Recap - 14

Recap #14

1 minutes reading time
15 Feb 2023

Read our distilled key quotes from last week's most noteworthy earnings calls Hermès, Shopify, Airbnb, and Palantir.

This week's dispatch covers topics such as the remarkable strength of luxury, Shopify’s market share and first price increases in 12 years, Airbnb’s record year and capital allocation framework, and how Palantir reached its first GAAP profitable full year in the company's history.


The French luxury design house and the ultimate status symbol that year after year has been recognized by elites, nobles, and royalties.


-> Strong sales growth across all geographies: In 2022, the growth of sales is remarkable in all geographical areas and the progression of double-digit growth. In France, we are at plus 27%; in Europe, excluding France, at plus 18%, have pursued a solid growth with a strong demand of local customers as well as international customers; Japan, plus 20% recording and progression of sustained and regular sales; Asia excluding Japan, plus 22%, has carried forward through the strong momentum of all of the region, including Australia, Korea and Singapore; the sales in Greater China have had sustained strong sales, especially in second and fourth quarter; America, finally, an exceptional year sustained by the opening of the stores in Austin and Texas in the spring, in Madison 706 end of September. - Axel Dumas, CEO

-> Average price increase: So the average price increase is seven percent, yes, in 2023, as things stand currently. Fairly informed increases in geographies. One exception, that was Japan, a little bit higher due to the depreciation of the yen and not quite as big increases in the U.S. because the dollar had reached higher rates. We continue with our basic rationale to pass on price hikes in the euro area. - Eric du Halgouët, Vice President of Finance

-> "I don't look at what others are doing, I may just get influenced.": Secondly, in our decisions, we don't try to look at, do we catch up with the industry. Pierre-Alexis used to say something that I like, "I don't look at what others are doing, I may just get influenced." So we spare ourselves that. And I say this very clearly, we do not have a marketing price policy. I've read in certain reports that the city not to have that. But that's our strategy that's linked to our manufacturing costs. And talking one of the other houses saying, because you're an artisan -- we are luxury but you are artisans. That's true. Hours of work on a bag, of what they are, and it's not the prices because the market asks us. So you can't reverse the Kantian principle if I can because I must -- or I must because I can. We can increase our prices more. - Axel Dumas, CEO

-> CSR and outside communication: As an aside, I don't choose the question so you won't choose the answer. But I'd like to thank you. You're not very desired in Hermès. You wrote a memo, you said Hermès is best in CSR and the worst to make it known. And I introduced to -- I spoke with complacency about the good results that we've had in CSR, with the CDP, et cetera. We said we must communicate more. Maybe we're not very good at communicating outside. Thanks to you because of what you said. - Axel Dumas, CEO

-> Not limiting production: First of all, mainly, let's begin with what's important to all of us, handbags. Absolutely, well, look at the year Leather Goods, up 16%. So we sold 16% more bags. We're not trying to limit production. We're not artificially creating selectivity. We're trying to produce as many as we can. So we must remember that, be aware of that fact. I remember when we had 250 artisans and bags that weren't selling well way back when. My first internship at Hermès, we had 56% of our sales were silk, 9% of our sales were with leather. And we had 250 artisans and we didn't manage to sell many Kelly's or Birkin's. Things have certainly changed. And I can remember the time it changed. All of a sudden, we became hugely desirable. I'm not answering directly, but my mother was in charge of production. My father -- Pierre-Alexis' father led Hermès. And your question was how can you grapple with this? We want to continue growing our revenue. We want to be high-performance. We want to continue being serene and moving forward at the same time. - Axel Dumas, CEO

-> Focusing on serving customers in the best way: We have seen skyrocketing e-commerce during COVID. It's an ongoing continuing trend. In spite of some questions here I've never wanted to give a percentage of sales that were digital. it's pointless, I've always said. That's not the way to look at it. The important thing is how do we serve our customers in the best way and the choice is up to them as to how they make their purchases. During times of COVID, there were 100% of our sales that were online when 80% of our stores were closed. [indiscernible] in charge of retail and digital home. We've truly become omnichannel. Tell me sometimes, what do you want? Depending on where you position products, we have local stores and we have digital stores and there has certainly been growth. - Axel Dumas, CEO


The world’s leading platform for empowering e-commerce merchants and arming the rebels.

Q4 2022 Y/Y Δ
GMV +13%
Revenue +26%
*Merchant Solutions +30%
*Subscription solutions +14%
Gross profit +15%
*margin 46% (50)
Adj. EBIT -53%
*margin 4% (9)

-> Market share and GMV: 2022 marked another strong year for our merchants and Shopify, a year that reflects the resilience of our business model and commerce operating system. Our revenue grew 21% for the year, reaching $5.6 billion as we added nearly $4 billion to our top line since 2019. [...] According to the U.S. Census Bureau, applications for new businesses have been approximately $5 million a year for 2021 and 2022, which is a step function above the $4 million per year average for the previous five years. Shopify’s penetration of the U.S. e-commerce market is currently 10%, with this year’s GMV surpassing $197 billion as GMV has grown more than 3 times since 2019. Since our inception, Shopify has powered over $0.5 trillion in global commerce as we increasingly become the platform of choice for brands of all sizes. – Harley Finkelstein, Vice President (00:01:22)

-> Price increase: In January, we announced an update to the subscription prices on our Basic, Shopify and Advanced plans. The prices that we have been charging for access to the best tools in commerce have largely remained unchanged for the last 12 years. This will enable Shopify’s exceptional value to continue as we solve more of the most difficult problems in the industry and empower more people to become entrepreneurs. These new prices went into effect immediately for new merchants and will take effect on April 23 for existing merchants. In short, in 2023, we will not slowdown. We are committed to simplifying commerce even further this year as we innovate and invest to future proof our merchants businesses and allow them to extract greater value from Shopify. – Harley Finkelstein, Vice President (00:04:23)

-> Shopify everywhere – international expansion: Lowering the barriers to entrepreneurship globally is a massive opportunity for Shopify and for our merchants. At the end of 2022, approximately 45% of our merchants were based outside of North America, making up approximately 27% of our revenue. We expanded our offering in the country with Shopify Payments now available in 22 countries, Shopify Point-of-Sale in 14 countries, Shopify Shipping in seven countries and Shopify Capital in four countries. We also rolled out our localized subscription plan pricing to approximately 200 countries and localized billing to make it easier for merchants to start and grow their businesses on Shopify. Looking ahead, we’re focused on helping our merchants reach consumers no matter where they’re located. We want to make selling internationally on day one as easy as it is to sell locally. – Harley Finkelstein, Vice President (00:11:26)

-> “Over time, profitability will take care of itself”: Profitability is a consequence of growth and efficiency combined over time. And I don’t look towards the quarters. I’m trying to build the ideal company. And the main thing comment I wanted to make was that I do think that companies have to – like companies are swimming in the waters of the market and are definitely affected by that. To play the game that’s currently on the best you actually have to change your behavior quite a bit. And in boom times, there’s a certain behavior that, like, looks best and where it allows you to get the most out of it. And then to some degree, you actually necessitated some behavior because of what everyone else does in growth times with cheap credit, there’s a certain way to play this in an ideal way. I think that in the more recessive times, we might not – I’m not making a statement about this being a recession. I think in these times, the conversation of the feedback loop lends itself much more towards trying to figure out how to be the best company given the opportunity that’s really in front of you. And I believe that over time, profitability will take care of itself if this is the kind of type of company you’re building. And I think Shopify has played the boom games. Ideally, I intend to have Shopify play the more recessive times similarly well. – Tobi Lütke, CEO (00:39:21)

-> “We are incredibly resilient as a business and as a company”: One of the best qualities about Shopify is our ability to navigate through different macro environments, different consumer trends, different business changes. Pre-COVID, you saw us operating with a particular efficiency, but also a particular eye on growth. During COVID, when things shut down, we went to work to help merchants move online. […] And I think economic environments like the one we’re in right now potentially is when merchants need us most. Shopify lowers the barrier to entrepreneurship, and we’re packed with value. Just to repeat something Tobi said because it’s very important. We were not raising venture capital like a lot of other companies were. If you look at our seven years since IPO, we were profitable five out of the seven and we like being profitable, and we’re going to work towards that. We were cash flow positive in Q4. We were AOI positive in Q4, which was the highest AOI quarter of the year. And we’re going to continue to push towards greater efficiency and be mindful of CapEx. That’s just the way we operate. We are incredibly resilient as a business and as a company, and we’ll continue to do that. – Harley Finkelstein, Vice President (00:41:27)

-> Pricing and value proposition: Our plan pricing has pretty much remained unchanged since I got here 13 years ago. In the same time, we’ve added significant value to our subscription offering to our merchants. And I – we want to keep making commerce better in it. So I think the price increase reflects a fair value exchange, but it also allows us to keep solving really, really tough problems and empower more people to become entrepreneurs. And so it’s still early days. We’re watching this closely, but I think people view Shopify as an incredible value whether you’re just getting started or you’re a much larger merchant on Plus or CCS. And so again, the value to cost ratio across every single Shopify product and Shopify plan is very much on the side of value. I think merchants understand it. And I think that the merchants that pay for Shopify every month believe they’re getting incredible value from us. – Harley Finkelstein, Vice President (00:43:22)

-> Customer acquisition strategy and attach rate: In terms of the free and paid trial, it allows us to get more merchants trying playing with Shopify. Again, the idea is we’re not changing physics here. Not every merchant will be successful. But the key for us is that we want Shopify to be the place that everybody goes to start a business. Some of those businesses won’t succeed, but the ones that do – it’s in our investor deck on our investor site. The ones that do succeed stay with us indefinitely. They take more and more of our Merchant Solutions. I mean we haven’t even got a chance to talk about our attach rate, which is almost 2.85% this year relative to 2.55% last year. I mean that is a proxy for the value and the amount of services and products our merchants use. – Harley Finkelstein, Vice President (00:48:01)


The world’s largest online marketplace for connecting people who want to rent out their homes with people who are looking for accommodations.

Q4 2022 Y/Y Δ
Nights and Experiences Booked +20%
Active Listings +16%
Revenue +24%
Adj. EBITDA +52%
*margin 27% (22)
FCF TTM +49%
*margin 41%

-> First GAAP profitable full year and revenue growth: Now before we get into our quarterly results, I want to recap the full year of 2022. While we're 3 years out from the start of the pandemic, we are still living with this impact. We've also seen high inflation, recessionary fears and the war in Ukraine, all of which we're still dealing with in 2023. And yet, through all this, people continue to travel, and 2022 was a record year for Airbnb. Revenue of $8.4 billion grew 40% year-over-year. And when you exclude foreign exchange, our revenue increased by 46% year-over-year. Net income was $1.9 billion, which marks 2022 as our first profitable full year on a GAAP basis. And finally, free cash flow was $3.4 billion. This $3.4 billion of free cash flow represented a free cash flow margin of over 40%. And because of our strong balance sheet, we were able to begin buying back stock last year, and we repurchased $1.5 billion in shares in just the past 5 months. Now during the height of the pandemic, we made some very difficult choices to reduce our spending making us a leaner and more focused company, and we've kept this discipline ever since. – Brian Chesky, Co-founder & CEO (00:03:07)

-> Highlights from the fourth quarter: Now during the height of the pandemic, we made some very difficult choices to reduce our spending making us a leaner and more focused company, and we've kept this discipline ever since. In over each of the past 2 years, we've only modestly increased our headcount. In fact, compared to 2019, our headcount is actually down 5%, while our revenue is up 75%. In every single quarter in 2022 outperformed past comparable periods. In Q4, net income was $319 million. Now this is $264 million higher than a year ago. Adjusted EBITDA was $506 million, which is 52% higher than Q4 of 2021. And we generated $455 million of free cash flow, and this is 20% higher than Q4 2021. During the quarter, we saw a number of positive business trends. First, guest demand at Airbnb remains strong. Nights and experiences booked increased 20% in Q4. We had our highest number of active bookers ever in Q4, demonstrating guest excitement of travel on Airbnb despite evolving economic uncertainties. During the quarter, we also continued to see guest booking trips further advance supporting a strong backlog for Q1. Second, guests are increasingly returning to cities and crossing border. And this is the bread-and-butter before the pandemic. Now both segments continue to accelerate while non-urban and domestic travel remains strong. Cross-border growth nights booked increased 49% compared to last year. – Brian Chesky, Co-founder & CEO (00:04:35)

-> Three strategic priorities for 2023: In 2023, we're focused on 3 strategic priorities. First, we want to make posting mainstream. If you're listening to this call, you've likely travel on Airbnb or you know someone who have. We want hosting on Airbnb to be just as popular and to achieve this, we'll continue to raise awareness around hosting, make it easier to get started and provide even better tools for hosts. Second, we are perfecting our core service. We want people who love our service. And that means obsessing over every single detail, and we've listened to our hosting guests, and based on their feedback, we're making a large number of upgrades to our service this year, including improving customer service, making it easier to find the right home and delivering greater value and much, much more. And you'll see more of this in the forthcoming in the coming months, especially our final release. Third, we're expanding beyond the core. We have some pretty big ideas for where to take Airbnb next. And this year, we're going to build the foundation for future products and services that will provide incremental growth for many years to come. So with that, Dave and I look forward to answering your questions. – Brian Chesky, Co-founder & CEO (00:07:58)

-> Organic growth and word of mouth: So let's start with the first one, urban supply growth. Let me kind of first start, Jed, by just talking a little bit more about how we think about supply. The great thing about our supply is that the vast majority of hosts that come to Airbnb come organically, and that's because of our global network. In fact, the #1 source of hosts are prior guests. And in Q4, 36% of our hosts were prior guests. And one of the other things we see is the fastest-growing market where we have supply is also the fastest-growing market we have demand. I think what's happening is a lot of our hosts are regular people. And as they get more bookings, they tend to tell their friends. And so this network is something that has a kind of self-growing effect to it. Now in addition to that, we've been doing a number of initiatives. Number one, we've been focused to make hosting easier with Airbnb set up. And between that and a new campaign we've been running Jed called Airbnb, which is basically this idea that if you have a space, you have an Airbnb. – Brian Chesky, Co-founder & CEO (00:10:23)

-> Efficiency by staying lean and layoffs: On headcount, something really interesting happened. So obviously, in 2020, we had to make some really difficult decisions and we became a much smaller and more focused company. And the obvious result of that is that we got more efficient and more profitable. But there was a less obvious result. What ended up happening is we have fewer people in meetings and people can move a lot faster. And we concentrate all of our very best people and put them on only a few problems. And I think that's been an explanation for why the company has grown really quickly. But also, I think it's made us a much more attractive place to work because it's much easier to get work done. And we have a general philosophy that we want the very best people in every field to come to Airbnb in every function. We're functionally organized. I think that we're one of the few tech companies that isn't doing layoffs. We're not cutting. We're not freezing. We're actually stepping on the gas. But in our mind, stepping on the gas doesn't mean adding a huge amount of people, we're going to continue to stay really lean, but we're really focused on just really hiring in key positions. And we -- and again, I kind of use this analogy that we're not building like a giant Navy, it's more like the special forces that's what we're focused on. So we've had a lot of success with talent. And of course, we're getting a lot of inbound. – Brian Chesky, Co-founder & CEO (00:12:39)

-> Uniqueness of Airbnb and organic traffic: On the competitive front, I mean, we have a lot of competitors and a lot of different categories. But I think Airbnb kind of stands in a class of its own. I mean we're now in over used all over the world. We're not just the U.S. business. We're not just the European business. We're a global business. We're not just vacation rentals. We're also urban and off the grid. We're known as an affordable way to travel, but we also have a lot of offering and everything in between. We have a pretty unique offering. And I think ultimately, 90% of our traffic comes direct. And that's because we have something that's unique. The vast majority of our homes don't exist anywhere else. And what we're really just focused on doing is we're obsessing over providing the very best experience for guests. And if we do that and we perfect that experience and then we do really great marketing, I think we'll do quite well. The only thing I'll say, Richard, on the distribution front is we have some unique assets that most other travel brands don't have. Let's take PR. There were 600,000 articles written about Airbnb last year. Airbnb is on social media a lot and a lot of people are talking about Airbnb on social media. So we generally have a slightly different approach to distribution, where we think just continually innovating on our product is great. – Brian Chesky, Co-founder & CEO (00:16:35)

-> Advantages regarding AI: The best loyalty program is building a product people love so much they want to come back and you have to pay them to come back. And we just take a full funnel approach to marketing around PR, and we think of our general advertising as really educating people on new products. Now as far as the changing landscape for technology, I'm actually very excited about the possibilities of AI. I think Airbnb will uniquely benefit from this. And the reason why it's because Airbnb is a fairly difficult product challenge. Unlike hotels, we don't have SKUs. There's no representative inventory. Every single 1 of our 6.6 million listings are unique guests who left more than 100 million reviews last year. And to parse through all these reviews is very glorious. And I think that AI is going to really benefit our long tail of data. And the fact that our search problem isn't really a search problem, so much as a matching problem. -- right? If there's like 50,000 homes in a city, what's the right 1 for you, that's less of a search problem than a matching problem. And I think that AI is going to be a really good opportunity for us. And just stay tuned for some developments there. – Brian Chesky, Co-founder & CEO (00:17:45)

-> Cash, SBC, and buybacks: We ended with $9.6 billion of cash on the balance sheet at the end of the year. That is after buying back $1.5 billion of stock. We have $500 million left on the existing repurchase approval, and we anticipate that will be executing early in the year. But clearly, we're also in -- still in growth mode like we are using this balance sheet to make sure that we can invest in growth for the business in the future. Clearly we keep enough cash for potential M&A opportunities, which could exist. And then to the extent that we can return stock and cash to shareholders through share repurchases that will be our primary vehicle that you would anticipate this year. We're going to have about $1 billion of stock-based compensation. We'll at least be offsetting that through share repurchases but I don't have anything more to say beyond that at this time, but we'll continue to evaluate what the appropriate amount of cash is to keep and how much we should continue to return to shareholders. But remember, we are still heavily in growth. We want to be able to invest in the long-term growth of this business. – David Stephenson, CFO (00:46:57)


The big data analytics powerhouse, with customers like the U.S Army, CIA, IBM and Amazon.

Q4 2022 Y/Y Δ
Revenue +18%
*Commercial +11%
*Government +23%
Customer count +55%
EBIT margin -3.5% (-14)
Net income margin 6.6% (-36)
BC -22%

-> GAAP profitable for the first time ever: At Palantir, we have a tradition of talking about macro events philosophy. There would be a lot to talk about this year. I think for the first time, people have seen the impact of digitization of warfare and Palantir's central role in the world. Leaving aside this, and I would love to talk more about it in the context of our earnings call, in the context of our interactions with the broader world, the transformations on the outside of the world brought to you by Palantir seem to be equally big on the inside. Palantir, for the first time, is GAAP profitable. I, in most of my discussions, talk about product, talk about product market fit, occasionally talk about revenue. And I'm often asked, well, if it's so good, why aren't you GAAP profitable? We promised you GAAP profitability in 2025, which you thought would be in 2027 perhaps. We are now, in the last quarter, GAAP profitable, and we plan to be GAAP profitable in this year. – Alexander Karp, Co-founder & CEO (00:02:06)

-> Net revenue retention and customer growth: Turning to our global top line results. We generated $1.91 billion in revenue in 2022, representing a growth rate of 24% year-over-year. In the fourth quarter of 2022, we generated $509 million in revenue, up 18% year-over-year and 6% sequentially. We generated $1.16 billion in total U.S. revenue in 2022, representing a growth rate of 32% over the year ago period. In the fourth quarter of 2022, U.S. revenue grew 19% year-over-year to $302 million. Overall, net dollar retention was 115%. Customer count grew 55% year-over-year and 9% quarter-over-quarter. Revenue from our existing customers continues to expand. Fourth quarter trailing 12-month revenue from our top 20 customers increased 13% year-over-year to $49 million per customer. – David Glazer, CFO (00:11:30)

-> Cost savings and SBC: Full-year 2022 adjusted income from operations, which excludes stock-based compensation and related employer payroll taxes, was $421 million. Fourth quarter adjusted income from operations was $114 million, representing an adjusted operating margin of 22%, 600 basis points ahead of our prior guidance. The significant beat on our adjusted income from operations guidance was driven by cost savings from our R&D efforts and disciplined spend management as well as moderated net headcount additions in the fourth quarter. The fourth quarter of 2022 was our strongest GAAP operating income quarter ever as we move closer to breakeven with an operating loss of $18 million. This is a testament to our disciplined spending amid the macro uncertainty as well as the normalization of our stock-based compensation expense overhang since becoming a public company. Stock-based compensation expense was down $38 million in the fourth quarter compared to the year ago period and down $213 million compared to the year ago period. As we look ahead to 2023, we will continue to exercise spend discipline across the company, pace hiring while continuing to invest in high priority areas, including in our product offerings, building out our go-to-market strategy and technical roles. – David Glazer, CFO (00:15:45)

-> Digitalization and AI: There's been a lot of talk about recent events in consumer Internet and OpenAI and incredible technologies that have been brought to bear. I think the biggest event in digitalization AI is actually on the battlefield. Palantir took over basically nonpublic programs when the rest of Silicon Valley at the time was very interested in not working with the military, potentially also opening offices in adversarial countries. At the time, AI was a joke, and most people purveying it were -- partially purveying some form of a PowerPoint bordering on fraud. And so we had a lot of thought going into this and spent the last 5 years building the core infrastructure that you would need to power and train AI algorithms. The proof in the pudding is simply look at events in Eastern Europe. And so every country in the world is looking how to do it. But what's super interesting in the consumer context is the technologies we built that will allow you to do AI in private networks, institutions and enterprises, have precursor technologies that will take other companies 4 or 5 years to build. [...] So we're very, very excited about this, excited about the interest and excited about bringing the fight to our adversaries. – Alexander Karp, Co-founder & CEO (00:21:47)

-> “We’re laser-focused on SBC”: We're laser-focused on SBC and we have been the last few years. If you go back to the quarter that we went public, Q3 of 2020, we had $849 million in that quarter of SBC. You go back to Q4 of 2022 just last quarter, it was only $129 million. The last 6 quarters, we've been down sequentially each quarter with our SBC, and 2022 versus 2021 is down 27% year-over-year. Stepping back, the ultimate test around SBC is really like, are you GAAP profitable? And the answer now is yes. It was yes in Q4. And as we look forward to 2023, the answer is yes there as well. Equity overall, we want to make sure that we align employees and our stockholders. And you sort of see that in the current results, which are all resulting in GAAP profitability. And so we plan to keep that alignment, to push on the top line, improve the margin and to stay GAAP profitable. – David Glazer, CFO (00:24:00)

-> Speculations about someone acquiring Palantir: You have a general move where in the last 5 years, enterprise software has moved from being a sales motion to an existential part of the enterprise, whether the enterprises commercial or in government. The war in the Ukraine proves this. I think most commercial entities in America know this. It's not clear that people know this outside of America, but this is a crucial part of your enterprise. It's also pretty clear that we've built proprietary technology that will allow you to do this in private networks in the context of regulated enterprises that is not available anywhere else. And it would take years and years to build. And that just generates a lot of interest in Palantir in a way that you didn't have before. And so our basic view of Palantir is we are in this to make institutions of the West stronger. We believe we're winning. Because we're winning, I think there's going to be a lot of interest in us in buying our software and potentially in buying us, but we are pretty focused on our product, which is us. So really not thinking about that very much at all. Gratified that there's been speculation all over that people might want to buy us, but that's really irrelevant. – Alexander Karp, Co-founder & CEO (00:27:58 )

-> Room for continued growth: I think there's a lot of positive indicators that we will continue to grow. I'm bullish on commercial. I just met with our commercial team. I suspect that will grow north of 40%. There's lots of reasons for that. Despite the fact that we may have a recession, and of course, the recession is severe enough, it will affect our revenue in the U.S. But you see a lot of positives, our customers went from something like 80 to 143 last year. It's almost 70%, 80% growth. In the U.S., we only have 15% of the top 1,000 companies buying our product, which means we have a lot of room for growth. And last and not least, arguably, most importantly, in the U.S., all kinds of enterprises buy our product. [...] They buy different parts of the product, and they're friendly to new things, and they've also gone through a cycle of seeing a lot of the enterprise products are just for churning and storing your data that there's not many results, and they're actually very expensive. And people are suspectful of having a compute model and something that gives you a margin. – Alexander Karp, Co-founder & CEO (00:31:58 )