๐๏ธ Weekly Quotes: LVMH, Netflix, ASML...
โ Analysing the Earnings Calls of LVMH, Netflix, Infosys, ASML, TSCM, IB, Charles and Bank of America.
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๐๏ธ This week's earnings calendar
We are off to a great start, analysing some of the highest quality companies an investor can buy. We hope this is the first of many releases and I hope this new content helps you and adds value to your daily life as an investor.
This week the following quality companies, selected by Quality Value, presented their results:
Today we look at one of the world's largest banks, which will help us understand the state of the current economy (Bank of America), one of the world's best luxury companies (LVMH), two of the best semiconductor companies (ASML & TSMC), two of the best financial brokers (Charles & IB), one of the largest IT companies and the OTT giant (Netflix).
Let's get straight to the point. ๐
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Summary and analysis of earning calls:
1- Netflix:
๐ Post-earnings share price performance:
๐๏ธ Summary of the questions and answers:
Netflix does not present its results, but rather holds a press conference to answer questions from analysts. So without further ado, let's get straight to the summary:
Revenue growth drivers: Netflix's 2025 revenue growth will be driven by a combination of membership growth, ARM (Average Revenue per Member) increases, and advertising expansion. Majority of growth in 2025 will be membership-driven, with expected incremental revenue of $4B to $5B, reflecting 11% to 13% year-over-year growth.
Profit margins outlook: Operating margins are expected to grow steadily over the long term, with 6 percentage point expansion in 2024. Margin increases will depend on strategic investments in content, live events, ads, and games. Netflix aims for gradual margin growth by investing in improving its service and controlling costs.
Latin American performance: Q3 saw a slight net loss in members in the LatAm region due to recent price increases, but revenue growth remains strong (up 9% YoY). Netflix expects LatAm membership growth to rebound in Q4, supported by popular regional content releases.
Advertising revenue: Ad-tier memberships accounted for 50% of sign-ups in Q3, with ad-tier membership up 35% quarter-over-quarter. Ads are not yet a primary revenue driver but are expected to double in 2025, with U.S. upfront ad sales commitments increasing by over 150%.
Partnerships and ad tech: Netflix is expanding programmatic capabilities through partnerships with The Trade Desk and Google, with plans to launch its first-party ad server in Canada this quarter and globally in 2025. More demand through these channels is expected to improve ad monetization and CPMs.
Content investment and engagement: Netflix continues to invest in original global content with notable releases in Q3 and a strong upcoming 2025 slate. Engagement remains stable, with average viewing hours up 1% YoY in the first half of 2024, supported by live events and hit series.
Pricing strategy: Netflix raised prices in select regions (Europe, Japan) and will continue to adjust pricing based on consumer value and engagement metrics. The focus remains on maintaining a balanced price spread between ad-supported and non-ad tiers to optimize long-term revenue growth.
Capital allocation: Netflix maintains a disciplined capital allocation policy, prioritizing reinvestment in growth and returning excess cash to shareholders via share repurchases. No plans to increase leverage or issue dividends.
This summary highlights the key financial themes from the earnings call, including Netflix's growth strategy, focus on advertising, and disciplined capital management.
๐Links to the investor relations website
2- Infosys:
๐ Post-earnings share price performance:
๐ฌ General summary of the presentation by the Board of Directors:
Revenue growth: 3.1% quarter-on-quarter (QoQ) and 3.3% year-on-year (YoY) in constant currency.
Financial performance: Stable operating margin at 21.1%, and strong free cash flow generation at $839 million.
Large deals: $2.4 billion in large deals signed during the quarter, with a strong pipeline for deals below $50 million.
Sector growth:
Financial Services grew 2% QoQ.
Manufacturing posted double-digit growth.
Energy, Utilities & Services grew 5.8% QoQ.
Retail remains challenged due to macroeconomic uncertainties.
Employee metrics: Attrition stabilized at 12.9%, with headcount additions after six quarters of decline (+2,500 employees).
AI initiatives: Significant focus on generative AI, with the development of industry-specific applications and partnerships.
CapEx plans: Continued investment in AI, cloud, and digital transformation projects across sectors.
FY '25 guidance: Revenue growth forecast revised to 3.75%โ4.5% in constant currency; operating margin guidance remains unchanged at 20%โ22%.
๐๏ธSummary of the questions and answers:
Revenue growth guidance: Revised upward due to strong Q2 performance, broad-based growth across sectors, and increased volume in Financial Services. Smaller deals (< $50 million) also grew in double digits, contributing to the guidance revision.
Generative AI (Gen AI):
Currently integrated into large deals to drive productivity and efficiency, not yet a primary driver of new large transformation deals.
Focus remains on embedding AI into existing large contracts rather than solely triggering new multiyear contracts.
Margins:
Factors impacting second-half margins include compensation hikes and seasonality (furloughs, fewer working days).
Tailwinds include operational efficiencies from "Project Maximus," such as pricing optimization and cost management.
Deal pipeline:
The pipeline for large deals remains stable and strong, though large deals can be lumpy from quarter to quarter.
Smaller deals (< $50 million) saw increased pipeline activity, adding strength to the overall deal pipeline.
Financial Services sector:
Strong discretionary spending in U.S. capital markets, mortgages, and cards and payments.
Broad-based growth in Financial Services, despite some slowdowns in the automotive sector in Europe.
Wage hikes:
Planned in two phases: January 2025 for junior employees and April 2025 for others. Variable pay has increased this quarter, partly offsetting wage hike effects.
Inorganic growth: Acquisitions contributed 0.8% to revenue growth in Q2, with continued impact expected in Q3 and Q4.
Outlook for H2:
Cautious optimism due to typical seasonality in H2, but growth could be softer compared to H1 due to fewer working days and furloughs.
Smaller deal pipeline growth may drive near-term revenue, but no confirmation yet if this trend is sustainable.
These key points reflect Infosys' focus on operational efficiencies, AI-driven initiatives, and a cautious yet optimistic outlook for H2 FY '25.
๐Links to the investor relations website
๐The summary of the transcripts of the following companies is exclusively for paid subscribers:
3- LVMH Moรซt Hennessy ($)
4 - TSMC ($)
5- ASML ($)
6- Bank of America ($)
7- Charles schwab ($)
8- Interactive Broker ($)
3- LVMH Moรซt Hennessy:
๐ Post-earnings share price performance:
๐ฌ General summary of the presentation by the Board of Directors:
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