Weekend Update #151

Thank you for your continued support and engagement. 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.

With his press conference remarks on Wednesday, Jerome Powell gave the go-ahead to equities for an upswing as the Federal Reserve took a balanced approach to the FOMC statement and press conference, even in light of recent indicators pointing to sticky inflation. The S&P 500 posted its biggest weekly gains of 2023 and yields fell with the 10-year U.S. Treasury bill ending the week at 4.57% as a risk-on sentiment strongly prevailed in light of the Fed Chair’s comments and a “Goldilocks” labor report on Friday.

Labor market data appeared to remain tight with a strong JOLTS report showing a reversal of progress on labor market tightness at 9.5 million job openings in September and 1.50 job openings per unemployed worker. However, Friday’s nonfarm payrolls report for October showed just 150,000 jobs added in the month, below the expected 180,000 jobs added — which signals that interest rates are finally showing signs that the Federal Reserve is getting closer to restoring balance to the labor market and therefore, closer to declaring a win over inflation. There were still signs of potential concern with average hourly earnings posting a 4.1% year-over-year gain in October, remaining above the consensus estimate and far from the 3.0% target set out by the Federal Reserve. The U-3 unemployment rate also increased to 3.9% in October, triggering the widely followed Sahm Rule indicator, which also opens up concerns over the downside to economic activity.

The densest week of earnings this quarter revealed companies being increasingly punished for misses on earnings and strong rewards for companies that have held up through decent economic activity in Q3 — among which, ROKU and SDGR were some of the biggest gainers in trading for the week following strong earnings reports. However, industrial stocks such as CAT and TRMB also posted warnings on growth concerns going into 2024 as businesses remain pressured by slowing growth and are beginning to cut back on spending in response to the worsening economic outlook, and various consumer companies have warned of value-seeking behavior starting to take hold as we move into the holiday season.

Friday’s Close (Weekly Performance)

S&P 500 4,358.34 (+5.85%)

Nasdaq 13,478.28 (+6.61%)

Dow Jones 34,061.32 (+5.07%)

Thank you Blue Room Analyst JARED FENLEY

Q4 FY2023 September Quarter Outlook

“As we move ahead into the December quarter, I'd like to review our outlook, which includes the types of forward-looking information that Suhasini referred to at the beginning of the call. The color we are providing today assumes that the macroeconomic outlook doesn't worsen from what we are projecting today for the current quarter. Also, on foreign exchange, we expect a negative year-over-year revenue impact of about 1 percentage point.

As a reminder, the December quarter this year will last the usual 13 weeks, whereas the December quarter a year ago spanned 14 weeks. For clarity, revenue from the extra week last year added approximately 7 percentage points to the quarter's total revenue. Despite having one less week this year, we expect our December quarter, total company revenue to be similar to last year. We expect iPhone revenue to grow year-over-year on an absolute basis. We also expect to grow after normalizing for both last year's supply disruptions and the one extra week.

We expect Mac year-over-year performance to significantly accelerate from the September quarter.

We expect the year-over-year revenue performance for both iPad and Wearables, Home and Accessories to decelerate significantly from the September quarter due to a different timing of product launches.

On iPad, we launched a new iPad Pro and iPad 10th Generation during the December quarter a year ago. For the Wearable category, last year we had the full December quarter benefit from the launches of the AirPods Pro 2nd Generation, the Watch SE, and the first Watch Ultra.

For our Services business, we expect the average revenue per week to grow at a similar strong double-digit rate as it did during the September quarter.

We expect gross margin to be between 45% and 46%. We expect OpEx to be between $14.4 billion and $14.6 billion. We expect OI&E to be around negative $200 million, excluding any potential impact from the mark-to-market of minority investments and our tax-rate to be around 16%.”

IN

Kevin Conroy — Chief Executive Officer, President & Chairman of the Board

Our third-quarter results reflect our commitment to help eradicate cancer with test that prevented, detected earlier and guide its treatment. Cologuard and Oncotype DX fuel our growing $2.5 billion business, and the next wave of breakthrough cancer diagnostic innovations. Our focus on solving the needs of patients and healthcare providers powered outstanding third quarter results, allowing us to raise our 2023 guidance, for both revenue and adjusted EBITDA.

Highlights from the third quarter include, delivering more than 1 million total tests, including a record number of Cologuard and Oncotype DX results. Growing core revenue of 23% to $625 million, also a record, generating $56 million of adjusted EBITDA a $69 million improvement. Exceeding 1 million people screened with Cologuard between ages 45 and 49 in the 2.5 years since the recommended start age was moved from 50 to 45.

Expanding the impact of Oncotype DX by launching in Japan on a reimbursed basis. Beginning to integrate Resolution Bioscience in our new liquid therapy selection tests into our portfolio. Presenting pivotal BLUE-C study results at the American College of Gastroenterology Conference, demonstrating next-generation Cologuard met all endpoints. And showcasing the breadth and depth of our research with five abstracts with our Precision Oncology and multi-cancer tests at the European Society of Medical Oncology Congress. The investments we've made in our core business are returning sustainable revenue growth and margin expansion. This allows us to strengthen our world-class team and develop new life-changing solutions for patients.

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Cristiano R. Amon — President & CEO, Qualcomm Inc.

Thank you, Mauricio, and good afternoon, everyone. Thanks for joining us today. In fiscal Q4, we delivered non-GAAP revenues of $8.7 billion in non-GAAP earnings per share of $2.02 above the high-end of our guidance. Revenues from our chipset business of $7.4 billion reflect a more stable Android handset environment. Licensing business revenues were $1.3 billion.

During the quarter, we also made significant progress on our leading technology and product roadmaps while improving operational efficiency. We remain fully focused on our future growth and diversification opportunities. Let me now discuss key highlights from the business.

As we enter the age of generative AI, we're seeing an unprecedented pace of innovation. On-device GenAI is evolving in parallel with GenAI in the cloud, enabling entirely new use cases. It has the potential to change how we interact with our devices, making the user experience more natural, intuitive, relevant, and personal, with increased immediacy, privacy, and security.

We have quickly established Qualcomm as a leader in on-device GenAI for smartphones, next-generation laptops, XR, and automotive, and we are well-positioned to benefit from this opportunity. We expect high-performance on-device AI to become a requirement over the next few years, driving content, units, or both.

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Eric Hansotia — Chairman, President & Chief Executive Officer

Good morning. AGCO has consistently delivered record results over the last two years. And I'm pleased to tell you that the third quarter of 2023 is no different. AGCO delivered $3.5 billion in third quarter sales, nearly 11% higher than the third quarter of 2022. Operating margins in the quarter were 12.3%, and 12.6% on an adjusted basis. That's 190 basis points better than 2022. This marks the fifth consecutive quarter with operating margins above 10.5%, which is evidence of how we have structurally transformed our business and further demonstrates the progress we're making towards our mid-cycle 12% operating margin target. This strong financial performance reflects the continued success of our Farmer-First strategy, focused on growing our Precision Ag business, globalizing a full line of our Fendt branded, and expanding our parts and service business. Our North and South American Fendt sales are ahead of our growth targets as we expand our distribution networks in the regions to give more farmers access to the industry's best equipment, and we continue to have the best parts fill rates in the industry.

Our strategy is generating strong growth in each of these margin-rich businesses, providing the foundation for 2023 to be another record year in sales, operating margin, earnings per share, and free cash flow. Our expanding tech stack is taking our products to new levels of performance and efficiency putting us in a winning position as farmers' most trusted partner for industry-leading smart farming solutions. The recently announced joint venture with Trimble is truly transformational for AGCO and for farmers. It also aligns perfectly with our strategy of focusing on a greater percentage of our business and the high-margin, high-growth Precision Ag segment of our industry. We'll talk more about the planned JV in a few minutes.

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Brian Chesky — Co-Founder and Chief Executive Officer

Q3 was another strong quarter for Airbnb. We had over 113 million Nights and Experiences Booked. Revenue of $3.4 billion, grew 18% year-over-year. Net income was $4.4 billion. Now, this includes a one-time income tax benefit from the release of a valuation allowance of $2.8 billion. But even excluding this tax benefit, adjusted net income was $1.6 billion, our highest-ever represented an adjusted net income margin of 47%. And free cash flow for the quarter was $1.3 billion. In fact, on a trailing 12-month basis, our free cash flow was $4.2 billion, which is also our highest ever. And because of our strong cash flow and balance sheet, we repurchased over $500 million of our stock.

Now during the quarter, we saw a number of positive business -- business highlights. First, we've added nearly one million active listings this year. Our supply grew 19% in Q3 compared to a year ago. We once again saw double-digit supply growth across all regions with the highest growth in regions with the highest demand. Urban and non-urban supply increased at nearly the same rate. And we saw a relatively similar supply growth among individual and professional Hosts with the majority of new listings exclusive to Airbnb.

Second, Q3 was a record travel season on Airbnb. Nights and Experiences Booked grew 14% in Q3 compared to a year ago. We saw an acceleration in Nights growth across all geographies. And we were particularly encouraged by the growth of first-time bookers during Q3. And we saw more Nights than ever booked in the Airbnb app with 53% of gross nights booked in the app, compared to 48% in the same period last year.

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David Kirn — Chief Executive Officer & Co-Founder

Before we dive in, we're proud to announce that 4D-710 will be featured tomorrow in the plenary session of NACFC for the second consecutive year, and also on Friday, in a symposium presentation by Dr. Taylor-Cousar, entitled, "Building a Path to the Cure, the Role of AAV Therapy".

Today, we're pleased to share additional positive data and updates that have led us to strengthen our commitment to pulmonology.

Our wholly-owned pulmonology franchise is powered by our aerosolized A101 vector and is currently focused on 4D-710 for cystic fibrosis lung disease and 4D-725 for alpha-1 antitrypsin or A1AT deficiency lung disease.

In terms of the clinical update on 4D-710, which is currently being studied in the Phase 1/2 AEROW Clinical Trial, today we'll present data from seven participants treated at two dose levels, one times 10 to the 15th vector genomes or 1E15 vg and 2E15 vgs.

To date, 4D-710 has generally been well tolerated during dosing and with long-term follow-up for up to 17 months. We have seen promising and reproducible CFTR transgene expression in all 34 lung samples collected from all seven participants.

The CFTR protein expression levels were significantly higher than normal controls, with 98% of airway cells expressing CFTR, including in basal cells and secretory cells, and at levels approximately 450% of normal lung controls. This profile significantly exceeds our target expression profile for 4D-710.

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REGENERON REPORTS THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS

Third quarter 2023 revenues increased +15.0% to $3.36 billion versus third quarter of 2022
Third quarter 2023 Dupixent global net sales (recorded by Sanofi) increased 33.0% to $3.10 billion versus third quarter 2022
Third quarter 2023 US net sales for EYLEA and EYLEA HD were $1.49 billion, including $43 million from EYLEA HD
Third quarter 2023 Libtayo global net sales increased 62% to $232 million versus the third quarter of 2022
Third quarter 2023 GAAP diluted EPS of $8.89 and non-GAAP diluted EPS of $11.59; includes unfavorable $0.77 impact from acquired IPR&D charge
FDA approved EYLEA HD for wet age-related macular degeneration (wAMD), diabetic macular edema (DME), and diabetic retinopathy (DR) and Veopoz for CHAPLE disease
Two-year results reported for EYLEA HD from pivotal PULSAR trial demonstrated durable vision gains at extended dosing intervals in wAMD
FDA accepted for priority review BLA for odronextamab for follicular lymphoma (FL) and diffuse large B-cell lymphoma (DLBCL) and sBLA for Dupixent in eosinophilic esophagitis (EoE) in children aged 1 to 11 years of age
Acquisition of Decibel Therapeutics complete, strengthening genetics medicines portfolio

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David Ricks — Chair & Chief Executive Officer

In Q3, Lilly continued the progress we've made so far this year. We delivered strong financial results, continued to advance our R&D pipeline, and invested in our future through several business development transactions.

As you can see on slide four, we continue to make progress against our strategic deliverables this quarter. Excluding revenue from the olanzapine portfolio and COVID-19 antibodies, revenue grew 24%. Our new products and growth products combined contributed approximately 17 percentage points towards volume growth, with over 12 percentage points coming from our growth products.

Last week, we announced that the FDA approved Omvoh for the treatment of moderately to severely active ulcerative colitis in adults. This marks Lily's first approval in the US for a type of inflammatory bowel disease, and it's important for Lilly's growth in its immunology portfolio. In addition to the FDA approval for Omvoh, we had several other important pipeline updates since our last earnings call. Specifically, Jardiance was approved by the FDA for the treatment of adults with chronic kidney disease at-risk of progression. And we reported positive Phase III results from the VIVID-1 trial, which evaluated the safety and efficacy of mirikizumab for the treatment of adults with moderately to severely active Crohn's disease.

IN

Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remain uncertain. The Committee remains 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 maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, 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 mortgage-backed securities, as described in its previously announced plans. 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 impede the attainment of Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on 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; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Phillip N. Jefferson; Neel Kashkari; Adriana D. Kuglar; Lorie K. Logan; and Christopher J. Waller.

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Brian Armstrong — Co-Founder and Chief Executive Officer

Let me start with a provocative statement. Onchain is the new online. The Internet was and is a game-changing technology that redefined our modes of communication, business and social interaction. It broke down barriers, democratized access to information and made knowledge universally accessible. Blockchain and crypto are doing the same thing today with a re-decentralization of the web and the introduction of a new building block, ownership. Instead of just reading and writing on the traditional Internet, onchain, you can now read, write and own.

Onchain is about digital assets, broader access to financial services and even changes how we think about identity, governance, artwork and non-financial services. Crypto creates a level playing field where everyone, irrespective of their socioeconomic status or geographic location, has access to more robust and transparent systems. Crypto creates a world with fewer middlemen, lower fees, faster transaction speeds, and greater protection and control over one's digital assets and identity.

It is for all of these reasons that we believe that crypto is the greatest tool in increasing global economic freedom. We also think that onchain will be as essential and impactful as the Internet is today. If we look back to the early years of the Internet, the companies that ignored the noise and built for the future of the Internet now stand as tech giants. The onchain companies of today will be the tech giants of tomorrow. Coinbase stands at the forefront of this technology and continues to build a responsible, compliant, trusted, financially strong, and innovative business that is building those linchpins products.

Speaking of financial strength, Q3 has been another strong quarter for us. In Q3, we delivered positive adjusted EBITDA for the third consecutive quarter and demonstrated continued operational discipline. In fact, we're on track to deliver meaningful positive adjusted EBITDA this year, which reflects the direction we set at the start of this year to be a company that can generate adjusted EBITDA in all market conditions.

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Ramy Farid — President & Chief Executive Officer

Thanks, Jaren, and thank you, everyone, for joining us today. We had a successful and exciting third quarter marked by several important milestones for the company. We reported total revenue of $42.6 million, representing 15% growth compared to the third quarter of 2022, and we are on track to deliver on our full-year revenue guidance.

We began patient dosing for our Phase I study of SGR-2921, and we received CTA approval to open clinical trial sites for our SGR-1505 patient study in Europe. Additionally, SGR-3515 is advancing, and we also have a number of exciting discovery programs just behind our lead programs, which we will discuss at more length at our pipeline day in December. Today we reported that rights to two related oncology discovery programs within the BMS collaboration reverted to us after BMS elected not to proceed with further development for strategic reasons. These programs were making excellent technical progress and our team is assessing the next steps for these programs in the context of our overall portfolio strategy. The BMS continues to be an important partner. We have three active research programs in the collaboration as well as SOS1, which reached development candidate status and transitioned to BMS earlier this year. We are also discussing the potential for additional discovery programs with BMS. Collaborations are an important part of our business and we continue to evaluate new partnerships where the science, overall scope, and value are consistent with our strategy.

Turning to our software business, we remain confident about the opportunity for significant revenue growth among our largest software customers this year. The interest in computationally-driven drug discoveries quite high, and we are seeing more customers increase in their utilization of our platform. We're continuing to invest in the development of new capabilities to enhance the value of our platform, and we expect these capabilities to support continued growth in our software business for many years to come. Our latest quarterly software release incorporates a number of key technologies, including the ability to more accurately predict certain ADMET properties, such as binding to cytochrome P450s and hERG, and technology that allows for prediction of antibody affinity as a function of pH.

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James Miln

Good afternoon everyone, and thanks for joining us on Yelp's third quarter 2023 earnings conference call. Joining me today are Yelp's Chief Executive Officer, Jeremy Stoppelman; Chief Financial Officer, David Schwarzbach; and Chief Operating Officer, Jed Nachman.

We published the shareholder letter on our Investor Relations Web site and with the SEC, and hope everyone had a chance to read it. We'll provide some brief opening comments and then turn to your questions.

Now I'll read our Safe Harbor statement. We'll make certain statements today that are forward-looking and involve a number of risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. In addition, we are subject to a number of risks that may significantly impact our business and financial results. Please refer to our SEC filings, as well as our shareholder letter for a more detailed description of the risk factors that may affect our results.

During our call today, we'll discuss adjusted EBITDA, adjusted EBITDA margin, and free cash flow, which are non-GAAP financial measures. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with Generally Accepted Accounting Principles. In our shareholder letter released this afternoon and our filings with the SEC, each of which is posted on our Web site, you will find additional disclosures regarding these non-GAAP financial measures as well as historical reconciliations of GAAP net income to both adjusted EBITDA and adjusted EBITDA margin, and historical reconciliation of GAAP to cash flows from operating activities to free cash flow.

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Earnings Release Commentary

Caterpillar Inc. announced third-quarter 2023 sales and revenues of $16.8 billion, a 12% increase compared with $15.0 billion in the third quarter of 2022. The increase was primarily due to favorable price realization and higher sales volume.

Operating profit margin was 20.5% for the third quarter of 2023, compared with 16.2% for the third quarter of 2022. Adjusted operating profit margin was 20.8% for the third quarter of 2023, compared with 16.5% for the third quarter of 2022. Third-quarter 2023 profit per share was $5.45, compared with third-quarter 2022 profit per share of $3.87. Adjusted profit per share in the third quarter of 2023 was $5.52, compared with third-quarter 2022 adjusted profit per share of $3.95. Adjusted operating profit margin and adjusted profit per share for both quarters excluded restructuring costs.

For the nine months ended September 30, 2023, enterprise operating cash flow was $8.9 billion, and the company ended the third quarter with $6.5 billion of enterprise cash. In the quarter, the company paid dividends of $0.7 billion and repurchased $0.4 billion of Caterpillar common stock.

“I’d like to thank our global team for delivering another great quarter, as demonstrated by double-digit top-line growth, strong adjusted operating profit margin, and robust ME&T free cash flow,” said Chairman and CEO Jim Umpleby. “We remain focused on supporting our customers’ success and executing our strategy for long-term profitable growth.”

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Third Quarter Press Releases and Relevant Business Updates

Aug. 17, 2023 – Moderna announced that preliminary clinical trial data from its updated COVID-10 vaccine for the fall 2023 vaccination season showed a significant boost in neutralizing antibodies against EG.5 and FL.15.1 variants. These results suggest that Moderna’s updated COVID-19 vaccine may effectively target the expected circulating variants of COVID-19 during the upcoming vaccination season.

Sept. 6, 2023 – Moderna announced that clinical trial data from its research assay confirm its updated COVID-19 vaccine for the fall 2023 vaccination season generates an 8.7-fold increase in neutralizing antibodies in humans against BA.2.86, a variant under monitoring. The CDC

Sept. 8, 2023 – Moderna has been notified that TRC Capital Investment Corporation has made an unsolicited “mini-tender” offer to purchase up to 1,000,000 shares of Moderna’s common stock, at an offer price of $107.56 per share, approximately 4.4% lower than the closing price of Moderna common stock on the Nasdaq Global Select Market on September 1, 2023, the last trading day prior to the date of the offer. Moderna does not endorse TRC Capital’s unsolicited mini-tender offer and recommends that shareholders do not tender their shares in response to the offer.

Sept. 11, 2023 – Moderna and Immatics (NASDAQ: IMTX), a clinical-stage biopharmaceutical company active in the discovery and development of T cell-redirecting cancer immunotherapies, announced a strategic research and development collaboration to pioneer novel and transformative therapies for cancer patients with high unmet medical need. The strategic R&D collaboration between Moderna and Immatics is built upon three pillars: (1) Applying Moderna’s mRNA technology for in vivo expression of Immatics’ next-generation, half-life extended TCR bispecifics targeting cancer-specific HLA-presented peptides; (2) Enabling the discovery and development of novel mRNA-based cancer vaccines by leveraging Moderna’s deep knowledge of mRNA science and customized information from Immatics’ wealth of tumor and normal tissue data included in the target discovery platform XPRESIDENT and its bioinformatics and AI platform XCUBE; and (3) Evaluating Immatics IMA203 TCR-T therapy targeting PRAME in combination with Moderna’s PRAME mRNA-based cancer vaccine. The collaboration contemplates conducting preclinical studies and a Phase 1 clinical trial evaluating the safety and efficacy of the combination with the objective of further enhancing IMA203 T cell responses.

IN

Despite the quarterly sales beat, we consider the fourth quarter outlook and implications for the Mi300 ramp in the data center to be underwhelming relative to our expectations. Breaking down the guide, we estimate that Data Center revenue will be $2.350 billion in the fourth quarter versus our $2.450 billion estimates. While the forecast is within our expected range of outcomes, the unit sales momentum is not at the same level as higher volume peers. Based on an initial four-quarter run rate of $1.6 billion ($400 million x 4 quarters) worth of Mi300 sales in the fourth quarter, and AMD’s forecast of $2 billion of full year Mi300 sales in 2024, growth in the product segment would be +25.0% Y/Y. Although this is strong growth for regular normal product launch, we see competitors scaling their data center GPUs at rates in the high 50% from CY23 to CY24. Additionally, we see additional supply coming online in the North American markets after the announcement of expedited export bans against China-specific GPUs.

Quarterly revenue beat consensus estimates ($5.800 billion actual versus $5.703 billion expected), led by stronger-than-expected growth in the client segment as inventory levels in the PC market normalized and returned to typical seasonal trends. With continued sell-in of Ryzen 7000 series processors and the Windows refresh on October 14, 2025, client-focused semiconductors are forecasted to resume growth in CY2024. The Gaming and Embedded segments were weaker-than-expected (as detailed in our quarterly earnings graphic) and are expected to remain weak for several quarters. In Gaming, the lifecycle of semi-custom consoles are reaching maturity and in the Embedded segment, customer inventories are being rebalanced after a three-year period of high lead times.

On a GAAP basis, operating expenses for the quarter came in 11.45% higher ($2.523 billion actual versus $2.264 billion expected), mostly led by investments in R&D and go-to-market of EPYC fourth generation processors and the ramp of Mi300 for the fourth quarter. This led to EPS coming short by 9c ($0.18 reported versus $0.27 expected). On a non-GAAP basis the company reported 70c EPS versus the 68c expected.

IN

Rob Painter — President & Chief Executive Officer

Welcome, everyone. Before I get started, our presentation is available on our website, and we ask that you refer to the Safe Harbor at the back. Our financial commentary today will reflect non-GAAP performance metrics, including organic growth comparisons, which refer to the corresponding period of last year unless otherwise noted.

Simplification, focus, and execution are the themes of today. I'll start with a review of the third quarter, then put a Trimble lens on the current market environment we see, followed by an overview of how we are taking action to maintain our strategic and financial progression.

Let's begin on slide two with a review of the third quarter. The clear highlights were continued ARR growth and gross margin progression, which translated into EBITDA progression. ARR stands at a record $1.94 billion, up 25% and up 13% organically. 50% of our revenue is now recurring.

Gross margin finished at a record 65%, a reflection of our Connect & Scale strategy translating into a more durable and attractive business model. EBITDA at 28% is also a record. The big strategic news of the quarter was the announcement of our joint venture with AGCO in our agriculture business.

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Paul Hennessy

Thank you, Chris. Good morning, everyone. Thank you for joining us today and I wish everyone a Happy Halloween. In the third quarter, Shutterstocks Data and Creative Engines fueled faster growth and furthered the transformation of our business. Enterprise demand picked up and we expect a further acceleration into the fourth quarter. We are seeing stabilization and are executing operationally to drive a recovery in E-commerce over the next several quarters, supported by marketing and product innovation on top of strong operational performance.

Shutterstock also delivered exceptionally strong financial performance this quarter with record revenues of $233 million representing growth of 14% year-on-year. We continue to be highly profitable, generating $65 million of EBITDA, or 28% margins. EBITDA has exceeded $60 million every quarter for three consecutive quarters and we are on track to grow EBITDA by double-digits this year. Based on our strong year-to-date performance and improved confidence and visibility in our business, we are again raising both revenue and EBITDA guidance for 2023 which Jarrod will discuss in more detail.

Q3 also marked the first quarter where Enterprise revenues exceeded E-commerce revenue for Shutterstock. Our enterprise channel is posting consistent growth and in the third quarter grew 60% in total, and grew 4% excluding Data. We continue to experience strong growth in subscription offerings for medium-sized enterprises with our Flex product, which grew 9% in the third quarter, and we also saw strong momentum at Shutterstock Studios, signing our two largest deals ever. Studios has a strong beachhead in virtual production, leveraging 3D assets for gaming ecosystems. We view this market opportunity as having tremendous legs as the gamification of entertainment and interactive media continues strength in SMB products and Studios is expected to drive accelerated Enterprise growth of between 10% and 15% in the fourth quarter, excluding data, on the 3D front.

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Third Quarter Press Releases and Relevant Business Updates

Aug. 3, 2023 – WW international announced that William Shrank, MD, MSHS, Venture Partner of Bio and Health at Andreseen Horowitz, and former Chief Medical Officer at Humana, has been appointed to the WeightWatchers Board of Directors, effective as of August 5, 2023. Previously, Dr. Shrank served as Senior Vice President, Chief Scientific Officer and Chief Medical Officer of Provider Innovation at CVS Health from 2013 to 2016. Prior to joining CVS Health, Dr. Shrank served as DIrector, Research and Rapid-Cycle Evaluation Group, for the Center of Medicare and Medicaid Innovation, part of the centers for Medicaid and Medicare Services (CMS) from 2011 to 2013, where he led the evaluation of all payment and health system delivery reform programs and developed the rapid-cycle strategy to promote continuous quality improvement.

Sept. 8, 2023 – WW international announced that it will present at the following investor conferences: Baird 2023 Global Healthcare Conference; Morgan Stanley 21st Annual Global Healthcare Conference.

Sept. 22, 2023 – Oprah Winfrey engaged in “The State of Weight,” a conversation with leading experts that addressed myths to lift the shame surrounding obesity and overweight. Oprah and her panelists explored the science and psychology of weight and obesity, did a deep dive into the new drugs and shared powerful testimonials from individuals living with the chronic condition.

Oct. 6, 2023 – WW international announced that WeightWatchers for Business has fully integrated WW’s science-proven behavioral program with its virtual obesity clinic and medication management. The Company now offers a full spectrum weight health platform designed for employers and health plans, that delivers individualized member pathways based on true clinical need. WeightWatchers for Business helps organizations navigate the puzzling GLP-1 medication and associated insurance landscape, building on its 30+ years of science-backed expertise in the employer-sponsored healthcare space with a complete cost management and utilization strategy that includes preventing progression and facilitating remission of weight-related conditions, as well as managing weight before, during and after pharmacotherapy.

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Harley Finkelstein — President

Good morning, everyone. We are here to discuss our latest quarterly results, which reflect Shopify's continued growth and commitment to empowering businesses around the globe. Our Q3 results should be taken as a clear indicator of our ability to reshape Shopify, making us faster, more agile, and ready for sustained profitable growth.

GMV was up 22%, revenue was up 25%, gross profit was up 36%, and free cash flow margin was 16%. Simply put, we executed extremely well in Q3, delivering results that reflect the power of our merchant-first business model and the progress we are making to further solidify Shopify's position as the global leader in commerce.

At Shopify, we excel in the face of change. It's embedded in our DNA and inspires us to continually learn, innovate and deliver more products to make commerce better for everyone. In the past six months, I've talked about how the wider commerce landscape is rapidly changing and how Shopify has adapted to this, operating with greater discipline and efficiency to ensure our merchants have the tools they need to navigate any macroeconomic environment.

The trust we have built with our merchants combined with our growing scale highlights the power of our platform and gives us increasing opportunities to deliver even more value to our merchants. From small local retailers to large global corporations, Shopify is helping them achieve even greater heights of success.

So let's dive in to the key accomplishments in the quarter, as we continue to execute on the massive opportunity ahead, supercharging merchants of all sizes to sell to anyone, anywhere, and always.

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Anthony Wood — Founder, Chairman and Chief Executive Officer

We are executing well as the shift to TV streaming continues and delivered a strong quarter. We grew our scale with net adds of 2.3 million active accounts, an acceleration from the previous quarter. We drove strong engagement with streaming hours surpassing 100 billion for the first time on a trailing 12-month basis, and the Roku Channel remains a top 10 streaming app with engagement comparable to Paramount+, Peacock and Max according to Nielsen. On the monetization side, platform revenue was up 18% year-over-year, reflecting strong contribution from content distribution and video advertising. We continue to tap into new ad demand sources and are now integrated with more than 30 programmatic partners.

Spend on the Roku platform through automated third-party demand sources in Q3 grew meaningfully year-over-year, and we expanded our partnerships with marquee brands this quarter. With Spotify, we introduced video ads in the Spotify app on Roku devices and with the NFL, we launched the first League-branded zone in the Roku Sports Experience. We continue to make progress in reducing our year-over-year OpEx growth rate. In September, we announced additional measures that included a reduction of our workforce and office facilities and the removal of select content. These measures and other cost reductions, along with our strong top line growth, enabled us to deliver adjusted EBITDA of $43 million in Q3. Going forward, we will balance investment for growth with our commitment to positive adjusted EBITDA for the full year 2024, and we expect continued adjusted EBITDA improvements after that.

With our growing scale and engagement, relentless focus on providing the best TV streaming experience and ongoing innovation, we are well positioned as the ad market recovers.

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October was nothing short of chaotic in the oil and gas market. Crude oil appeared with unusual frequency on the front-page this month with colossal mergers and acquisitions, rising geopolitical tensions, and other market-shaking news seemingly without reprieve. Despite a slog of ever-increasing tail-risks to the upside, the WTI benchmark fell over the course of the month, settling at $83/bbl after ending September at more than $91/bbl. To this end, despite the continued signs of tightness in the physical crude oil market, complemented by the powder keg that is Iran, investors continue to struggle balancing the reality of the oil market with continued market and macroeconomic concerns.

The month began with the Kingdom of Saudi Arabia and Russia announcing the continuation of their voluntary oil cuts through December 2023. In the Saudi Press Agency’s release, the leader of OPEC continued its justification of the supply reduction through the aim of supporting the stability and balance of oil markets. It was at this time that the price of oil began to slip from its year-to-date highs, falling from $94.75 per barrel to $82.06 over the course of one week. Herein lies the paradox: when the balance for crude is recognized as exceptionally tight and supply is further constrained, investors take that as a sign demand must be faltering somewhere. Indeed, any indication of demand weakness – as seen through data or imagined through economic forecasts – has profound negative effects on the price of crude. So despite global inventories resting at record-low levels and all indications pointing to further drawdowns, the price of crude oil continues to trade headline-to-headline, searching for any sign of weakness so that it can sell off.

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Weekend Update #151

Featured Guest: Hillary SchoelzelCo-Founder of Key to Storytelling

Weekend Update #152

Weekend Update #150

Featured Guest:
Hillary Schoelzel
Co-Founder of Key to Storytelling