US Reporting Season Wrap-up | Hearing direct from the tech giant CEOs

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing, whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my Equity Mates Ren. How are you going, bro? [00:00:31][16.0]

Alec: [00:00:31] I'm very good. Bryce happy reporting season. [00:00:33][2.0]

Bryce: [00:00:35] It's very exciting time. [00:00:36][0.8]

Alec: [00:00:36] It is. It is. It's just it's content galore. [00:00:39][2.3]

Bryce: [00:00:40] It's content galore. Expectations broadly seem to be being beaten, particularly over in the States. And we've got a pretty exciting episode to, uh, to bring to the Equity Mates community today. [00:00:52][12.3]

Alec: [00:00:53] Yeah, well, you wanted to get on the mic and just do forty five minutes of reading out numbers in your deep baritone voice, which is apparently so deep that it's busting speakers. So that's that's a bit of a feather in your cap. But I thought that maybe we could do something better than forty five minutes of Facebook beat earnings by... [00:01:18][25.0]

Bryce: [00:01:20] Could be pretty exciting. No, but you're right Ren there's a better way to do this. So today we're going to be taking a bit of a look at what has been happening in reporting season with a particular focus in this episode on the tech sector over in the States. We will be doing more episodes over the next couple of weeks focusing on some of the companies over in Europe as well as here in Australia. But to kick it off, it's all things tech today. Equity Mates is all about making markets accessible. Ren, as we've said many times and for a long time, you and I have actually had a bit of a gripe with earnings calls. And and that's because either at pretty inconvenient times and B, they are quite difficult to find and to listen to on demand. But I think we both recognize that there's such a rich source of information for for particularly for retail investors. [00:02:10][50.7]

Alec: [00:02:11] Yeah, 100 percent. It's pretty rare that you get to listen to, you know, Mark Zuckerberg get grilled about Facebook for an hour or Elon Musk get grilled about Tesla for an hour like that is a rich source of information to hear from these CEOs and founders themselves about their companies and to have them have to answer questions that, you know, isn't PR managed or anything. It's investment bankers asking the hard questions. So it is such a great source of information. We've often discussed how we can get that information to more retail investors. But we've we've actually found that a company has gone one step further and actually done something about it rather than us. Just talking about how [00:02:59][47.8]

Bryce: [00:02:59] we've been beaten to the beaten to the punch is that they're saying whatever. But we have found a company. And when we're asked what are some of the resources that we like using when it comes to investing, a quarter is one that we've come across recently. Q u a r t r such a start up name quarter. And what they do is essentially aggregate all of these investor calls from around the world, many countries, and put them into an app that allows you to listen to them on demand. And also for some of them, they provide PADF with the actual earnings reports as well. So you can go through and choose your countries, choose your companies and and really tune into as as you said, Ren listening to the CEOs, the CFOs all talk about their companies pretty much as soon as the investor calls are released. [00:03:55][56.1]

Alec: [00:03:56] So, yeah, yeah. Basically, like the Afterpay and square earnings call was 10 p.m. on a Monday and I woke up on Tuesday and it was there. So pretty timely. It's basically like a podcast app for earnings calls. And the fact that we're talking about it today probably isn't sensible because people will start listening to the CEOs directly rather than doing not sure. But but it is it is a great resource are even better. It is free. And yeah, I think it's it's definitely not that's become part of my habits around reporting season. So definitely a good one to check out. One final note, Stockholm is the home of audio, but that's that's my call and I'm sticking to it. Spotify comes out of Stockholm, then ACost comes out of Stockholm. Now Corde is coming out of Stockholm. I feel like if you want to be an audio based entrepreneur, you've got to get yourself over to Sweden. [00:04:58][62.1]

Bryce: [00:04:59] Does that mean we have to move to Sweden? [00:05:00][1.1]

Alec: [00:05:04] We need maybe we need a satellite office in Sweden. [00:05:07][2.8]

Bryce: [00:05:09] That wouldn't be bad. So to check it out quartr, but what we're going to do today is actually take some of these investor calls. We've got, as you mentioned, Ren the square and Afterpay investor call. We've got Twitter, we've got SNAP and we've got Facebook, all very interesting earnings calls. We've taken out some of the key parts of those calls and we're going to have a bit of a conversation around those and really just highlight the rich information that these calls do offer. And and hopefully by the end of it, people will be hooked on earnings calls just as much as way out. So no time like the present. And I guess there couldn't be a bigger story to be talking about than the square Afterpay acquisition Ren. So should we sell DOT? [00:06:02][53.2]

Alec: [00:06:03] Yeah. If people aren't sick of this story already, we hopefully will be adding some color to it by rather than us just rehashing what happened. Jack Dorsey Square, co-founder and CEO and Nick Molner Co. CEO and co-founder of Afterpay can talk about it in their own words. But for people who are unfamiliar, square, a hundred and fifteen billion dollar US tech company or fintech company has acquired or announced they're going to acquire Afterpay for 39 billion Aussie dollars. Twenty nine billion US. And after that announcement was made on last Monday, there was an earnings call for Square's quarterly results that night. And Nick Molnár joined the call because obviously a lot of the questions were about Squiz acquisition of Afterpay. So we're going to play a few clips. Jack Dorsey and Nick Molnár talking about it and then taking some questions from investment banking analysts. But to kick it off, I think let's start with the introduction of the call where Jack Dorsey and then Nick Molner talk about the result and the acquisition. [00:07:13][70.3]

Jack Dorsey: [00:07:15] Thanks, Jason, and thank you, everyone, for joining us today. Before we discuss their plans to acquire Afterpay, which we announced yesterday, I'd like the first share two highlights from the quarter. Continuing our commitment to expand access to financial tools and services. In July, we launched square banking for your Dollars. This new suite of products will help business owners better manage their cash flow and get more out of their money for banking. That includes three core products to deposit accounts where savings and score checking joining Square's existing lending products now called squarer loans, by offering essential banking tools to integrate seamlessly with those solutions like payments and square payroll. So we now have a unified view of the payments, balances, expenses and financing options. We also announced the launch of a new business square. Its name is Covid, which will focus on building an open developer platform with the goal of making it easy to create non-custodial relationships and decentralized financial services. Our primary focus is on Bitcoin, driven by our belief that Bitcoin has massive become tools to level the playing field for all. We're going to make our development process completely transparent to the public. The plan to share updates publicly in real time as we have them now on yesterday's acquisition of NASA. Today is an important day for square for Afterpay and for our work, for what we can do together to better serve our customers through. This transaction will be uniting two companies with a shared focus on economic empowerment and financial inclusion and taking the important opportunity to connect our two largest business units, seller and Pasha, by integrating Afterpay into seller and cash. We plan to combine complementary businesses while also accelerating even stronger connections and driving more commerce across both ecosystems. Increasingly, we're seeing strong demand for buy now, pay later for both merchants and consumers, and rapid adoption. Among those, especially among younger consumers with new financial service gives more control to individuals and merchants. And there's one in one we want to make part of our combined ecosystem. It's a simple idea enables those customers to pay for purchases later interest without having to use traditional credit sources while helping to drive more omnichannel sales to the seller. Afterpay has built this out a seller store and combine that with a flexible, responsible payment method for consumers that also includes merchants. Merchants Discovery. As of June 30th, Afterpay served more than 60 million consumers and nearly one hundred thousand merchants globally. It's a huge opportunity for growth on both sides who grew up in one house, the other just like the rest of our ecosystem, to be on the compatibility of our businesses who've been drawn from the start to Afterpay founder led entrepreneurial Tim Afterpay co-founder and Cossy Nicanor has an authentic, thoughtful and visionary team focused on economic empowerment. It's been incredible to witness how effortlessly our conversations flowed around shared ideas and visions. Every conversation has raised the bar on what we can all do together, and our strong collaboration will well serve our integration process. I'm thrilled that upon closing, they can and will join square and help lead Afterpay respective merchants and consumer efforts as part of Square's stellar and catch kids. I'm excited to see what we can build together. For that, I'd like to turn the call over to Nick to tell you more about Afterpay. Thank you very much, Jack. Hi, everyone. It's an absolute pleasure to be here today back in the U.S. and just in time to announce the next phase of our incredible journey. I'm here today because of my co-founder and Casey Anthony Eisen, who only a few years ago sat down with me over some Vegemite on toast around his kitchen table to discuss how we could improve the financial well-being of the next generation, to empower them to spend responsibly without having to revolving debt, interest payments or services. I'm thankful every day that and my path crossed them that we and our families have had the privilege to go on this journey together. It's been an incredible six years since ending our fiscal year 2021, nearly doubling our business year on year, building a loyal base of Afterpay as we love the product and a network of more than 100000 merchants who see increased retail opportunity through our partnership and notwithstanding the recent challenges in the global economy. I couldn't be more proud of what we've achieved so far. And I know that yesterday's announcement there is so much more to come. We've been long admirers of the square team and in many ways have lived parallel journeys as entrepreneurs focused on creating financial empowerment for consumers and businesses alike. As we've gotten to know each other better, the scale and shape of our businesses, the synergies in our products and our shared purpose, it's abundantly clear that we're at the start of an amazing partnership. And I know our team across the globe will share my excitement and enthusiasm at the opportunity to come. We started Afterpay having met by chance as neighbors in Sydney both and tonight we're passionate about developing an alternative to traditional finance and credit products. Having seen firsthand the impact of the global financial crisis and knowing that many millennial and GNB consumers were looking out for an alternative to traditional credit. We saw a way to empower consumers to responsibly buy what they wanted with their own money and to drive incremental value to merchants. Since then, Afterpay has become a leader in the global buying our latest state. We have flipped the traditional credit model on its head to drive significant value to both merchants and consumers. Our product and approach is simple to sign up within minutes, make your first purchase via in-store, online or app and repay them for equal installments when you sign up to Afterpay. We don't conduct a credit check or ask you to jump through hoops. Our model is based on trust. You start with a lower spending limit that increases over time and reflects good repayment behavior. Afterpay consumers share a deep loyalty and affinity with our product and brand their Afterpay Afterpay their purchases frequently across many retailers and verticals. It's this frequency with which our consumers use Afterpay that fully differentiates us and shows the power of our product and platform. On average, our top 10 percent of consumers globally used Afterpay more than 30 times in the US and 60 times in Australia in financial year 2021. And for merchants with their large enterprise of small and medium sized businesses, we truly partner to help grow their business. We have driven higher average order values, greater basket sizes and the additional new and repeat customers, often who within 24 or 48 hours of going live above the value of our core payment proposition. In NY 21, Afterpay drove over over one million lives on average per day, and AXA, the key marketing customer acquisition channel for our global retailers in attracting this highly valuable next generation consumer. And Anthony, I've gotten to know that square team better. What's become clear is how aligned we are not just in our business, but the way we think, live and breathe our mission. In almost every conversation, we've been focused on creating a better way for people to spend, save and do business with the intent of building greater financial well-being. And the brilliant thing is that both of our companies share this commitment by bringing together our platform, which where we know we can leverage our combined strength to continue to connect both sides of the economic equation so that everyone shares in great outcomes as we look forward. There are a number of ways in which our businesses can achieve shared and even greater success. Our businesses are highly complementary across segments, products, channels and geographies. This combination will further expand our combined opportunity across small, medium and enterprise businesses, consumer banking and financial services, water, retail categories and both online and in-person commerce. Both Square and Afterpay resonate strongly with the Millennials and GenZE consumers, and we're excited at the opportunity for the Afterpay product to be offered to a growing base of more than 70 million annual active cash customers whose lifestyles preferences. And views are shared and very familiar with these consumers will increase the reach for our retail partners and the marketing value we can drive to their businesses. Likewise, our merchant bases are very complementary to the millions of sellers that use Square to run and grow their businesses today. We believe we can introduce a number of market and global sellers to the square business. And as merchants and consumers increasingly look for famous in-store and online experiences. I am confident that together we can really maximize the strength of our omnichannel offerings, complementary technology and expertize. Yesterday's announcement marks the start of an incredible opportunity to unlock the next phase of growth in our business. The compelling transaction provide our shareholders with the opportunity to participate in the future growth of an innovative company aligned with our vision and importantly, our Australian Afterpay shareholders will still be able to maintain exposure to the growth and value creation of the combined company through owning square shares or CDOs. I know both aunts and I are incredibly excited to join the square team upon completion of the transaction and help lead Afterpay respected merchant and consumer efforts as part of the square JLR and cash shop efforts. Thank you to the square teams for picking up a conversation with two Aussie entrepreneurs and seeing the strength of our combined opportunity. I can't wait to see where we take this team. [00:17:08][593.6]

Bryce: [00:17:09] Well, there you go. We've just heard from Jack Dorsey and also Nick Molnár, who is now going down in Australian corporate history. Given the size of this, especially in capital markets, given the size of this this acquisition. So pretty awesome opportunity to hear directly from him. A lot of chat about Bitcoin from Jack and a lot of chat about mission. I don't know if you found that as well, but a lot of these acquisitions, its mission. Mission, mission. [00:17:36][27.8]

Alec: [00:17:37] Yeah, this was particularly particularly mission focus. [00:17:40][2.6]

Bryce: [00:17:41] Yeah, but but look, I think my only question and it's probably not worth unpacking too much here, but from a square point of view, like what happens if they do get this bitcoin that wrong? If if Bitcoin doesn't turn out to be as transformative as they think it is because Jack's massive on Bitcoin. [00:17:59][18.3]

Alec: [00:18:01] Well, that's what we're going to get to, Jack, on the Twitter earnings call later. And no surprises here. Bitcoin rates a mention on Twitter's earnings call as well. But I think I think the business that square has been building is a bit much bigger than Bitcoin. Obviously, there's a number of reasons why they like the functionality of Bitcoin. Trying to build a global fintech is a lot easier with the global digital currency rather than trying to having to rollout in each local currency. So from a business perspective, a global digital currency helps square a lot. And I would hazard a guess that that's part of the reason why Jack is such a big evangelist, because there's like a real, tangible, meaningful benefit for the business that is running. But yes, Square is such a big business. It's yeah, like 70 million users on the cash up, massive number of millions of merchants using it. Even if Bitcoin fails, they'll be fine. Yeah. [00:19:02][60.9]

Bryce: [00:19:03] Okay, Ren. Well, we've heard from Jack and Nick. So who have we got next? Amrita, the CFO of Square. Any key points we should be taking from this, from your point of view? [00:19:13][10.5]

Alec: [00:19:14] Yeah. So in this clip, Amrita talks about, I guess, the prospects for Square and Afterpay going forward. I think really important. If you are an Afterpay shareholder and you're weighing up your options, do you want to continue to hold shares in square? This this is a good clip. Something that really caught my ear was the discussion of Afterpay cohort economics Afterpay split out their users by how many years they've been on the platform. And the data is pretty incredible in terms of how much each additional year people are using Afterpay more, which is great for a business. If every customer you're keeping them and they're spending more every incremental year, that's a really good sign and that's definitely something that Square picked up on. So listen out for Amoretta talking about that in in this next clip. [00:20:04][50.3]

Amrita: [00:20:04] Thanks, Nick. We believe this is a transformative opportunity for our combined companies. And there are three topics I'd like to cover regarding the proposed Afterpay acquisition. First, the strength of the Afterpay business. Second, the complementary aspects of our merchants and consumer ecosystems. And third, the profound growth opportunity we see together. Afterpay has distinguished itself as a category leader and buy now pay later with a product that is well positioned for a secular shift among merchants and consumers. First, greater consumer and merchant adoption has a. Afterpay to deliver remarkable growth with revenue of approximately four times over the last two years, we see a number of levers to help drive continued growth for Afterpay first in terms of ongoing secular growth to buy now pay later in e-commerce, and second, in terms of Afterpay future growth adjacencies. Second, Afterpay business has strong cohort economics, providing a durable foundation for growth across its merchants and consumer base. Afterpay has delivered positive GMV retention and increased purchase frequency over time with strong paybacks and returns on acquisitions. Then these fundamental mirror the dynamics in our cash shop and seller ecosystem around growing engagement and strong returns. Next, we're excited by our compelling cross-sell opportunities. By integrating Afterpay directly into our cash and ecosystem, we can expand each brand customer base, strengthen each other's products and build connections. On the consumer side, the addition of Afterpay and then commerce more directly into Kaszak Afterpay merchants. They will have access to four times more consumers and cash that will have access to 16 million Afterpay consumers who represent a complementary demographic based on the merchant side will introduce square sellers to Afterpay fine now pay later offering, which expand Afterpay more deeply in the new verticals and in-person commerce. Turning to the financial impact in the deal, we're excited about the beautiful growth opportunity Afterpay will add one year over year gross profit growth. Ninety six percent in the last 12 months ended June 30. We expect Afterpay to be accretive to gross profit growth in the first year after closing Afterpay as a younger business and earlier and ramping its profitability. So we expect a modest decrease to adjusted EBITDA margins in the first year after closing. Historically, our investment behind strong climate economics have driven compounding profitable growth. We similarly intend to invest behind Afterpay strong return to unlock the significant synergies we see ahead. Under the terms of the agreement, Square will acquire Afterpay for approximately twenty nine billion US dollars. We're Afterpay shareholders will receive a fixed exchange ratio of point three seven five shares of square class, a common stock for each ordinary share of Afterpay they own. The transaction is expected to close in the first quarter of twenty. Twenty two is subject to customary closing conditions, including regulatory approval and approval by shareholders of both companies. And of course, the stock based consideration of this transaction not only strongly aligns management's incentives, but also enables shareholders of both Square and Afterpay to participate in future upside opportunity. We believe the combination of Square and Afterpay will benefit our customers in the long term profitable growth of our company. I'll now provide a brief overview. [00:23:38][213.5]

Alec: [00:23:38] So this next clip features a question from an investment banker. That was a key question that I had as well when I first heard the news of the Afterpay Square deal, which was why by Afterpay for twenty nine billion US dollars, rather than just build, buy now, pay later functionality in-house. So I think that was a key question. It's a question that a lot of analysts have had. And here is Jack Dorsey and Amrita answering that question. [00:24:07][29.0]

Jack Dorsey: [00:24:08] If that's what you think, the solution as you move into the space, it's getting more and more crowded. And obviously there's a lot of services and solutions out there. We we started with the word looking at the built and and how ambitious and entrepreneurial and innovative thinking that they were extremely early in the space of deploying a lot of it and really raised the bar on what everyone else is doing. So we were impressed by the vision, by their ambition for the entrepreneurship. I think the other big thing for us is making sure that, you know, we've talked on this poll a lot about how we connected to our two biggest ecosystems, solar and casher. And this was a clear fit in a way that they built their model, simple vertical and some incredible discovery for consumers. So for consumers, Afterpay offers true interest free products, really for any credit history, something vastly different from what we've seen with other minority leader products. And this allows for access to consumers while helping them spend a lot more responsibly. So that goes towards the purpose of economic development. And for Merchants, Square has always asked the question, how can we help our merchants make more sales? And that is exactly the question that Afterpay has been asking, providing them a way to generate leads to the Afterpay, which has helped them improve conversion rates. The transaction closes and lets you repeat purchases and repeat customers. So this allows Afterpay to reach more than 60 million consumers and hundred thousand merchants globally. So we're not looking at the appeal. This is an obvious connection between Italian cash and antimicrobials on top of an ecosystem model. There's a clear fit into our model that makes it even stronger for us and the team that built these incredible, creative, innovative and ambitious. And, you know, we just saw this as a perfect metaphor for both companies. [00:26:20][131.6]

Amrita: [00:26:22] And we said I'd add a thank you for that. Well, we've been really impressed with the strong business fundamentals that Afterpay has demonstrated. Of course, we look at the combination of both growth and cohort economics and what we see here in the cohort economics is growing engagement among consumers. After onboarding, customers transact more frequently each year that they're on the platform with some of the older cohorts from Australia, New Zealand transacting 30 times per year. We also look at the international expansion that this team has executed and demonstrated. Afterpay has shown an ability to grow quickly in new regions, including the U.S., which has been its fastest growing market to date, and then the alignment to the strategic priorities of cash and sellers where Afterpay sign up later. Products can help strengthen our existing ecosystems and help. We can help Afterpay expand with small and medium sized businesses and in and additional verticals. So these values metrics that we've done that Afterpay have demonstrated with merchants, whether it's twenty five percent uplift in transaction size or 20 percent uplift in conversion rates and and in purchase frequency and the lead generation they've demonstrated for merchants with a million leads per day. As Nick said, these are stats of healthy foundation on which we can build together to accelerate growth across both the Afterpay ecosystem as well as Cash and Sellar Ren. [00:27:53][90.5]

Bryce: [00:27:53] So the final clip we have here is another big question that a lot of the Equity Mates community have been asking beyond the build or buy, but also how Afterpay and Square are going to be competing with the likes of PayPal, Apple, Amex and other large payment providers. So in this clip, Jack goes into a bit of detail around the ecosystem that square a building both from a seller's point of view in the Bryce point of view. And then Nick also touches on how they compete and where they see Afterpay unique value proposition and fitting in with the square ecosystem. [00:28:30][36.5]

Jack Dorsey: [00:28:31] I can I can start with this first and foremost, where we believe our most differentiated is our combined ecosystem ecosystem services. So, you know, we see a lot of competitors with a similar ecosystem or a consumer ecosystem, but there are very, very few with pull together. And as you look at the market, you know, having having the ability for a seller to come in for being a leader, but also have the entire suite of tools they need to run. The rest of the business is pretty magical, magical because it saves them a lot of time. They don't have to spend a lot of time connecting different vendors together. They can focus entirely on just building the business. And I think that's important for the smaller companies. It's even more critical for the larger companies, even the enterprise, global retailers as well. So our model and our strategy is really focused on this fundamental principle of do we have to ecosystems still serving full size with the power. And the more we can connect them together to be seamless, the more value we will create for the merchants, for the individuals, their customers, and also for our company as well. Maybe they can speak to us. Yeah, absolutely. Thanks, Jack. Look, from from from my perspective, you know, we've differentiated ourselves over the years by providing looking at it through the lens of what value can we drive to the retailer. So naturally, you know, our retailers see value in our core payment platform and it delivers a higher average order value, increase return rates, lower, lower lower exchange rates, increase conversion rates. But the undercurrent here of how retailers really assist us in the business performance is can we actually drive new business to their platform? Can we act as a customer acquisition channel? For the retailer and drive business to them, and as I mentioned before, you know, on average, sending a million leads per day over the course of the last 12 months to our retailers shows that, you know, we can perform, you know, not not just not just to the core payment platform, but actually add value directly. And there aren't a lot of payment providers that have successfully built, you know, a platform that has the ability to drive new business to retailers. So when I think about what we've been able to achieve as a result of reaching 16 million annual active consumers, the ability to couple that with 70 million annual active cash out consumers and, you know, the ecosystem that that that unfolds as a result of that, the value we can drive to our retailers, I believe, is demonstrably greater than the existing, you know, strong results that we've been able to perform. So I'm really excited about it from from that perspective on our site. [00:31:43][191.8]

Alec: [00:31:44] So that brings us to the end of the square and Afterpay segment. I guess the there all the clips that we've got from that earnings call. There was a bunch of other stuff that we didn't cover the dark neck in the team or asked about Square's international expansion plans and how Afterpay helps them into new markets where Square isn't particularly strong. They also get asked again about the buy versus build decision. And, you know, they go into some further detail on that. So obviously we couldn't include it all, although it would have been a very easy episode for us to put together if we just put all 15 minutes of the earnings call. But I think if people if you want to listen to the full call, it's worth checking out. It's a pretty momentous, I guess, moment in Australian business history. Head over to the quarter up and you can listen to the whole thing. But look, that's just one earnings call. Those hopes to go in this episode. We're going to cover Twitter, SNAP and Facebook because there's some interesting stuff in all of them. But before we do, we're going to take a quick break to hear from our sponsors. [00:32:53][69.2]

Bryce: [00:32:55] All right, Ren, So we've done the big one in Square and Afterpay, but there's still plenty of other massive companies to talk about. So we're going to touch on Twitter, SNAP and Facebook, your massive Twitter fan have been for a while. And that's not only because you like venting through your private Twitter account, but you you love to build the business that Jack Dorsey is building. So pretty busy, man, given that he's running not only Twitter but is now engaged with. So you're not. [00:33:25][29.2]

Alec: [00:33:25] Not so. Not now. What is co-founded square. Look for some people love Jeff Bezos. Some people love Elon Musk. I love Jack Dorsey and his shaved head and big beard. [00:33:37][11.7]

Bryce: [00:33:37] Weird. Yeah, weird looking guy. A bit of a bitcoin fanatic. But what can we expect from what can we expect to hear from Jack regarding Twitter? [00:33:45][7.7]

Alec: [00:33:46] So we've pulled out an opening clip from the earnings call when in sort of his introductory remarks here, he focuses on three key trends that are relevant to Twitter, artificial intelligence, decentralization. And the third one, no surprises, Bitcoin. And if you're wondering how Bitcoin ties into a social media platform, Jack Dorsey finds a way. [00:34:13][26.7]

Bryce: [00:34:13] I'm sure he does. [00:34:14][0.6]

Alec: [00:34:15] So, look, we'll let the man speak for himself. So we've got to we've got a short clip from Jack Dorsey on Twitter's Q2 earnings call. All right, [00:34:25][10.0]

Jack Dorsey: [00:34:26] Ron, thanks for joining us. With a strong Q2 total revenue hit one point nineteen billion with that revenue up 87 percent year over year, driven by faster shipping cadence, strong sales execution and a broad increase in advertiser demand, average monetize about a year reached two hundred and sixty nine 11 percent year over year. In line with our outlook and historical seasonal trends, we intend to build an ecosystem of connected features and services focused on serving three core jobs news, which is what's happening discussion, conversation and helping people get paid. Every single person in the world has some need for at least the first two, and people need to start building a model like this. Is it easy or fast? It's delivering less shows, resilience and ever increasing global value. There are three trends relevant to Twitter and you are shareholders. I decentralization and the Internet finally having access to a global native currency in Bitcoin. All these will help with your jobs better, and we intend to lead the way in which we pay. In machine learning, we increase relevance and discovery. A long standing issue on Twitter, which we're improving every day from sign up to enough questions. With the information, we increase the size of the corpus of conversation we have access to and improved conversational health by giving more people more power to individuals. And with a global currency, we can serve people. People and companies can freely trade goods and services anywhere on the planet. Ecosystem model will enable an experience or an individual or company of any size can tweet, reply, audio to read the following, write a newsletter, charge for content and eventually sell a service or good all in one simple for each part of the cycle will positively reinforce other parts and build upon yourself. I've seen this work elsewhere and I'll work even more for Twitter along the way. We're going to try things that end up not being that we're going to be fast to recognize this and take action without hesitation, as we did with tweets. There are better solutions to the problem we're trying to solve in the stories format. Everyone has adopted an entirely new format that are unique to Twitter and our model. This is what we're starting to create. Expect to start and stop many more features than we have in the past. That's all for me. For now, I want to thank you all for your continued trust and belief as we do our work. [00:36:54][148.7]

Bryce: [00:36:55] So pretty phenomenal growth coming from quick Twitter. I'd encourage anyone listening to actually go and have a detailed look at their earnings, a company that continues to to surprise over the last 12 months or so, particularly. Another surprise, though, Ren in this company completely dropped off my radar. I must admit, over the last couple of years since their IPO, that sort of fell flat and then they tried to launch a pair of wearable glasses. And subsequently I didn't really hear much. But they are roaring back. And that is SNAP Inc and Evan Spiegel. So what can we expect to hear from from SNAP? I know there are a few surprises in there around and not surprises, but a real focus on Asia. [00:37:40][45.2]

Alec: [00:37:41] Yeah, well, forget SNAP will snap as a social media platform. SNAP is an augmented reality company like that is that is what their value proposition is and the way that that sort of just materializes. Is in their social media platform, but over 200 million users globally use Snapchat, which is a pretty phenomenal number. It doesn't really touch Facebook's two point nine billion, but still 200 million. Pretty impressive. But, yeah, I listen to this clip, and my big takeaway was forget snap as a social network, if you're investing in SNAP, it's an augmented reality tech play. And that's the thing I love about these earnings calls. You see the way that the company leaders view these companies. So, again, probably not much more we need to talk about. Let's let's throw it to Evan Spiegel and his thoughts. [00:38:36][55.4]

Evan Spiegel: [00:38:39] Thank you all for joining us today, our second quarter results reflect a broad based strength of our business and the hard work of our team as we execute to serve our community and partners. This quarter, we grew both revenue and daily active users at the highest rates we have achieved in the last four years. Daily active users grew twenty three percent year over year to two hundred and ninety three million, and we more than doubled the revenue year over year to nine hundred and eighty two million, generating one hundred and seventeen million in adjusted iveta adjusted EBITDA improved by two hundred and thirteen million compared to last year, marking our third adjusted even a profitable quarter in the last 12 months as we continue to demonstrate the leverage in our business as we scale. At our annual partner summit in May, we introduced new product innovations for our community and partners, including the next generation of spectacles, augmented reality glasses that overlay computing on the world. And we are excited by the tremendous opportunity for our business in twenty, twenty one and beyond. We made significant progress with our augmented reality platform this quarter, more than two hundred million Snapchat engage with our every day on average and over two hundred thousand creators use one studio to build our lenses for our community. We are focused on learning from our large and engaged community of supporters and creators, which allows us to continually improve our lenses and the tools we provide to create them and lend studio. This quarter, our cartoon 3D style lens, which uses machine learning to turn people into 3D animated cartoon in real time, highlighted the power of lenses to go viral both inside and outside of Snapchat. In the first week of release, it's generated two point eight billion impressions on Snapchat alone. We rolled out one studio 4.0 at our Partners Summit with new features like visual classification, multi-person 3D, body mesh, advanced Quast Simulation, True Size Technology for eyewear trial and the new visual effects editor, which enables creators to build sophisticated lenses without writing any code. We also want connected lenses, which enables real time shared experiences and augmented reality, like building a Lego model together with your friends. We are continuing to create value for businesses by reimagining the shopping experience through Eaarth. By leveraging the long term investments, we've made an augmented reality and personalization. We were laying the groundwork for an improved online shopping experience. For example, we are making it easier to discover new fashion items through scan by helping stepladders scan a friend's outfit or save photo or screenshot to shop similar looks and recommendations when it comes to purchases and returns. We believe that helping people find the right size and improving the trial experience could both increase conversion rates for purchases, as well as reduce the rate of returns for online shopping. We are excited about this opportunity because returned goods cost businesses hundreds of billions of dollars each year and have a large environmental impact. We are pleased with our early progress in this space and look forward to experimenting and learning more with our retail and e-commerce partners. We are also collaborating with a variety of partners to power our experiences in their own applications with camera kit, which brings the power of the Snapchat camera to partner applications using our SDK. This quarter, we rolled out a number of Camerata partnerships worldwide, including with Walt Disney World, will commemorate their fiftieth anniversary with an experience where visitors can place their own picture on Cinderella's castle to create a virtual mosaic of shared moments, as well as access exclusive Arlin's with Disney characters through the Mind Disney experience. We also partnered with Bumble and Vibert to bring Lenz's to their respective mobile apps and are working with Google to bring our lenses directly to the new geophone in India with a native camera integration. We announced our next generation of spectacles that are part of our summit, which are available exclusively for creators. There are first device with a built-In 3-D augmented reality display and represent another step forward toward our goal of overlaying computing on the world. [00:43:16][277.4]

Bryce: [00:43:17] So pretty phenomenal growth there from from SNAP. To be honest, I would have said that Twitter was a bigger company in terms of active users than SNAP, but I was pleasantly surprised to find that SNAP just has the lead in terms of active users. But speaking of active users, Ren, you did mention the massive size of Facebook, two point nine billion active users on Facebook, which is just phenomenal given, I guess, the population of the world. But they're Q2 earnings call featured. A bit of a an interesting take from Mark Zuckerberg on the future of Facebook and how he's, I guess, trying to not necessarily pivot, but move it towards what he sees as the future of computing. [00:44:06][48.2]

Alec: [00:44:06] Yeah, I think the really important context for the next two clips is Mark Zuckerberg finest moment as CEO of Facebook was he realized how disruptive and how game changing mobile would be very early. And he internally disrupted his whole business to focus on mobile. And obviously it worked. And it really set the stage for the business that we know today. That is important context, because Mark is once again trying to pick the future of the Internet. And it is a term that I wasn't very familiar with. I've done some reading up on it. The Metaverse. Now, is that is that a term that you you know, you love roblox, so maybe you're familiar with it. [00:44:49][42.8]

Bryce: [00:44:50] It's not a term that I've actually come across. But when we were talking about this offline, yes. It does seem that roadblocks is certainly playing in this space. I'm not sure if their version of it is what Mark sees, but I'm keen to hear what how you would describe it. [00:45:06][16.1]

Alec: [00:45:06] Well, I mean, I feel like I'm not going to describe it as well as Mark is going to in the past about supply. But basically the metaverse brings the physical, the augmented and the virtual world together into an immersive Internet. Right now, interaction with the Internet is mediated through our phones or through our computers. And I guess the metaverse is really asking the question, what if it wasn't so? Zuckerberg shared some thoughts on on the earnings call. So we've got two clips here. The first one from his introductory remarks, the second one from a question where he was asked to expand on it. So let's hear Mark Zuckerberg explain what he sees as the future of Facebook and more generally, the future of computing. [00:45:52][45.7]

Evan Spiegel: [00:45:54] The third area I want to talk about is building the next computing platform. We're continuing to invest very heavily in building technology and products to deliver a false sense of presence. This is going to be critical for unlocking the next generation of social Internet services. Questa, in particular, continues doing well and it keeps getting better monthly as we release regular software updates, including, most recently, our passthrough API, so developers can start building mixed reality experiences on. The range of content experiences that we're seeing keeps broadening as well to the point where there are a lot of popular virtual reality experiences beyond games at this point. The most popular apps on Quest are Social, which fits our original thesis here, that virtual reality will be a social platform, and that's why we're so focused on building it. But we're also seeing compelling use cases and other forms of entertainment as well, as well as work, creativity and fitness. Looking ahead here, the next product release will be the launch of our first smart glasses from Rabanne in partnership with Etzler Luxottica. The glasses have their iconic form factor and they let you do some pretty neat things. So I'm excited to get these into people's hands and to continue to make progress on the journey towards full augmented reality glasses in the future. Now, the areas that I've discussed today, creators, commerce and the next computing platform. They're each important priorities for us and the region to unlock a lot of value on their own. But together, these efforts are also part of a much larger goal to help build the metaverse. And I'll be sharing a lot more about this in the months ahead. So I wanted to discuss this now so you can you can see the future that we're working towards and how our major initiatives across the company are going to map to that. So what is the metaverse? It's it's a virtual environment where you can be present with people in digital spaces and you can kind of think about this is an embodied Internet that you're inside of rather than just looking at. And we believe that this is going to be the successor to the mobile Internet. You're going to be able to access the metaverse from all different devices and different levels of fidelity from from apps on phones and PCs to immersive virtual and augmented reality devices. Within the metaverse, you're going to hang out, play games with friends, work crede and more. You're basically going to able to do everything that you can on the Internet today, as well as some things that don't make sense on the Internet today, like dancing in a defining quality of the metaverse presence, which is this feeling that you're really there with another person or in another place. Creation avatars and digital objects are going to be central to how we express ourselves. This is going to lead to entirely new experiences and economic opportunities. I think that overall, this is one of the most exciting projects that we're going to get to work on in our lifetime, but it's going to take a lot of work and no one company is going to able to build this all by themselves. Part of what I've learned over the last five years is that we can't just focus on building great experiences. We also need to make sure that we're helping to build ecosystems. The millions of other people can participate in the upside and opportunity of what we're all creating. They're going to need to be new protocols and standards, new devices, new gyms, new software for rendering engines, payment systems and everything in between, and in order for the metaverse to fill its potential. And we believe that it should be built in a way that is open for everyone to participate. I expect that this is going to create a lot of value for many companies up and down the stack, but it's also going to require a very significant investment over many years. I see our focus here as a continuation of our work to build technology that brings people together in many ways, the metaverse is the ultimate expression of social technology. Some of the experiences that I've dreamed of building since well before I started Facebook are only starting to become possible. Now, if you look at the investments that we've made over the years, you can see this vision gradually starting to come to focus and and you can see why we're so excited about it. So in addition to being the next generation of the Internet, the metaverse is also going to be the next chapter for us as a company. And in the coming years, I expect people will transition from seeing us primarily as a social media company to seeing us as a metaverse company. And there's a lot that we need to do to get there. And there are going to be many exciting milestones along the way, including some which we'll share in the months ahead. But in the meantime, I just want to take a moment to thank everyone in our community, all of our partners and employees and everyone who has supported us so far. I continue to be grateful to be on this journey with all of you. And now here is Sheryl. [00:50:47][293.0]

Bryce: [00:50:49] Well, there you go, Ren a lot to get your head around when it comes to the metaverse, Zuckerberg is obviously he's obviously got his head around it more than you and I do. So it's going to be fascinating to see how this all plays out over at Facebook. Can he do another incredible pivot and continue the growth story of Facebook timeline? Little? I guess so. I guess then Ren the question that a lot of analysts on the call were asking is, what does the business model look like for a business that's centered around the metaverse? We know the traditional form of business model for Facebook at the moment is primarily advertising. Pretty straightforward to understand. But in this clip we hear from Mark as he explains how they plan to scale and then actually look to monetizing this business model of the metaverse. [00:51:38][49.0]

Evan Spiegel: [00:51:40] You know, we're primarily focused on here. Know, before I get into the business model, our basic playbook as a company is build products that you get to scale, especially social products. That's important to the people you want to interact with are there. So we're going to focus on having hundreds of millions of people use the metaverse and the new platforms that we're building before we we really turn this into what I expect to be a very important and big part of the business. But overall, I think that there's. As we embark on this next chapter, as they're going to continue being an important part of the strategy across the social media, part of what we do and and it'll probably be a meaningful part of the metaverse, too, and commerce is going to be increasingly important, which is why we're one of the reasons why we're focused on this across our current apps and the current economy. But I think digital goods and creators are just going to be huge, right, in terms of people expressing themselves through their avatars, through digital clothing for digital goods, the apps that they have that they bring with them from place to place. A lot of the metaverse experience is going to be around being able to teleport from one experience to another. So being able to basically have your digital goods in your inventory and bring them from place to place. And that's going to be a big investment that people that people make. And our focus for now is really on, you know, helping to develop the community, helping to develop the number of people who who can grow the number of people who can be in these metaverse experiences and can experience some of the next computing platforms like virtual and augmented reality. And that's, I think, what you should expect us to focus on for the next period. But over the long term, I think that there's going to be a very big digital economy around this. And that's what we're primarily going to be shooting for. You know, our business model isn't going to primarily be around trying to sell devices at a large premium or anything like that, because our mission is around serving as many people as possible. So we want to make everything that we do as affordable as possible to as many people as possible can get into it and then compound the size of the digital economy inside it. So that's kind of at a high level. How how how I'm thinking about this and I'm happy to talk about this more as we continue to evolve the investments and do can can speak about the expenses and disclosures and all that. But I will note that that I appreciate the ingenuity and cleverness of listening to our job descriptions to see where we're investing. This is a big, big focus, as I called out and in my comments at the beginning. [00:54:14][154.3]

Alec: [00:54:15] So there we have it. Mark Zuckerberg explaining what he sees as the future of the Internet and how Facebook, I guess, wants to play a role in that and how they may make money from that in the future. So Bryce, that is really all we have time for today. Already a pretty long episode. I think, you know, we could have featured so many more earnings calls. It's such a rich stream of information coming from these earnings calls at this time of year. So if you want to hear from more company CEOs, you can go and check the quarter up, cucu a RTR download from the App Store or headed to their website aquarter dot essay. But we've got two more of these episodes coming Bryce. So we're not going to be going over US companies again. We're going to do a bit of a trip around the world, but plenty more CEOs and company leaders to hear from. [00:55:10][54.7]

Bryce: [00:55:10] That's right, Ren. We are done with the US. We're going to be heading overseas to Europe next. You mentioned that Sweden is the home of audio. Spotify have also released their earnings. So we'll definitely check in on them as well as some of the companies that the Equity Mates community may not have heard of. So looking forward to that. And then we'll be doing an episode featuring some of the companies back in Australia. So very much looking forward to that as well. Just a shout out, though, that keep your ears tuned for this Thursday as we continue with our CEO series. We've got John Kasich from Webjet, managing director of Web Webjet, who was kind enough to give us some of his time. And we really dug into the impact of covid, the growth of Webjet, their massive business websites and the future plans. So if you're interested in Webjet or one of the shareholders, make sure you stick around and tune into episode on Thursday as we chat with John. But Ren always good to chat stocks. We will be back next week with another reporting season episode. But until then, I'm happy listening. Sounds good. [00:55:10][0.0]

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