produced cells. And we've got an amazing plan for making the 4680 cell low cost and high energy density. So energy storage also saw record growth, and that is continuing to accelerate. That's always worth remembering that the 3 pillars of a sustainable energy future are obviously electric vehicles, solar and wind, and the third key item is stationary storage to store the energy from solar and wind, because obviously, the sun doesn't shine all the time and the wind doesn't blow all the time. So you have those 3 things. You can convert all of earth to a fully sustainable situation many times over, actually. So I would like to just make it clear that there is a path to a fully sustainable future for humanity, and we -- our goal at Tesla is to accelerate progress on that path as much as humanly possible. – 00:04:40. Elon Musk, Technoking of Tesla, CEO & Director

-> Three key points for 2023: Partially offsetting these impacts, we've continued to execute on Tesla controllable cost reductions, in line with the progress we've made in prior years. These improvements include our continued work to gradually move towards a regionally balanced build of vehicles. The energy business had its strongest year yet across all metrics, led by steady improvement in both retail and commercial storage. While much work remains to grow this business and improve costs, we believe we are on a good trajectory. As we look towards 2023, we are moving forward aggressively leveraging our strength and cost. There are 3 key points I want to make here. First, on demand, as Elon mentioned, customer interest in our products remains high. Second, on cost reduction, we're holding steady on our plans to rapidly increase volume while improving overhead efficiency, which is the most effective method to retain strength in our operating margins. In particular, we're accelerating improvements in our new factories in Austin, Berlin and in-house cells, where inefficiencies are the highest. – 00:09:30. Zachary Kirkhorn, Master of Coin & CFO

-> That might be the biggest value increase of anything in history: Something that I think some of these smart retail investors understand but I think a lot of others maybe don't is that every time we sell a car, it has the ability, just from uploading software, to have full self-driving enabled, and full self-driving is obviously getting better very rapidly. So that's actually a tremendous upside potential because all of those cars, with a few exceptions -- I mean only a small percentage of cars don't have Hardware 3. So that means that there's millions of cars where full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history. – 00:17:18. Elon Musk, Technoking of Tesla, CEO & Director

-> Elon on Twitter and brand image: Well, let me check my Twitter account. Okay, so I've got 127 million followers. It continues to grow very rapidly. That suggests that I'm reasonably popular. It might not be popular with some people, but for the vast majority of people, my follower count speaks for itself. I have the most interactive social media account, I think, maybe in the world, certainly on Twitter, and that actually predated the Twitter acquisition. So I think Twitter is actually an incredibly powerful tool for driving demand for Tesla. And I would really encourage companies out there of all kinds, automotive or otherwise, to make more use of Twitter and to use their Twitter accounts in ways that are interesting and informative, entertaining, and it will help them drive sales just as it has with Tesla. So the net value of Twitter, apart from a few people complaining, is gigantic, obviously. – 00:19:03. Elon Musk, Technoking of Tesla, CEO & Director

-> Full Self-Driving competition: Late last night, we were asking, so who do we think is close to Tesla with a general solution for self-driving? And we still don't even know who would even be a distant second.[...] I don't think you could see a second place with a telescope, at least we can't. So that won't last forever. So in 5 years, I don't know, probably somebody has figured it out. I don't think it's any of the car companies that we're aware of. But I'm just guessing that someone might figure it out eventually. So yes. – 00:46:33. Elon Musk, Technoking of Tesla, CEO & Director

Q2 2023 Y/Y Δ
Revenue +2%
*Prod. & Business +7%
*Intelligent Cloud +18%
*Pers. Computing -19%
*Azure +31%
*LinkedIn +10%
*Xbox C&S -12%
EBIT -9%
*margin 38.6% (43.0)
EPS -11%


-> Early innings for cloud: Enterprises have moved millions of calls to Azure and run twice as many calls on our cloud today than they did 2 years ago. And yet, we are still in the early innings when it comes to long-term cloud opportunity. As an example, insurer AIA was able to save more than 20% by migrating to Azure and reduced IT provisioning time from multiple months to just an hour. We also continue to lead with hybrid computing with Azure Arc. We now have more than 12,000 Arc customers, double the number a year ago, including companies like Citrix, Northern Trust and PayPal. Now on to data. Customers continue to choose and implement the Microsoft Intelligent Data Platform over the competition because of its comprehensiveness, integration and lower cost. Bayer, for example, used the data stack to evaluate results from clinical trials faster and more efficiently while meeting regulatory requirements and ASOS chose Cosmos DB to power real-time product recommendations and order processing for over 26 million global customers. Now on to AI. The age of AI is upon us and Microsoft is powering it. We are witnessing non-linear improvements in capability of foundation models, which we are making available as platforms. And as customers select their cloud providers and invest in new workloads, we are well positioned to capture that opportunity as a leader in AI. We have the most powerful AI supercomputing infrastructure in the cloud.  – 00:04:28. Satya Nadella, Chairman and CEO

-> Open AI and Chat GPT: It’s being used [Microsoft’s computing infrastructure] by customers and partners like OpenAI to train state-of-the-art models and services, including ChatGPT. Just last week, we made our Azure OpenAI service broadly available and already over 200 customers from KPMG to Al Jazeera are using it. We will soon add support for ChatGPT, enabling customers to use it in their own applications for the first time. And yesterday, we announced the completion of the next phase of our agreement with OpenAI. We are pleased to be their exclusive cloud provider and we will deploy their models across our consumer and enterprise products as we continue to push the state-of-the-art in AI. All of this innovation is driving growth across our Azure AI services. Azure ML revenue alone has increased more than 100% for five quarters in a row with companies like AXA, FedEx and H&R Block choosing the service to deploy, manage and govern their models. Now on to developers. Modernizing applications is mission-critical to any company’s operations today. And with GitHub, Visual Studio and Azure PaaS services, we have the most comprehensive portfolio of tools to help. GitHub is now home to 100 million developers and GitHub Copilot is the first at-scale AI product built for this era, fundamentally transforming developer productivity. – 00:05:56. Satya Nadella, Chairman and CEO

-> Microsoft 365 and Microsoft Teams users: Now on to systems of work. Microsoft 365, Teams and Viva are essential for every organization to adapt to the new world of work. Microsoft 365 is rapidly evolving into an AI-first platform that enables every individual to amplify their creativity and productivity with both our established applications as well as new applications like Designer, Stream and Loop. We have more than 63 million consumer subscribers, up 12% year-over-year and we introduced Microsoft 365 Basic, bringing our premium offerings to more people. Teams surpassed 280 million monthly active users this quarter, showing durable momentum since the pandemic and we continue to take share across every category from collaboration to chat to meetings to calling. Teams has emerged as a first-class platform. Apps from Adobe, Atlassian, Poly, ServiceNow and Workday have each surpassed 0.5 million active users and the number of third-party apps with more than 10,000 users increased nearly 40% year-over-year. There are more than 500,000 active Teams Rooms devices, up 70% year-over-year and the number of customers with more than 1,000 rooms doubled year-over-year. Novo Nordisk will deploy Teams Rooms to 5,000 meeting rooms globally in our largest deal to date. – 00:09:17. Satya Nadella, Chairman and CEO

-> Cybersecurity now constitutes ~10% of total LTM group revenue: We are also seeing growth in cloud-delivered Windows with usage of Windows 365 and Azure Virtual Desktop up by over two-thirds year-over-year. Leaders in every industry from Campari and Grant Thornton UK to Nutrien and Woolworths are using cloud-delivered Windows, including more than 60% of the Fortune 500. Now on to security. Over the past 12 months, our security business surpassed $20 billion in revenue as we help customers protect their digital estate across clouds and endpoint platforms. We are the only company with integrated end-to-end tools spanning identity, security, compliance, device management and privacy informed and trained on over 65 trillion signals each day. We are taking share across all major categories we serve. Customers are consolidating on our security stack in order to reduce risk, complexity and cost. The number of organizations with four or more workloads increased over 40% year-over-year. UK retailer Fraser Group, for example, consolidated from 10 security vendors to just Microsoft. – 00:12:49. Satya Nadella, Chairman and CEO

-> LinkedIn – record engagement and more than 900 million users: Now on to LinkedIn. People and companies continue to look to LinkedIn to connect, learn, sell and get hired. We once again saw record engagement among our more than 900 million members. Three members are signing up every second. Over 80% of these members are from outside the United States. And as the members come to the platform to find and share professional knowledge and expertise, newsletter creation was up 10x year-over-year. [...] We offer more than 20,000 courses in 11 languages and companies are also turning to a skills-based approach in place of degree or pedigree to identify qualified talent, with more than 45% of the hires on LinkedIn explicitly using skills data to fill their roles. Finally, LinkedIn Marketing Solutions continues to be a leader in B2B digital advertising, helping companies deliver the right message to the right audience on a safe and trusted platform. – 00:14:27. Satya Nadella, Chairman and CEO

-> News highs for Game Pass subscriptions: Now on to gaming. In gaming, we continue to pursue our ambition to give players more choice to play great games wherever, whenever and however they want. We saw new highs for Game Pass subscriptions, game streaming hours and monthly active devices, and monthly active users surpassed a record 120 million during the quarter. We continue to invest to add value to Game Pass. This quarter, we partnered with Riot Games to make the company’s PC and mobile games, along with premium content available to subscribers. And finally, we are energized by our upcoming lineup of AAA game launches, including exciting new titles from ZeniMax and Xbox Game Studios and we will be sharing details in Gameplay at our showcase tomorrow. In closing, I want to extend my deepest gratitude to our employees for their continued dedication to our mission, customers and partners. We will continue to pursue our long-term opportunity and innovation agenda with urgency while also raising the bar on our operational excellence. With that, I will hand it over to Amy. – 00:16:09. Satya Nadella, Chairman and CEO

-> Open AI and Chat GPT entails competitive differentiation: One of the reasons why we are the leaders in robotic process automation and workflow automation today is because of some of the AI capabilities that we have in there. GitHub Copilot is in fact, you would say, the most at-scale LLM based product out there in the marketplace today. And so, we fully expect us to sort of incorporate AI in every layer of the stack, whether it’s in productivity, whether it’s in our consumer services. And so we are excited about it. But I think that we are also excited about OpenAI zone innovation, right. So, they commercialize their products. We are excited about the Chat GPT being built on Azure and having the traction it has. So, we look to both, there is an investment part to it and there is a commercial partnership. But fundamentally, it’s going to be something that’s going to drive, I think innovation and competitive differentiation in every one of the Microsoft solutions by leading in AI. – 00:40:27 - Satya Nadella, Chairman and CEO

-> Cautiousness among customers: The question is how many times is it given the overall inflation-adjusted economic growth. So, that’s kind of how I look at it. Given that, I think the two things that we see, we commented on that even in the last quarter, and it’s even in the outlook, which is that customers are doing what they accelerated during the pandemic. They are making sure that they are getting most value out of it or optimizing it and then also being a bit more cautious given the macroeconomic headwinds out there in the market. [...] And then the other aspect I would also say is simultaneously investing in this new AI trend, because I don’t think any application start that happens next is going to look like the application starts of 2019 or 2020. They are all going to have considerations around how is my AI inference performance, cost, model is going to look like, and that’s where we are well positioned again. So, that’s how I view it. The market, you all are better readers of, quite frankly, what’s happening out there. We can tell you what we see. What we see is optimization and some cautious approach to new workloads and that will cycle through, but we do fundamentally believe on a long-term basis, as a percentage of GDP, tech spend is going to go up. – 00:42:30 - Satya Nadella, Chairman and CEO

-> Every app is going to be an AI app: I think it’s too early to sort of start somehow separating out AI from the rest of the workload. I mean even the workloads themselves, AI is just going to be a core part of a workload in Azure versus just AI alone. So, in other words, if you have an application that’s using a bunch of inference, let’s say, it’s also going to have a bunch of storage and it’s going to have a bunch of other compute beyond GPU inferencing, if you will. So, I think over time, obviously, I think every app is going to be an AI app. That’s I think the best way to think about this transformation. On your characterization of the large customers, whether there is any changes in their trajectory, I would say I would point back to, I think some of the commentary around every large customer is looking to optimize the workloads that they have at scale today and plowed some of that money back that they save into new project stock. – 00:57:07. Satya Nadella, Chairman and CEO